Tuesday, July 30, 2019

Golden InfoNuggets - JUNE - Business, CRE, Finance, Tech, Blockchain and AI


We use a powerful method of sharing - post #GoldenInfoNuggets on Social Media multiple times daily or in regular emails (every 5-15 days).  We’ve been sharing the essence of articles and a few powerful comments regularly.* 

Commercial Real Estate, Finance, Technology, Blockchain and AI

Yves Mulkers (17 years - high-tech consultant, entrepreneur).  AI CAN HELP DETECT FINANCIAL CRIMES.  According to Paige Dickie (8 years - entrepreneur, AI, banking), who develops #AI and #DigitalStrategy for Canada’s #banking sector (#Technology #Analysis #Finance #Business #Data #FinTech #Research #Expansion #Investment #Startup; edited - Article):
  • "AI can have a significant impact in data-rich domains where prediction and pattern recognition play an important role: risk assessment, fraud detection etc in the banking sector.
  • AI can identify #aberrations by analyzing past behaviors.
  • There are, of course, concerns around issues such as fairness, interpretability, #security and privacy."  Lnkd.in/eHVFa99
Marc Rutzen (10 years - CRE, finance).  LENDERS CHANGING #CRE FINANCING - to underwrite profitably in this space requires minimizing human involvement.  Lenders are investing heavily in startup companies to help build a competitive advantage in this arena (#Technology #Analysis #Finance #Business #Data #FinTech #PropTech #Research #Expansion #Investment #Startup; edited - Forbes Article):
  • "I was surprised how few large #multifamily lenders made loans for smaller than 50-unit apartments.  Larger transactions create larger fees, and underwriting costs are too much for small properties.  This segmentation has impacted the way technology has developed to serve the multifamily industry.  
  • Over the past 20 years, a strong data ecosystem has evolved around the 50+ market, and more standardization than you'd see with properties less than 50 units, furthering focus on the top end of the market. BUT with greater access to data, the largest brokers, lenders and owners are now competing for slimmer and slimmer margins at the top end of the market.
  • So lenders are becoming increasingly interested in the small-balance loan market to generate greater volume and profits.  But, to underwrite profitably in this space requires minimizing human involvement.  Lenders are investing heavily in startup companies to help build a competitive advantage in this arena.  Lnkd.in/eYrUm49

1. Processing scanned #RentRolls and #T12s - converting scanned [even Excel PDFs] to spreadsheet documents is generally time consuming, but very soon, parsing software will process scanned rent rolls and T12s with ease.  [Requiring the documents in the proper format obviates most of this.]  More available time SHOULD increase customer service, marketing and profitability.
2. Standardizing the Underwriting Process - in 3-5 years, lenders will either make everyone use a standardized template for underwriting deals, or (more likely) use AI for translating between different financial models, databases and documents.  Lnkd.in/dyJp-EG
3. Automated Valuation Models (#AVMs) For Commercial Real Estate - this is the holy grail. Automated valuation models for commercial real estate are coming to the market (such as , GeoPhy and Clik.ai). Just as lenders use automated valuation models as guidelines in residential real estate (such as CoreLogic, Zillow and ), they will start to adopt AVMs to 'preapprove' CRE deals. This will allow lenders and brokers to prospect for deals much more efficiently, evaluate loan portfolios instantly, and quickly distinguish between deals that can be underwritten automatically from those that require a deeper dive by underwriting teams. This will significantly increase lenders' profitability, and substantially decrease the time it takes for everyone else to get a loan. 
  • At the end of the day, the cutting-edge technologies that lenders are investing in today are going to make everyone's lives much easier in CRE.  Keep that in mind the next time you're responding to a document request from underwriting."  Lnkd.in/e3-HMK3
Edvancer.  DATA CLEANING – "the secret ingredient to the success of any Data Science Project (#Technology #Analysis #Finance #Business #Data #FinTech #Research #Expansion #Investment #Startup; edited - Article): 
  • Raw data is collected from various sources and usually unsuitable for analysis. There might be many entries for a shopper leading to duplicity, or there might be a typo in the email ID of a customer, or some of the questions might have been left blank by a surveyor.  
  • With an uncleaned dataset, no matter what type of algorithm tried, one will never get accurate results, which is why data scientists spend a considerable amount of time on data cleaning.
  • Better data beats fancier algorithms.  Steps and techniques for data cleaning will vary for each dataset, but the standards are:
  • Identifying relevant data and removing irrelevant data
1. Fix Irregular cardinality and structural errors2. Outliers3. Missing data treatment
        Many details and examples in the article.  Lnkd.in/euJfuqA

