504 Loan Blog: Curated by Mercantile Capital Corporation

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What do The Celebrity Apprentice and MCC have in common?

If you watched the final episode of The Celebrity Apprentice, you saw Piers Morgan crowned as the winner. You also may have noticed that his charity was the Intrepid Fallen Heroes Fund – the same organization we made a significant contribution to during one of our Holiday Giving campaigns a couple years ago.

For the past few years our staff has decided that it’s better to give than receive, so we’re pooled our personal and corporate gift money and chosen a worthy charity — one giving a “hand-up” rather than a “hand-out.” The Intrepid Fallen Heroes Fund provides help to U.S. military personnel who have been wounded in the line of duty and also for their families.

It turns out that this organization holds a special place in Piers’ heart — his brother has served two tours of duty in Iraq, and his brother-in-law has served two tours in Afghanistan.

We, too, try to do our part and were honored with a commemorative medallion, a special listing in their hard back book and a special title placed near the entrance to the Center for the Intrepid, the National Armed Forces Physical Rehabilitation Center.

Believe it or not, Tony and Nick were at a tradeshow in San Antonio a couple weeks ago and happened to visit the Fund’s state-of-the-art physical rehabilitation facility . . . the very next day after Piers won his Apprentice job! Of course, it was the same facility that appeared in the final episode of Celebrity Apprentice and that we helped build.

Congratulations to Piers, and our many thanks to the Intrepid Fallen Heroes Fund for the help they provide to our brave soldiers and their families.

If you would like to join us in making a donation, you can visit www.fallenheroesfund.org

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NOW is the Best Time to buy commercial real estate.
  • Thursday, March 27th, 2008 at 11:19 am
  • 1 Comment

Why would I stand up against the downpour of economic negativity all around us from pundits, talking-heads, and even many bankers? (Yes, we’ve even heard about life-long employee-bankers tell businesspeople not to buy property right now — maybe they’re too inwardly-focused on their poor residential loan decisions.) Well for starters, there are commercial property deals out there that didn’t exist 12 and 18 months ago, as many prices per-square-foot have come down (and cap rates have risen) in the past several months. Commercial rent rates (the variable expense that business owners CAN convert to a fixed cost) rose more in 2007 than in any other time since 2001 and must continue to rise (perhaps after a brief plateauing currently) in order to produce the returns commercial landlords (especially newer ones) need to justify their investments. Lastly, interest rates for commercial property are near all-time lows. The 10-year Treasury yield (which virtually all commercial financing indices track) hasn’t been this low in my lifetime. Sure, the press gives plenty of attention to reductions taken by Chairman Bernanke, but these mostly affect short-term borrowing — they do virtually nothing to long-term borrowing costs for things like commercial real estate. If you’re like me and have courage to spare, then arguably there hasn’t been a better time to buy commercial property in recent memory. The value you can create in the present environment is staggering . . . IF you’re a smart contrarian. And it is a BIG reason we’ve just had our biggest January and February EVER! If you or your Clients still rent their commercial space, perhaps this once-in-a-generation information is welcome news. I’m sure there’s at least one person you ought to share this with . . . like, IMMEDIATELY.

