Private Equity Firms Step Up CRE Debt Financing

Private equity firms have been moving into debt financing at all different levels of the capital stack with increased velocity over the past 24 months.

The number of players has widened and where they are focusing their energies also has widened out, says Neil Bane, senior vice president, capital markets, at Walker amp; Dunlop, a provider of commercial real estate financing solutions, in New York City. Originally, that shift started a few years ago with big players such as Cerberus, Blackstone and Colony Capital stepping in to provide debt financing to investors buying pools of single-family home rentals. That segment of the market has evolved to the point where private equity firms are now providing capital to a variety of property types as well as the acquisition of land for new development.

Blackstone recently loaned $102 million for the development of Hyde Resort amp; Residences in Miami. The $200 million condo and hotel project includes more than 400 units. In another Miami deal, Canyon Capital Realty Advisors LLC provided a $157 million senior construction loan to a joint venture between the Related Group of Florida and SBE Hotel Group to finance the development of the SLS Brickell Hotel amp; Residences.

Private equity firms are focusing primarily on making mezzanine and bridge loans, as well as construction loans. To a lesser extent, they will also do long-term permanent loans. The investment horizon of a private equity firm is shorter, which necessitates the life span of their loans having a shorter maturity date, says Jay Sakalo, a partner in the business finance restructuring practice group at the Miami-based law Firm Bilzin Sumberg.

Private equity groups have had tremendous success in raising large amounts of capital. Blackstone alone has raised billions of dollars. That has allowed these firms to take a much broader approach to real estate investment in not just buying properties, but also providing mid- to high-yield debt financing to the market, says Bane. And I think we are going to continue to see that for the foreseeable future, he adds.

Debt financing, particularly as it relates to mezzanine and bridge loans, also offers higher yields. Mezzanine financing might generate returns in the low teens compared to cap rates for trophy assets in major metros that have dipped below 6 and even 5 percent in many cases.

Private equity firms are filling a void in areas where other lenders have not been as active, such as properties in transition or borrowers that have less than stellar credit. For example, pre-recession there were a number of Wall Street firms and conduits providing construction financing and bridge loans. That is not a case today and private equity players see that as an opportunity. They have also been active in providing financing for condo conversions that are making a comeback in markets such as Florida.

What you find today is that the larger banks, Wells Fargo and Bank of America, are reserving their balance sheet for their best clients, says Bane. So, private equity firms are taking advantage of that and trying to provide service to a broader audience and higher leverage financing for properties in transition.

So how do private equity loans stack up to other financing sources for borrowers? Private equity money is by no means cheap. Rates for private equity loans are typically higher than for other institutional lenders such as banks, life companies and CMBS money. That being said, rates can vary widely depending on the individual deal and its structure, says Sakalo.

Where private equity lenders often gain a competitive edge is speed and less bureaucracy in their decision making, notes Sakalo. For example, Sakalo has worked on bridge loan deals that have closed in less than 30 days. In addition, private equity firms generally dont require developers to give personal guarantees. Another advantage is that they can co-invest, bringing capital to both the debt and equity side of a deal.

Yet there is no guarantee on how long private equity will remain committed to providing debt financing to real estate. Private equity has traditionally done a very good job of asset allocation and understanding where their money should be deployed based on perceived opportunities on a short-, medium- and long-term basis, says Sakalo. So depending on where real estate goes overall in the economy will dictate how long of a play this remains for private equity, he notes.

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3 Things Silicon Valley Entrepreneurs Can Learn From Wall Street

1. Long-term inflation and low interest rates are your friend. The purchasing power of the dollar has steadily declined since 1971, when its convertibility into gold was suspended. The Fed has printed so much money that the value of the dollar has decreased, by about 83%, according to basic purchasing power calculators. But this long-term depreciating trend can be beneficial to entrepreneurs.