        Ricardo Rodríguez (18 years - IT, entrepreneur) noted Tech Business Guide's  "AI PRODUCTIVITY APPS for ANDROID (#CRE #Technology #Analysis #Finance #Business #Data #FinTech #PropTech #Research #Expansion #Investment #Startup ; edited - Article)
        • Personal Assistant Apps - Google Assistant; Lyra Virtual Assistant; Cortana; Knowmail; Hound; BriN.ai; ELSA Speak.
        • AI Camera Apps for Android - Flow (powered by Amazon); Google Lens; Cam Find."  Lnkd.in/exsReYu
        Matt Senechal (23 years - IT sales).  "HOST IDENTITY PROTOCOL is HIP!  The Foundation for Zero Trust Networking - a result of over 20 years of development, testing, and deployment in co-ordination with international companies, as well as standards bodies such as the Trusted Computing Group, IEEE 802, before being officially ratified in 2015 by the Internet Engineering Task Force (IETF).  HIP 101 Topics (#Technology #Analysis #Business #Startup #Research #Expansion #Investment #SmallBusiness #AI #Blockchain #DataScience #STEM #cybersecurity #zerotrust #hip #nationalsecurity; edited - Article):
        • The Cause of Network Complexity and Security Exploits;
        • Abstracting the IP Layer With Verifiable Machine Identities;
        • Self-Generating Key Pairs;

        Commercial Real Estate, Finance and Business

        Liberty SBF.  "NON-BANK #LENDERS (NBLs).  Good summary of how NBLs are essential to the #CRE #mortgage landscape.  They offer some banking services, but do not take deposits from its customers or the public (#Analysis #Finance #Business #Data #Startup #Research #Expansion #Investment #SmallBusiness; edited - Article):  

        OBTAINING a NON-BANK CRE LOAN - bank declines leave many small business owners in need of financing. Look for the best non-bank lenders, whose leaders have years of experience of economic ups and downs in the CRE sector and a thorough understanding of loan procedures. Qualifying is as rigorous as qualifying for traditional financing:
        • Why seeking a loan - property acquisition, a refinancing, a building upgrade, or other?
        • What kind of financing is appropriate for the project.
        • Choose an NBL with expertise with your specific deal, and is experienced, highly responsive and efficient.
        • Loan seekers/brokers increase success with careful presentation, and if the source is well researched, once may be all that’s needed."  Lnkd.in/eub28d8
        SBA 504 LOANS:
        • SBA loans are like traditional term loans with greater benefits and they’re partly guaranteed by the US government. An SBA 504 loan minimizes risk for commercial lenders, and gives creditworthy business owners (with sufficient liquidity and net worth to be acceptable to the lender) access to better financing than they would otherwise qualify for in a conventional loan.
        • The experts at a strong SBA lender specialize in helping guide borrowers though the loan process efficiently to ensure their successful SBA 504 loan closing.   Now is the time to lock in a fixed-rate CRE loan while interest rates are still low.  Get the job done in 45 days or less."  Lnkd.in/dMENBtg
        CHARACTERISTICS (comment, last month):  Lnkd.in/e_Mg93u

        Southpace Properties. #FINANCING #CRE PROJECTS (#Technology #Analysis #Finance #Business #Data #FinTech #PropTech #Research #Expansion #Investment #Startup; edited - Article - Part I).

