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Last week was a great week for us. We are starting to see money flow again. Oddly enough, most of the investors are not US based. We are seeing positive activity from investors in Europe, Russia and China. We even got three casinos approved at 100% LTC. Of course, not all projects will be as profitable as casinos, but the great news is we are starting to see the cash flow again. If you are frustrated with not being funded for the last 2 years...please give use a call at 281-764-1605 or brian@walkercf.com. We look forward to sharing the prosperity with you!
It disgusts me to hear what spews from the mass media conglomerate's news.....if you want to know what is really going on...try these news sources:
In the recent past, nearly 70% of all commercial appraisals were ordered by the banks that were going to fund the project. Now that banks are absent from the performing funding space, many developers are left with the responsibility of ordering an appraisal. Unfortunately, many of the appraisals they order and submit are simply unacceptable to 90% of our funding sources.
As a rule of thumb, if you don't have an appraisal, don't order one. Let the funder that has an interest in your project suggest one that you use. Otherwise, if you want to order your own appraisal, there are few bits of advice to follow:
1) Ask your mortgage broker who they use and have had success with. Be prepared to spend more than what the local guy quoted you. Your mortgage broker is always going to choose an appraiser he or she has had success with and gotten deals funded with, which is your primary objective.
2) If you want to shop yourself, make sure the appraiser is MAI certified. The acronym stands for Member of the Appraisal Institute. It's no simple achievement to get this accreditation. According the the Apraisal Institute, MAI appraisers must meet the following criteria for accreditation:
- Receive a passing grade on 11 examinations that reflect 380 hours of classroom instruction and that test the appraiser's knowledge of basic and advanced appraisal principles, procedures and applications; report writing; valuation analysis and standards of professional practice
- Receive a passing grade on a four-module, two-day comprehensive examination
- Hold an undergraduate degree from a four-year accredited educational institution
- Experience: Receive credit for 4,500 hours of experience, all of which must meet strict criteria
3) Anyone that is not MAI certified will perform your appraisal at about half the cost, but...it's a fool's errand because your finder is going to require that you get an MAI certified appraisal. So, you end up paying for two appraisals.
4) Try to find someone that is familiar with your area and project type. This enables them to do them faster and at a lower price.
While this is not the appropriate place to give recommendations, feel free to contact me at my office and I'll gladly steer you in the right direction.
Weak projects, no matter how great they appear, can turn a funder off if any of the following conditions are present:
1. The project has a funding deadline - a funder would rather take a project that will work if they have to wait for funding. Funders frown on projects that have a deadline. For example, "If I'm not funded in 5 weeks, I'll lose the property." We as intermediaries would never accept a project like this when there are hundreds more that won't be calling us every day and giving us guilt trips for their project not being funded.
There are many reasons a project could be delayed and it's completely out of our funder's hand. We've even noticed a trend with a few of our funders, where they do not give a closing date. They'll say, "60-90 says, but there is no scheduled closing at this time" So what does the client think? If he isn't funded in 60 days, there are serious problems and he feels the need to call everyday and become a nuisance to the funder...which only hurts the developer.
2. The project will only work in a specific location. Your project must be strong enough that it can work where you want to buy the land or 2 or 3 other locations. These are typically JV clients that bring nothing but an idea to the table. Your project should not be dependent on the funder buying a particular piece of land that could be bought while waiting on funding. Short and sweet, we are not going to burn a bridge with our funders by having pushy and demanding clients that can't produce a dime of equity in their projects. We are the nice guys and enjoy working with people that don't pressure us or the funder. Naturally, we'll do the best we can, but there are enough projects out there that aren't under the gun to get funded. True, we can fund bridges and hard money deals in 5-10 days, but every funder is different. I suggest you read: http://nobscommercialmortgages.blogspot.com/2010/03/what-happens-to-pushy-demanding.html Thanks, Brian Walker- I can be reached at 281-764-1605
A client sent this to me...something circulating around the internet. Please read...it is a perfect analogy......
Heidi is the proprietor of a bar in Detroit. She realizes that  virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed in a ledger (thereby granting the customers loans).
Word gets around about Heidi's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit.
By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Heidi's gross sales volume increases massively.
A young and dynamic Vice President at the local bank recognizes that these customer debts constitute valuable future assets, and increases Heidi's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.
At the bank's corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on international security markets. Naive investors don't really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics.
Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.
One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi.
Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since Heidi cannot fulfill her loan obligations, she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs.
Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.
The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with not only having to write off her bad debt but also with losing over 90% of the presumed value of the bonds. Her wine supplier claims bankruptcy, closing the doors on a family business that had endured for three generations, and her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.
Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion dollar, no-strings attached cash infusion from their cronies in Government.
The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Heidi's
As many of you know, Walker Commercial Funding works exclusively within the private funding world. All of our projects are funded by private sources and have been since 2006. Unfortunately, some developers still believe they live in the financial world of 2006. To get results, they could put some heat on their funders and threaten to stop banking with them or any other sorts of threats. Obviously it was effective, otherwise they wouldn’t have developed that behavior
In present times, the private and evasive sleeping giant is meeting old school "this is how my bank did it for 30 years" developers.