Must Read: Warren Buffetts 7 Secrets to Dividend Investing Revealed

This means that rich people, who are your potential angel investors, face an asset-allocation and capital-preservation problem. They get virtually no yield if they park their money in savings accounts. In the US, there are 8.5 million accredited investors, those eligible to make angel investments, but not all of them are doing so. According to one survey,less than 11% of them were making informal investments.

Because of persistent inflation and low interest rates, rich people are looking to invest, but many havent gone the angel route.

Forget that youre a hungry start-up entrepreneur. Make the conversation about your potential investors: Ask them how they allocate their wealth and what kind of risky assets are in their portfolios. Counsel them that its important to diversify, to put a small part of their assets in emerging-market stocks, hedge funds or your start-up. Its important that you see the investment landscape from their perspective, to better understand how your company can fulfill their wealth-building objectives.

2. You are biased. Behavioral economistscontend that no rational person should play the lottery. The odds of winning are nearly zero. However, my father plays the lottery every week. He exhibits a cognitive bias, the term that behavioral economists use when explaining how humans make irrational financial decisions. In this case, my father demonstrates whats known as the availability bias: He can easily remember the pictures from the evening news of those winning the lottery, so he has inflated expectations of winning, instead of a calculated understanding of the low statistical probability.

Does this sound familiar? No rational person should start a company, because the odds are long. As an entrepreneur, you admire Facebook (FB) CEO Mark Zuckerberg for his success. But dont inflate your expectations of success based on his. Not all start-ups make it.Henry Blodget has written that companies accepted into theY Combinator start-up program have less than a one-in-10 chance of becoming a big success. Researchers have found that entrepreneurs are more likely to demonstrate cognitive biases like availability and overconfidence. If youve identified your own cognitive bias, and understand your long shot odds, and you are undeterred — I admire your tenacity. To paraphrase Steve Jobs, heres to the irrational ones.

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Lafayette Federal Credit Union Review

Choosing a big, national bank doesn’t always mean you’ll get the most competitive products or the largest menu of services. Lafayette Federal Credit Union (LFCU), a regional credit union in the Washington metropolitan area, manages to provide a plethora of perks and products that would amaze big-bank customers.

Lafayette Federal Credit Union Review

Founded in 1935, LFCU was originally created to serve the employees of the Reconstruction Finance Corporation, the RFC Mortgage Company and the Commodity Credit Corporation. But today, six branches serve members around the Washington, DC, area.

The Jack Welty and SBA financial service centers in DC offer service from 8:30 am to 4 pm, Mondays through Fridays. Four locations — Columbia Heights in DC, Kensington in Maryland, Cabin John in Maryland and McLean in Virginia — are open Saturday mornings from 9 am to noon, with Cabin John also offering later hours on Thursdays.

LFCUs savings are federally insured by the National Credit Union Administration to at least $250,000.  IRA deposits are insured separately to an additional $250,000. 

Lafayette Federal Credit Union Products and Services

A review of LFCU reveals you can expect all of the financial products you’d typically get from a big bank, as well as more conveniences and niche products. For example, members of the credit union can earn 0.025% APY on checking account balances of any size. It’s an easy bar to reach for an interest-bearing account: just $5 to open, no minimum balance requirement and no monthly maintenance fee.

The bar for a basic share savings account is equally friendly; it only costs $50 to open and maintain. The account also offers dividends of 0.10% APY.

LFCU’s other savings accounts skew toward members with much higher balances. Preferred Savings accounts target members with balances as low as $0 and higher than $20,000. Depending on your balance, you can earn 0.10% APY, 0.20% APY or 0.30% APY. Premier Savings accounts, on the other hand, offer various APYs on balances of at least $50,000.

The credit unions competitive rates for fixed-rate certificate and IRA accounts range from 0.40% APY to 2.01% APY, based on your balance.  Terms start at seven months (not including IRAs) and extend up to five years. Meanwhile, fixed-rate certificates and IRAs require a $500 minimum opening deposit and balance to earn the APY. You’ll find more flexibility in LFCUs variable-rate certificates, however. They require a $50 minimum opening deposit and balance. Terms extend from 18 months to five years at rates ranging from 0.75% APY to 1.76% APY.