        SMALL #LOCAL #LENDERS - Since 2008, most of the factors that contributed to the downfall of the property market have been addressed. However, buyers and banks are proceeding with caution, but it is possible for local developers to secure the capital needed to finance a smaller projects:
        • $15M to $100M+ loans are generally only financed by major regional and national banks, large lending institutions and well-established insurance companies, with many locations, resources, securitizations, and compliance checks and balances.
        • $2M to $15M projects should consider #Community #Banks, that generally look for long-term professional partnerships with commercial customers that extend far beyond standard transactional engagements. Not only do they want to undercut the competition at the best rates, they usually want to gain a comprehensive understanding of both your personal and professional financial portfolios. They develop a customized, mutually-beneficial final lending solution that’s equitable and conservatively written to ensure minimized risk and optimized profits for both parties." Lnkd.in/epGdPqj 
        • The 2008 CRE tumble helped lending institutions recognize the errors made, both by themselves as well as by other loan developers in the region. These banks are now well equipped (and determined) to avoid repeating those same mistakes with today’s buyers and investors. These lenders are striving to eliminate unnecessarily risky financing options, opting instead to get back to the essential lending basics of partnering with knowledgeable industry leaders who are uniquely positioned to succeed amidst any market strain. 
        • As a result, more banks are returning to the well-known 'five C’s' of credit to create and maintain robust, yet conservative, commercial loan underwriting."  Lnkd.in/e8G-yy7
        The #CREDIT 5 C’s "establish a thorough system of checks and balances that weighs each component to gauge risk for financiers.  Understanding them help you determine your eligibility for a CRE loan:
        • CHARACTER - financial institutions want to lend to [management teams] that have consistently repaid debt. Their credit history determines a pattern for meeting previous or current debt service.  Banks may include analysis on:

        1. Current standing in the market
        2. Capability for growth
        3. Experience in the industry
        4. Sustainable business model [and plan]
        5. A bank may ask for
        6. Personal financial statements
        7. Personal and Business credit reports
        8. Performance of deposit accounts
        9. Bank statements
        10. Owner resumes."  Lnkd.in/eCgiCJG
        • CAPACITY - aka #CashFlow - determines whether the investment can generate enough to repay overall debt, with a debt service coverage ratio of 1.2 for enough 'wiggle room.' Doc requirements:  historical, interim, and projected financials, tax returns, and rent rolls for leased properties.
        • COLLATERAL serves as a safety net to cover unforeseen circumstances and is essential to prove that an organization has assets to cover the loan.  Doc requirements:  valuation of the property, equipment and assets, depreciation, and a statement on marketable security accounts.
        • CAPITAL establishes a company’s ability to sustain an economic downturn and gauges a borrower’s commitment to the success, expecting owners to contribute 20-30% of the total investment value to secure financing. Capital may include retained earnings and capital raises.
        • CONDITIONS - it’s essential for banks and other financial institutes to evaluate economic conditions as well.  During economic downturns or turbulence, it may be tougher for commercial property borrowers to secure the financing."  Lnkd.in/e4SfCPe

        Beth Mattson-Teig (26 years - CRE journalism).  SMALLER #BANKS STEP UP #CRE #LENDING (#CRE #Technology #Analysis #Finance #Business #Data #FinTech #Research #Expansion #Investment #Startup; edited - NREI Article):  
        • Smaller banks [and Credit Unions] are carving out a bigger CRE foothold, competing more aggressively to win deals, with the market tilting towards banks <$100B."  Lnkd.in/eGvYS8U
        • "Smaller banks have been more willing to do CRE, holding 78% of the market share on construction loans late 2018 vs 56% 10 years earlier 2008, with larger banks conserving capital for existing clients."  Lnkd.in/ehRnRAh
        • "Competing for deals outside their geographic footprint, lately following clients to new markets, sometimes through relationships with mortgage brokers.
        • Competition is pushing banks to be more competitive on loan pricing and structure, with smaller banks willing to be very aggressive to win deals."  Lnkd.in/duHwWxE
        • "Although industrial properties are in high demand, some smaller banks struggle with the speculative nature of most industrial developments."  Lnkd.in/eGCS82S
        • "Inconsistencies in how banks are regulated that has opened the door wider for smaller banks., which can be regulated at state or federal levels.
        • Mortgage delinquencies are at extremely low levels of about 0.5%." Lnkd.in/eNeW9rK
        NADCO: National Association of Development Companies via Progress Capital. "#SBA504 #LOAN PROGRAM'S 20-YEAR #FIXEDRATE DIPS BELOW 4% - a Milestone Low-Rate in Program's 33-Year History (#CRE #Technology #Analysis #Finance #Business #Data #FinTech #PropTech #Research #Expansion #Investment #Startup; edited; NADCO Article):
        • Borrowers of SBA 504 loans this month will be in the first class with 504 financing fixed at a rate below 4% in the program's history. The 20-year effective rate for the June sale was 3.98%,* edging below the 4.01% record set in December 2012.  This is the first time a 20-year 504 effective-rate calculation has been this low**.
        • Another standout metric is the 504 rate when compared to the current #prime rate. At 152 basis points under the Bank Prime Rate, the June funding is the furthest below prime that 20-year rates have been since May 2007. Even if the Federal Reserve makes the two ¼-point policy rate CUTs anticipated by the market this year, the 504 effective rate may remain approximately 1 full point below prime (not including any additional spread over prime charged by many CRE lenders).
        • The SBA 504 Loan Program is facilitated by SBA-certified development companies (#CDCs).  Typically, small business borrowers make a 10% down payment, a bank or credit union finances 50% of project costs in the first lien position, and a CDC finances 40% of project cost in the second lien position that is guaranteed by the US government. This loan program, with 10, 20, and 25-year fixed rate options, is used for commercial fixed assets (land, property, construction, or equipment) with total project costs from approximately $100,000 to approximately $15,000,000.
        • NADCO represents over 200 CDCs – the SBA's certified on-the-ground partners charged with facilitating SBA 504 loans. NADCO CDCs are ~95% of the industry, which serves all 50 states. In FY2018, the SBA approved 5,874 504 loans totaling $4.7Bln.
        *The 3.98% rate is the current fiscal year effective rate, defined as the 20-year maturity effective rate calculated by the Central Servicing Agent using a 0.625% CDC fee and the borrower fee for the current government fiscal year.
        **Based on the current fiscal year borrower fee."   Lnkd.in/eSYHSg7

