"At the top of the market, the cap rates of tertiary-market properties were similar to properties in primary and secondary markets." (CCIM Institute) Coupled with the fact that Balance Sheet Lenders, i.e., institutions that lend per the Balance-Sheet, aka, Portfolio Lenders, are filling the void left by the dearth of solvent secondary Commercial Mortgage Backed Securities (CMBS) markets, it may be time to take another look at investing in smaller commercial real estate markets, because local lenders know their towns and commercial property real estate values are dropping in tertiary markets, too.
Note: "Smaller banks also have higher capital reserve requirements than larger rivals, which left them 'operating on better capital cushions going into this downturn,'" said Jay Brinkmann, chief economist for the Mortgage Bankers Association ("From Smaller Mortgage Lenders See Opportunity in Turmoil," Wall Street Journal, Dec. 2, 2008).
As you know, Balance Sheet or Portfolio Lenders are conservative, "old-fashioned" lenders, common both with life insurance businesses and, pay attention, with regional savings and loan institutions, like you find in Bozeman, Montana. With this old "norm" returning, meaning retaining debt on your own books and not repackaging the debt into securities which are then sold off, "a number of the balance-sheet lenders are also using secondary markets as opportunities to stand out and diversify their offerings," (CCIM Institute) which means it may be the time to consider securing your loan at the local level in not just the secondary commercial real estate markets but also in the tertiary commercial real estate and smaller markets like the Bozeman commercial real estate market. "While location continues to play the most prominent role in commercial real estate investment, some balance-sheet lenders are finding that the most opportunistic locations may not be in the most obvious places." (CCIM Institute)
Note: "Second Quarter 2008 SIOR Commercial Real Estate Index, compiled by the Society of Industrial and Office Realtors (SIOR) in association with the National Association of Realtors (NAR), indicated that commercial real estate markets have not yet begun their rebound" and have "dropped for a sixth straight quarter to an overall total of 76.4 points. A score of 76.4 reflects conditions that are significantly less favorable for landlords and sellers, but excellent for tenants and purchasers." (Magellan USA)
Bozeman Commercial Real Estate - Bozeman Commercial Property
Call - 406.579.3115 or email - brett.fagan@prumt.com
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