Eric Von Berg - Newmark Realty Capital - 595 Market Street, Suite 2550, San Francisco, CA 94105 - for loan quote: evonberg@newmarkrealtycapital.com 415 956 9922

November 25, 2014

2014 San Francisco Bay Area Economic Engine

The Bay Area is firing on all cylinders!

At the end of each year I survey the economic sectors that make up the Bay Area economy. As 2014 draws to a close, I found almost every economic sector in the Bay Area is on an upward trajectory.


Download report
This time last year, we saw a decline in the traditional Silicon Valley tech sectors; Semiconductors, PC’s, Servers, Corporate IT Software and Defense, and layoffs by HP, Lockheed, Cisco and others. The California Employment Development Department (EDD) reported a reduction in the Bay Area job growth rate from 99,000 jobs added in 2012 to just 70,000 new jobs in 2013.
But the decline was happening alongside a boom in the new tech sectors: Social Media, Mobile and the Web.

Actually ... about that New Tech Sector growth 

In March 2014 the EDD announced, “Never mind! We under-counted the Bay Area 2013 net job growth by 67%. There were actually 117,000 new jobs in 2013”.

According to current EDD statistics, for the 12 months ending in September 2014, the Bay Area added 102,600 jobs.  San Francisco and Silicon Valley are adding jobs at impressive 3.7% and 3.5% annual rates respectively.  The East Bay shows a respectable annual rate of job grow at 2%.  This level of growth puts Bay Area total employment above the peak achieved at the height of the dot-com boom in January 2001, and brings the unemployment rate down to 4.2%.

That's an impressive growth according to the official count. But judging by the traffic we see on the freeways and the insatiable demand for housing, I will not be surprised if there is another correction from the California EDD and they say once again... "Oops! We under-counted.”

You can download my detailed report here and as always I welcome your feedback!
2014 Bay Area Economic Engine


November 16, 2014

Name your Loan Servicer… Newmark Realty Capital!

Newmark Realty Capital’s new business model for CMBS 3.0  

We are blazing new trails in the CMBS world at Newmark Realty Capital. While known for our representation of life companies, Newmark Realty Capital can now also take a CMBS deal to market and assure our clients that will take care of them for the life of the loan; through loan placement, loan closing all the way through until that last debt-service payment is made.
Many commercial real estate investors swore off conduit loans after experiencing the rigidity and poor loan servicing of CMBS 1.0.  Investors love getting together and trying to top each other with CMBS loan servicing horror stories.  We often hear from clients that they will never do another conduit loan again.  This prevalent attitude may have been great for Newmark Realty Capital’s life insurance lender/correspondents, but can limit a comprehensive commercial real estate investment strategy, See footnote at end of this article for when a CMBS loan may be the best solution.

Choose Newmark Realty Capital as the Primary Servicer, for the life of your next CMBS loan: 

When you choose Newmark to place your next CMBS loan, you can require in your loan request that the CMBS lenders bid your loan using Newmark Realty Capital as your Primary Servicer. 
By appointing Newmark as the primary servicer, you as the borrower avoid the potluck of CMBS loan servicing. Usually loan servicing contracts for CMBS pools are bid after all the loans close.  The winning bidder for the master servicing contract is often the low cost provider, the firm that can cut costs the most by being thinly staffed with low-wage servicing employees.

We worked to earn the right to service your loan!

S&P Rating:

Newmark obtained an S&P rating as a Primary Servicer.  This took us a while. We needed to build a multi-billion dollar loan servicing portfolio, become Regulation AB compliant, use the right accounting control systems and loan servicing software, restructure our work flow and cash handling procedures, and use SEC recognized auditors to meet the demands of the rating agencies.

Master Servicing Agreements: 

The Primary Servicer Rating allowed Newmark to leverage the $12 billion annual production power of the SAM network (http://samalliance.com/) to establish Primary Servicing Agreements with the five largest master servicers who represent over 90% market share for CMBS servicing: Midland, Key, Berkadia, Wells Fargo and GEMSA. 

Conduit Servicing Agreements:

Newmark arranged agreements individually with eleven of the largest Conduits, covering over 70% market share, who bid their loan servicing to this core group of Master Servicers.  This means that Newmark can still create excellent competition among these eleven conduit lenders to get the best terms for our borrowers.  Yet, we can be the borrower’s primary contact for the loan after it closes. 

What this means for you

As a cashiering primary servicer Newmark conducts the NOI reviews, inspects the property, reviews leases, releases escrowed funds and writes the assumption memo.  As with our life-company servicing accounts, Newmark makes operational decisions throughout the life of the loan, and will give recommendations around major loan events that are decided by the special servicer. We promise to give you good service. Unlike the stereotypical CMBS loan servicer, we value your relationship and we want your next deal. 

We think through issues that might crop up over the life of a loan

Since Newmark, as Primary Loan Servicer, will handle all issues that will come up during the life of the loan; we have an extra incentive to head off problems upfront.  Securitized loans are by design inflexible; REMIC rules require decisions to be made strictly according to the loan documents.  If an event was anticipated in the loan documents, the resolution can be easy.  If not the answer too often is... it's too late now.

The Public Private Partnership world is moving away from design and build, to design, build, operate and maintain  

Users of buildings find they get a better, lower-maintenance building if the developer has to operate and maintain the building for its first 10-20 years.  So too with the mortgage business: Having the firm that originates your loan deal with the loan’s issues for the loan’s life, gives the mortgage banker an incentive to craft the loan documents into a workable form.

Newmark gives personal service   

I recently attended a Brokers’ Symposium put on by Wells Fargo Bank’s CMBS unit.  Wells Fargo is the largest Master Servicer of CMBS loans and one of the best.  They are well aware of the problems in CMBS loan servicing and are encouraging Newmark’s efforts to build a better mousetrap for CMBS 3.0.  Wells Fargo does offer an enhanced level of service to their biggest customers: If you reach $500 million in loan serviced by Wells Fargo, you get a single point of contact and a different phone number. 

Newmark can give you this personalized level of service with your first loan  

If you would like to meet the servicing team who will service your next CMBS loan, come by our San Francisco office.  Feel free to give me a call on 415-956-9922
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Footnote: A CMBS loan can make sense when:

A loan request is big: 
Above $150 million life-company start to club loans.  When multiple lenders need to agree on terms and loan changes unanimously, loans get expensive, inflexible and messy.
High leverage or extended IO is the best solution:  
On a low-risk deal, high leverage or an extended interest-only period can make sense.  Especially for sponsors of investment funds, using CMBS’s aggressive underwriting can cash out the original equity investors, replacing a high rate of preferred-return on equity with a low interest rate on debt.  This can turn a short-term play into a long-term hold. 
Portfolio lenders pass:  
Life companies are most borrowers’ first choice, thus these portfolio lenders can afford to be picky. Many good deals need to turn to CMBS for financing because life companies just are not very interested or not very aggressive.
The borrower wants to lock in today’s low cap rates:  
Even if an investor plans to sell in the medium term, putting on long-term financing now might be a smart hedge.  An assumable loan at today’s historically low rates can lock in a significant portion of the value in case interest rates jump which will cause cap rates to rise.  Locking in a high cash-on-cash return, will preserve a good portion of your property’s value