The Importance of Luck and Timing in Real Estate
They say “timing is everything,” right? Well in financing commercial real estate, this statement holds true in almost every aspect of the business. But, when it comes to financing, here are some tips on the best (or worst) times of the year to “get lucky.”
There are some times of the year that are notorious in banking for everyone being “checked-out.” Of course, the holiday season from Thanksgiving through New Year’s is one in which the “No Vacancy” sign is lit up like a Christmas tree announcing to the world that “if we are not already working on a deal together, don’t bother because I am finishing what is on my plate. Then I’m going on vacation! See you next year!”
Then there is the two-headed snake of the summer. At the beginning of the summer, kids get out of school, and many families go on their summer vacations, slowing down the financing process. At the end of the summer, the bond markets go on hiatus during the Labor Day holiday, making many conduit CMBS transactions more difficult to close during this time of year. It is often better to be prepared to close in mid-September after the markets (and kids) go back to work (or school), trading volumes pick back up, and largely volume-based volatility normalizes.
Considering that the financing process from start to finish averages about 90 days, in reality, the best time of the year to start the financing process is during the first quarter of the year. Bankers are refreshed and eager to meet their annual lending volume quotas, meaning bonuses! Second best to the first quarter is right after Labor Day. During this time, people are back from their vacations, kids are back to school, and lenders are again eager to get their last round of deals started for the year so that they close before the holiday season, earning their stocking stuffers from employers.
Most real estate professionals are in and out of the capital markets several times in any given year but not always at the most opportune time. However, Metropolitan Capital Advisors lives, sleeps, eats, and breathes the commercial real estate capital markets. Clients and borrowers are far better served by listening to a finance intermediary who is well schooled in the CRE Capital Markets and understands the ebb, flow, and timing considerations of the transaction business.
For example, last summer markets were melting down due to the debate about increasing the U.S. debt ceiling and the resulting downgrade of the U.S. credit rating. MCA recommended to a client that we withdraw the transaction from the market until after Labor Day. In doing so, the client secured a far better loan with more proceeds at a better interest rate. While it is easier to be lucky than smart, it is better to be smart and create your own “luck!”
“I’m a great believer in luck, and I find the harder I work, the more I have of it.”