When you need a loan, review the standard options at LFCU: mortgages, home equity loans, auto loans and credit cards. You can establish your credit with a Credit Builder Loan, receive rate discounts with a first-time homebuyer loan, pay less interest with an equity builder mortgage and much more.

The credit union also offers custodial accounts, trust accounts, foreign currency exchange and insurance for your vehicles, home and more. As for business financial solutions, LFCU has a bunch of offerings, including business checking and savings accounts, commercial loans and business credit cards.

Pros and Cons of Lafayette Federal Credit Union

The most obvious advantage of becoming an LFCU member is having access to its comprehensive range of financial products and services at nationally competitive rates. For example, the Lafayette Federal Platinum Rewards card beats big-bank rewards credit cards in almost every way. The credit card boasts lower rates for regular purchases, balance transfers and cash advances, as well as lower fees for cash advances and late payments. Also, there are no balance transfer or annual fees.

Related: 7 Benefits of Opening a Credit Union Credit Card

Members will find few drawbacks to LFCU’s generally fee-free basic services. But there is one exception: the $5-per-month fee to use the online bill payment service, which is usually a free service at other banks and credit unions.

Additionally, the credit unions website could be a plus or a minus, depending on your preference. What looks cluttered and old-fashioned at first glance turns out to be surprisingly user-friendly. Instead of being buried behind fancy splash pages, everything is easy to find in drop-down menus.

Bottom Line

As long as you are eligible for membership, LFCU can cover many of your personal and business financial needs. Without a doubt, you’ll find competitive rates on standard financial services, plus a slew of other benefits.

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WSJ: Borrowers Are More Delinquent in Home-Equity Loans

Banks are potentially facing billions in losses as homeowners face a rude financial awakening after embarking on a borrowing binge 10 years ago.

Borrowers who took out home-equity lines of credit (commonly called Helocs) when real-estate prices were surging are struggling to keep up as principal finally comes due after years of interest-only payments, The Wall Street Journal reported.

Homeowners who signed up for Helocs in 2004 were 30 or more days late on $1.8 billion worth of outstanding balances four months after principal payments began, according to data provided to Journal by credit-reporting firm Equifax.

That represents 4.3 percent of the balance on outstanding 2004 Helocs, according to Equifax a sharp rise from the 2.7 percent delinquency rate on those same Helocs one month before borrowers reached the end of the interest-only period, which typically lasts for 10 years, the Journal reported.

With a Heloc, consumers borrow against the equity they have in a home. Monthly payments can rise by hundreds of dollars when the interest-only period ends.

There are some early signs of choppy waters ahead, said Dennis Carlson, deputy chief economist at Equifax.

And such a problem with late payments on Helocs may spread to other facets of the economy and continue to be a lingering problem, experts warn.

Borrowers delinquent on their Heloc were found more likely to also be delinquent on other loans. Global information services group Experian looked at delinquencies on other consumer debt like mortgage, credit cards, auto loan and auto lease.

Experian also found that Heloc originations have been rising since 2010 after falling during the recession when borrowers had little equity in their homes. Heloc originations were $20.44 billion in originations in the fourth quarter of 2010, but soared 81 percent to $37.04 billion in the same quarter last year, National Mortgage News reported.

As home prices have rebounded in much of the country, were seeing the same trend with Helocs, said Michele Raneri, Experians vice president of analytics and business development.

This could be a sign of the economy further recovering, yet there are still concerns about the pre-recession Helocs that are now in repayment and how that could negatively impact consumers and the economy as a whole.

Related Stories:

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  • Boston Community Capitals Cherry: Housing Crisis Persists for Lower-Income Americans
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5 unexpected steps to building wealth

Building wealth isnt rocket science, but it isnt always obvious, either. While the foundation of building wealth is in smart savings habits, there are numerous other steps to the process that can both expedite the process and boost your savings potential. So with that in mind, Im sharing my five most unexpected steps to building wealth.