        BisNow #CRE #CAPITAL IS COMPETITIVE AND READY TO DEPLOY (#CRE #Technology #Analysis #Finance #Business #Data #FinTech #PropTech #Research #Expansion #Investment #Startup; edited - Article):  
        • Despite frequent debates about whether the CRE market is in its final leg of a 10-year cycle,  'It seems [capital] has become much more abundant the last year, so there is more competition for high-quality loans.  Multifamily is still a relatively robust market particularly if you stay away from luxury product.' --Trez Capital
        • Mortgage Bankers Association data shows commercial/multifamily mortgage debt outstanding rose by $45.3B (1.3% to $3.46T) in 2019Q1.  Commercial banks hold to most (39%), then agency and GSE portfolios (20%), life insurance companies (15%) and asset-backed securities (14%).
        • Strong funding is good, but some private direct lenders more able or willing to loosen their underwriting standards, are competing against other debt and equity providers.
        • Many more private lenders are emerging and chasing yield, so capital providers are having to compete on various metrics from underwriting to price."  Lnkd.in/eWH6Q3m
        Laws.com.  "FACTS YOU DIDN'T KNOW ABOUT COMMERCIAL LENDING - to help companies fund short-term expenditures or pay for capital equipment, backed by hard collateral (#CRE #Analysis #Finance #Business #Data #Research #Expansion #Investment #SmallBusiness #Startup; edited - Article):
        • Common Practices - qualifications and standards vary, but generally based on the company’s ability to make money and their credit history, and are viewed as more lenient compared to banks; 
        • Brokers - facilitate the process and to deliver an innovative way to overcome obstacles impeding access to funds, but may incur more up-front fees and higher loan rates; 
        • Industry - operates with responsiveness and speed, making it attractive for quick sources of funding, but watch out for predatory brokers; 
        • Loan Terms - shorter than residential, generally 5-10 years [but may amortize over a longer period ending with a balloon payment].  Watch for pre-payment penalties."  Lnkd.in/ev4r5Uq
        Katie Dahlin (6 years - real estate, consulting).  #STEM DRIVING #OFFICE #GROWTH (#CRE #Technology #Analysis #Finance #Business #Data #Startup #FinTech #PropTech #Research #Expansion #Investment #SmallBusiness #AI #Blockchain #STEM; edited - Report Page):
        • "STEM-related occupations are being created at much higher rates than are jobs in all office-using industries. 21 markets accounted for 50% of all computer/math occupations in the U.S. in 2017"  
        • Makes sense since STEM workers "rule" and will continue to drive every industry, even customer support, because "who you gonna call" when your robot acts up?  Lnkd.in/ecrwWiz
        Much more from earlier and originals at our LinkedIn Posts

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