I regret to inform our readers that several projects that had been approved by our private funders were kicked to the curb with no funding and a bad reputation to follw because they were pushy, demanding, insulting and rude. Worse yet, these developers had no "NBA" or "next best alternative”. We placed them with performing funders that, for their particular project, there were no other alternative to getting their projects funded. So, basically, they worked with the funder we have placed them with or they simply have no other doors to knock on to get funded.
First, in the old days, developers received their funding from banks who had the liquity to fund the loan. This is no longer true. Everyone from the Rothchilds to the average Joe have pulled their funds from banks, where they have a measley FDIC coverage of $250,0000. Anything above that amount is not insured. The result is that they gave and continue to give their funds to the private sector, asset manangers. These assset managers are the individuals or groups that are funding the loans. They take the assets in from investors and invest it in solid real estate projects. The investment can be debt or joint venture.....or even joint venture without any debt! That's how the capital enters the private funding universe and projects are eventually funded. Most of our funders are even comfortable with 100% financing.
What went wrong? The answer is simple: the developers committed some of the cardinal sins of dealing with private capital. Here they are:
• Your funder doesn't have anything to prove to you because he's not asking for upfront money. He doesn't want to be interview or vetted....yet the developers insisted on a list of closed deals, which would violate the NCND the funder signed with the client. Witch hunts are simply not advisable, if someone asks for a fee they cannot justify, simply walk from the table.
• The developer made a list of a "demands" that must be met to "win" his business (that no one else will fund). As the old adage says, "the tail will not wag the dog”.
• The developer established his own funding date, when he was giving a range of 60-90 days. The clock doesn't start ticking until you have signed the contract with the funder. Don't blame the funder when your attorney took 2 two weeks to review and made significant changes that were ridiculous and unreasonable. On that note, the clock doesn't start the day you gave the deal to the broker. Your funder doesn't care when you submitted it to your broker or that you had to wait 2 months before your transaction was submitted. Presently, projects submitted today won't be submitted for two months. There is a lot of deal congestion and we don't see it letting up anytime soon.
• They developers call and call and call. Maybe your deal funds late. Moving money is difficult internationally and there are delays. There's nothing your broker or funder can do about this.
• When calling the developers start making demands and demanding a funding date with the funder truly doesn't know....and they aren't going to give you a date for the sake of giving you a date.
• The calls continue....the developers wants to play 20 questions and discuss matters the funder and broker don't have firm answers on. Neither your broker nor your funder have time to spend 30 minutes on the phone with talking about "what if's" and matters of pure conjecture. No offense, it’s just business.
• Finally, the developer gives a deadline or else he pull out. I have to be funded by XYZ or else........
• This is the point (or sooner) where we decline the project based on (lack of) professional conduct.
Ultimately the funder will see the project as weak and not worth funding if two weeks is going to kill the deal. Or he’ll just dismiss you and your project on the grounds of poor planning. At Walker Commercial Funding, we keep it simple: always tell the truth; which includes good news, bad news or even no news. We also inform the client it is not necessary to “check in” everyday. We immedately call them with news concerning their project. To sum it up, I recommend patience, grace and repect to both your broker and funder.
Welcome to 2010, the defacto year of Joint Venture (JV) financing. Institutional financing is not available so developers are looking outside the box to fund their projects. The most common form of favorable financing is JV. This financing comes in more shapes, sizes, and terms than colors of the rainbow. There are, however, a few common things that all JV funders look for, regardless of the project, location or dollar amount. The purpose of this article is to share with you what these common denominators are and how you should present your project to get the most favorable terms.
Let's look at this from your potential funder's perspective. What does he want? The answer is simple, but arriving at achieving his goals involves a tremendous amount of scrutiny and due diligence on you, the developer. Quite simply, the JV funder wants a return on his investment. You must speak his language. What he wants is a pro forma that shows what his internal rate of return (IRR) is at two and five years. If you cannot prepare one of these, find someone who can. This document or spreadsheet shows vision and the common goal of making money.
Everything else is secondary, but also very important. You need to prepare a package that consists of the following items:
- an executive summary of the project that is no more than 5 pages (no funder will read a 120 page business plan before reading an executive summary)
- the proforma
- bios and resumes of all of the key players, including your contractors
- the entire business plan
- an appraisal if you have one
Logically, the funder has the money. You have to prove that you have the brains, muscle and integrity to be a great and cooperative partner. Your opportunity is not the only one on his desk, but it will certainly be the most presentable. Sloppy presentations make for sloppy projects.
Finally, the worst thing you can do is put pressure on the funder to act or fund immediately. Desperation only indicates weakness and poor planning.
Happy New Year!
I apologize for my absence, but just wanted to let all of you know we are still here and have weathered the horrendous financing storm of 2009.
We have developed strategic alliances with several JV partners. And, true to form, our JV partners bring a lot more than money to the table. If you have a dynamite project and need funding or a JV partner, please call us today at (281) 852-9422 or brian@walkercf.com ..... you can always go to our website at www.walkercommercialfunding.com and click on the "what's hot" page.
We still have other programs, but I'll save that for another blog.
Cheers to 2010! And let the good times roll!
Brian Walker
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Brian Walker
Houston,
TX
More about me…
Walker Commercial Funding
Address: Houston, TX
Office Phone: (281) 964-8037
Email Me
The truth and real solutions about the commercial lending world....explained by a seasoned professional..Brian Walker
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