Let the bargain hunting commence!

That's one possible interpretation of CalPERS (California Public Employees' Retirement System) and their announcement yesterday that the system is going to allocate 10% of assets towards real estate.

The Calpers fund is worth about $250 billion, which isn't a bad day at the office. In a time when people are fleeing real estate, Calpers is diving into the pool by putting another $5 billion into the market It's almost as though someone taught them how to buy low and sell high..... (Besides, even in California, you can buy a good bit of property with $5 billion.)

If you have money to put into play, this is a great time to buy and hold multi-family housing, as a number of properties that should be good deals and snapped up quickly are moving more slowly. While commercial real estate is still a long way from the apocalypse that some have forecasted for it, there is room to make a value play on some properties.

Give me a call and see if I can help!

New product alerts!

Two sweet new products that have come into my toolkit:

1) Medical working capital loans. These are unsecured loans with an 84-month term, with no requirements on the part of the lender for the practice's daily deposits. Because they're unsecured loans, the heart of the business, such as machinery or real estate, is not put at risk.

2) Direct franchise loans. Traditionally the answer for anyone buying a franchise is to go with an SBA loan. But what if you don't qualify for an SBA loan, or what if you don't want to pay their loan guarantee fees? On some busineses, that fee is going to be as high as 15%!

This program can get approved more quickly than a traditional SBA loan, and it can be thousands of dollars cheaper than for the entrepreneur!

If you want to talk about these or any other loan scenario, call me on my new 800 number: 800-956-3915.

Good news for Kansas City

Two bits of good news for those of in the Kansas City business world:

1) Our area economy is strong and expected to stay strong through 2008, with strong growth predicted in the coming year. KC should have strong job growth for the next two years.

2) Commercial real estate will stay strong as well, with new projects breaking ground. KC is taking the lead among MidWestern cities, and is on track to become a distribution powerhouse.

The Fed holds an auction

So because banks are having trouble borrowing money to lend out, the Federal Reserve is holding an auction. Banks get to bid on money that they can't borrow from each other.

Essentiallly the Fed is injecting money into the system to offset the credit crunch, not just here, but also in Europe. From the story:

The Fed linked the new auction process to an announcement that it was extending a line of credit in dollars to the European Central Bank and the national bank of Switzerland so that those institutions could better deal with credit problems in Europe. The Fed said it was also coordinating with the central banks of England and Canada.

The stampede starts to turn

Back in the days of the Old West, during the long cattle drives from South Texas up to Kansas or beyond, there was no question of if the cattle would stampede -- it was a matter of when. Any sudden noise, from a dropped cookpot to a clap of thunder, could set the longhorns off.

Once a stampede was under way, there really wasn't anything that could actually stop it. Thousands of cattle would be running like mad.

The only way to get the herd back under control that I heard of was to ride to the front and to the side of the stampede and start firing shots into the ground. The idea was to make the herd turn and turn again, until the stampede was essentially panicked cows running around in a circle. After awhile, they'd get tired of running and go back to "normal."

If a "herd mentality" was to blame for the "credit crunch", then you can see the stampede starting to turn in this article from Forbes. Essentially a French bank, finding that it can't sell its SIV, is taking over the fund itself.

Here's the money quote:

About 9% of the fund's $4.3 billion portfolio of investments is made up of securities backed by American subprime mortgages, and investors are wary of investing in anything that is backed by to subprime debt because of the growing number of defaults in the United States.

If half of that debt went bad, the fund would be off by 4.5%. Yet investors are so skittish that they're not willing to pay anything over firesale prices for that risk.

While no one wants to lose 4.5%, it beats losing 50%, or more. Investors in Societe Generale are responding positively to the move, and stock prices in the bank are going up on news of the move.

New product alert

A new product that's now in the mix: short-term "hard money" for commercial loans. Essentially this is a bridge loan, with an interest-only payment option and a 75% LTV cap. The loan size goes all the way up to $100,000,000, and this loan is idealy suited for foreclosure bailouts and bank workouts.

Well, actually, it's "effect" not "affect"...

If you can ignore the mistake in the title, this essay posted on Net Gain Real Estate is actually quite good.

Titled (incorrectly) "The Affect of Record Crude Oil Prices on Commercial Real Estate," the author does some analysis on what rising oil prices mean, not just for retailers, but also for employers in the non-retail section. Required reading if you're going to buy commercial property.

Well, that's interesting....

Years ago, when I was in college, my work-study job was in the theater technical department. This was where I found out life skills like how to splice tape, run and dress cable, and how to solder three-pin connectors. In short, skills that are mostly useless now, but ones I'm still glad to have.

The theater's Technical Director was a man named Bob Bovard, who had what could only be described as a very dry sense of humor. When something really went very wrong, Bob would stand amidst the wreckage and say, with apparent relish, "Now that's an interesting problem."

Here's a piece of news, that, to put it mildly, is an interesting problem: some banks in the United Kingdom are asking customers to stop borrowing money.

In other words, these banks can't execute their core business for another four weeks. Granted, these are special customers and specific loans, but even so -- imagine calling your customers and saying "please don't work with me for four weeks."

So how did the subprime meltdown get this bad? If you can get past the funky formatting, Richard Martin, a Canadian management consultant, has this very good write-up on how a herd mentality developed. Essentially people were loaning money based on assets that didn't exist, and then packaging those loans and selling them to each other. Now, no one knows exactly how much is in the bag they're holding.

What does this mean for you? One, don't overestimate the degree to which the sky may be falling. But secondly, do make sure the loans you're in now are the loans you can be in for a 3-5 year window.