1. Stop Procrastinating

The longer you wait to start building wealth, the more you stand to lose. Procrastinating on your savings and wealth building plans only keeps you from taking advantage of compound interest. The more time you give yourself to collect interest and then collect interest off that interest, the faster and easier it will be for you to build wealth.

2. Be Open to Taking Risks

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Hiring Guru: Tim DeCapua – Wealth Building Real Estate

Tim DeCapua is President of Wealth Building Real Estate, helping create turnkey opportunities for the inexperienced investor, and we cut right to the chase. I asked:

How do you help clients build wealth with real estate?

Our team has been buying, fixing, and selling houses full time since 2006. We developed a system that allows us to buy at a low enough price to fix them, place turnkey tenants using professional property managers, and sell them at wholesale value to our clients around the world. As investors were very particular as to the properties that we select to purchase. Any property that does not meet our standards is not considered, meaning our clients receive only the best properties. We have a professional property management team in place that works to select trustworthy tenants, and manages the property for our clients.

Im a hiring guy, so know WHO your clients deal with is of great importance; does that factor in to your process of adding new personnel to your team?

Its extremely important for me to be personally connected to the process when it comes to adding new team members. Im very involved, and have my finger on the pulse of hiring for all of our ventures.

What about selection of the extended team like contractors?

Yes, definitely! If its a contractor that is working on one of our properties, they must do quality workmanship, and not cut corners with their repairs. If its one of our sales individuals, they must be a good listener, must be passionate, and a good communicator.

Do you have an anecdote or philosophy to share that comes to mind that would sum up your thoughts about hiring?

Yes! When were looking at hiring someone, its adamant that they be a diligent hard worker. They must be passionate, a good listener, good communicator, and have integrity.

Do you have Core Values your team follow?

Yes. The Wealth Building Real Estate Way: We strive to deliver fully renovated, income producing, and professionally managed property to investors all over the world. Customer service is extremely important in any business, but especially when dealing with someones home, or investment. We make it easy for investors to purchase the right property, at the right price, while protecting your capital, and providing exceptional customer service, and property management.

What has driven you in building such success?

For starters, I feel appreciative, and blessed that I have parents that instilled a strong worth ethic, and discipline. Being able to genuinely help others is the main driving factor on a daily basis.
And that closes the deal on this one!

Interview by David Jensen for The Huffington Post

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Financially Tuned with Tara Nolan

Tara Nolan is a High Net Worth Advisor who offers a unique and specialized approach to planning for her awesome clients.  Tara combines 15 years of strategic military planning with her knowledge of finance and investing to provide comprehensive, insightful and detailed personalized planning for her clients.  Tara specializes in helping smart people who have limited time to donate towards investment planning due to business and family demands on their time to achieve and retain the lifestyles they want.  

Tara graduated from the United States Air Force Academy and succeeded as a military officer meeting many challenges. She was an aircraft commander flying C-130 cargo aircraft in combat zones, managed logistical systems world-wide and taught biology to future Air Force leaders at the Air Force Academy. Tara’s problem solving, critical thinking and planning skills have been honed through real-world experiences and are now directly benefitting her clients with specially tailored portfolios. Tara understands the value of building a strong team of experts and knows how to lead the team to achieve success. 

Tara decided to focus on innovative methods to support people in a client focused manner. An educator at heart, Tara enjoys taking time with people to learn their needs and desires. Then, she likes to clearly present and explain the options open to them in their wealth building process.   

A life-long learner… Tara has a voracious appetite for knowledge that complements her real-world experience. She holds an MBA from the University of West Florida, an MS from Colorado State University, numerous financial series licenses, completed Undergraduate Pilot training, 2 senior level military leadership programs and locally is a Leadership Pikes Peak program graduate Class of 2011.  

Tara believes… knowing your options greatly reduces stress because you can take positive steps towards your goals. Your financial future should not be an unknown outcome or a surprise! 

Living her lifelong dream , Tara now actively competes her horses, Donzer and Ava in Dressage. Tara competes in the United States Dressage Federation, the Rocky Mountain Dressage Association and the United States Equestrian Federation. Tara is a Pikes Peak Therapeutic Riding Center board member and has donated a horse to the program. Tara lives with her husband, three horses and many barn cats on their 13 acre farm. In addition to being a superb horse husband, Kris, is a successful local businessman in Colorado Springs

In order for my clients to achieve the lifestyle of their dreams, I offer a comprehensive range of retirement planning services, savings options that permit both tax-deductible contributions and tax-deferred earnings, and a dedicated and knowledgeable staff to help with planning your retirement. In addition, I can assist you in developing your overall financial plan to achieve specific goals through targeted tools including 401(k) plans, traditional IRAs and Roth IRAs. I support businesses in their development of employee pension plans and educate plan manager and employees alike. Personal services adapted to individual needs. My services start with a Comprehensive Planning Review. My process has 5 steps to capture, analyze amp; update your financial plan as your life progresses.

What to Expect at Our First Meeting

1.  At the first meeting new clients typically like to discuss one of the following 4 topics:

How do I raise my kids with wealth?  

I am interested in creating my personal philanthropic philosophy?  

How do I do this?

What are my option? 

What are my 4 Estate Planning Must Do Now Issues? 

I need help structuring my tax planning but don’t even know where to begin or what CPA to hire?

 2. In addition to this discussion, you will receive a goal setting workbook to keep. What is the purpose of this workbook?    It is an effectivecommunication tool to make sure you’re on the same page with your partner and yourself.  It is surprising how revealing it can be to write your goals down on paper.  To create an effective plan it is critical to uncover hidden goals and discuss obvious goals.  The true alignment of purpose with yourself and your loved ones is the very first step of creating a successful wealth management plan.  There is a summary page that consolidates your identified goals and we will use this list as the foundation for planning.  Math is a simple, black and white tool to implement your investment plan.

3.  Plan for 30 minutes for this first meeting.   

 

List of Available Services 

Businesses Services
o Individual 401(k) Accounts
o Business 401 (k) Plans
o Plan evaluations
o Plan manager education
o Employee education

 Individual Planning Services
o Financial Planning
o Comprehensive Planning Review
o College Planning
o Estate Planning
o Trust Services
o Transfers to Beneficiaries
o Annuities
o Charitable Endowment Fund
o Charitable Partners Program
o Retirement Planning
o Individual Retirement Accounts (IRAs)
o Individual 401(k) Accounts
o Managed Accounts
o Asset Management Services
o Wealth Management Solutions
o Asset Allocation

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Begins Coverage on Discover Financial Services (DFS)

began coverage on shares of Discover Financial Services (NYSE:DFS) in a research note issued to investors on Saturday. The firm issued a buy rating and a $70.00 price target on the financial services providers stock.

Shares of Discover Financial Services (NYSE:DFS) opened at 58.75 on Friday. Discover Financial Services has a one year low of $54.02 and a one year high of $66.75. The stock has a 50-day moving average of $58. and a 200-day moving average of $59.. The company has a market cap of $26.00 billion and a P/E ratio of 12.07.

Discover Financial Services (NYSE:DFS) last announced its earnings results on Tuesday, April 21st. The financial services provider reported $1.28 earnings per share (EPS) for the quarter, beating the consensus estimate of $1.27 by $0.01. The company had revenue of $2.17 billion for the quarter. During the same quarter in the previous year, the company posted $1.31 earnings per share. On average, analysts predict that Discover Financial Services will post $5.29 earnings per share for the current fiscal year.

DFS has been the subject of a number of other recent research reports. Analysts at Vetr upgraded shares of Discover Financial Services from a buy rating to a strong-buy rating and set a $68.50 price target on the stock in a research note on Thursday. Analysts at Stifel Nicolaus initiated coverage on shares of Discover Financial Services in a research note on Thursday. They set a buy rating and a $70.00 price target on the stock. Analysts at Sanford C. Bernstein reiterated a hold rating and set a $69.00 price target on shares of Discover Financial Services in a research note on Saturday, May 23rd. Finally, analysts at Nomura reiterated a buy rating and set a $66.00 price target on shares of Discover Financial Services in a research note on Wednesday, May 6th. Eight equities research analysts have rated the stock with a hold rating, sixteen have issued a buy rating and one has issued a strong buy rating to the stock. Discover Financial Services presently has a consensus rating of Buy and a consensus target price of $70.45.

Discover Financial Services is a direct banking and payment services company. The Company is a bank holding company as well as a financial holding company. The Company’s products include Direct Banking, Credit Cards, Student Loans, Personal Loans, Home Loans and Home Equity Loans and Deposits. The Company manages business activities in Direct Banking segment and Payment Services segment.

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Can Investors Bancorp, Inc. (NASDAQ:ISBC) Surprise Analysts this Quarter?

In the most recent quarter, Investors Bancorp, Inc. (NASDAQ:ISBC) reported an earnings surprise of 0% when the firm last announced their results for the period ending on 2015-03-31. The actual earnings per share number of $0.12 was $0 away from the consensus analyst number.

Investors Bancorp, Inc. (NASDAQ:ISBC) will next issue their quarterly earnings announcement on 2015-07-23. Brokerage firm analysts surveyed by Zacks research are estimating earnings of $0.12 per share. This is the consensus number calculated from the 6 polled analysts taken into consideration by Zacks. Institutions and investors alike will be closely monitoring estimate revisions of the EPS numbers leading up to the expected results date.

Stock Price Target

Sell-side firms covering the equity are estimating that the stock will reach $13 on a short-term basis. This is the mean estimate based on the 6 brokerage analysts surveyed by Zacks. The most bullish analyst sees the stock reaching 14 while the most conservative target is set at $11.75.

By simplifying the analyst ratings into a 1 to 5 scale where 1 represents a Strong Buy and 5 a Strong Sell, Investors Bancorp, Inc. has a rating of 2.29 . This is the arithmetic mean of all the analyst estimates taken into consideration by Zacks. When the same analysts were polled three months ago, the rating was at 2.29.

Investors Bancorp, Inc. is a holding company for Investors Bank (the Bank). The Bank is a chartered savings bank.The Company is in the business of attracting deposits from the public through its branch network and borrowing funds in the wholesale markets to originate loans and to invest in securities. It originates mortgage loans secured by one-to four-family residential real estate loans, multi-family loans, commercial real estate loans, construction loans, commercial and industrial loans and consumer loans, the majority of which are home equity loans and home equity lines of credit. On January 6, 2012, the Company completed the acquisition of Brooklyn Federal Bancorp, Inc. On October 15, 2012, the Company completed the acquisition of Marathon Banking Corporation. In December 2013, Investors Bancorp Inc competed its acquisition of Roma Financial Corp, and its subsidiary banks, Roma Bank and RomAsia Bank.

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Company Shares of Talmer Bancorp, Inc. Drops by -1.41%

Talmer Bancorp, Inc. is a bank holding company. The Company owns three subsidiary banks, Talmer Bank and Trust and Talmer West Bank, which are Michigan state chartered banks, and First Place Bank, which is a federal savings association. Its product line includes loans to small and medium-sized businesses, residential mortgage loans, commercial real estate loans, residential and commercial construction and development loans, farmland and agricultural production loans, home equity loans, consumer loans and a variety of commercial and consumer demand, savings and time deposit products. The Company offers a full range of deposit services that are available from most banks and savings institutions, including checking accounts, commercial accounts, savings accounts and other time deposits of various types, ranging from daily money market accounts to longer-term certificates of deposit.

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