Capital and cash-flow are king for business owners, but even the most well-intentioned forget it. A former Client of mine (very briefly) started a food preparation business for busy families. While there are plenty of these concepts in franchised form, she wanted to start it from scratch. Since she was just beginning, it made no sense to purchase her property, so she rented her facility. Her banker didn’t really like the kitchen equipment and other leasehold improvements as collateral, but rather than searching for other options, she plowed most of her cash into paying for these things. Strapped for capital to operate and market her business, she closed down not quite six months later and went back to work for someone else, instead of realizing her dreams. Sad. Truly sad on many levels. So what should she have done? She should have gone to another banker and gotten an SBA 7(a) start-up loan with terms that would have allowed her to stretch her dollars. She would then have had the capital to operate effectively and market her business in order to establish it in the marketplace. Years later, she would then have needed to buy her commercial property to create additional wealth from her business (not through operating it, but through converting her rental payments into an income-produced mortgage payment on an appreciable asset like commercial real estate) with cash-flow sensitive financing — meaning longer terms and half as much cash down. But now, her dreams are shattered. This is exactly why, in good times and bad, I’ve always advocated putting as little cash down as possible — to be like all the other smart investors who always try to get the greatest return from their investments, not merely to appease the first banker they speak to. It’s also why getting longer terms with real estate financing makes so much sense — you stretch your payments so you can weather the cycles and worry less, but always have the ability to prepay when you’re in great times. It’s like having your cake and eating it, too. But no matter how many times I’ve stated this over the years, many people think the good times will always continue when we’re in one, and they preserve virtually nothing for when times get tough. Well-intentioned is nice, but it often doesn’t produce the results we need. As a fellow business owner myself, I KNOW (certainly more than employee-bankers telling people, “now isn’t a good time to buy”) that preserving cash is a regular balancing act for entrepreneurs. Why anyone willingly increases the risks to their business to put down two to three times the capital that’s needed for their bank when our SmartChoice Commercial Loan is readily available is beyond me. Why anyone would accept a 15-year amortization on a commercial loan that ends up pinching your monthly cash-flow when 25-year and 30-year terms are available from us is beyond me. Why anyone would continue leasing their property after they’ve established themselves in their marketplace, just making their landlord wealthy is beyond me. Why anyone would work with an ordinary banker, instead of an entrepreneurial one (not an oxymoronic statement in our case) is truly beyond me! Perhaps it’s time we chat.

This is THE place to get smart information on how to best produce wealth and better grow your business. Don’t be like the lady in the story above OR let your clients be like her. This is the ONLY place to get truly useful information on ways to grow your business better AND learn of the smartest financing options for business owners and entrepreneurs ready to produce additional wealth from their businesses. Now go pass it on . . . and do your small part in our economic recovery. The sky isn’t falling. There are blue skies ahead and bigger and better days, too. Now TAKE ACTION and right your ship! I wish you, your Clients, and those you know success and prosperity . . . regardless of current economic conditions.

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Daughter and Daddy Holiday Weekend in New York City (Part 1)
  • Thursday, January 31st, 2008 at 2:03 pm

So after meeting Heisman winner, Tim Tebow, the day before he won the award in the JFK baggage claim area, we proceeded to our hotel near Rockefeller Center for an early check-in. We then walked down 49th Street to see the sights at Rockefeller Center and get some Two Boots Pizza in the basement of the building. After a few pictures outside, the cold air was just too much for us… so we wandered over to the American Girl place. We had planned to spend quite some time there as I’d booked reservations for Afternoon Tea and the American Girl musical as well.

The Tea was an exercise in “experience choreography.” By that, I mean they did what few businesses do (but really smart and successful ones do)… which is to say, “they thought of everything.” And they made the experience, not necessarily the product or service, the thing that mattered most. The staff had mini-highchair “clip-on” chairs that hooked to each table and were custom-made just for their dolls. Her doll got it’s own mini-teacup and mini-plate, while the American Girl founder’s story was spelled-out right on the back of the menu (apparently she had a very memorable experience 50 years ago with just her mother taking her to New York to see a show and eat at a fancy restaurant – it became the inspiration behind the American Girl Place).

One of the most brilliant ideas was the 50 or so question-slips in a miniature box in the middle of each table. Clearly this was meant to keep conversation moving along and elicit some startling answers. When answering why she picked her particular doll, which doesn’t really look like her at all (Julianna has blond hair and brilliant blue eyes; Molly, her doll, has brown hair, brown eyes and glasses), she said she picked her because she saved her father from going into the War (WWII) and was therefore a hero. Then I became not one of the only six guys in the room, but the only one with tears in his eyes. It was an answer I hadn’t expected at all. My daughter knows that I consider her my hero or guardian angel from 9/11 (she was born only 12 days before it and but for my wife’s prohibition on my travel in her final trimester, I would have been with a dozen colleagues in an important meeting in the first tower on that fateful day). I was a bit shocked to receive this insight into my six-year old’s worldview at the American Girl Afternoon Tea. But if it weren’t for those question-slips, it might not have happened for some time, if at all.

Lastly, to fully appreciate the experience in its totality, I’ll mention what happened in the restrooms (there are plenty more things they do right, but I’m not teaching an MBA course here… just musing a bit). In the restroom, they had a patent-pending “doll hanger” to suspend your doll by as you went to the toilet. When I realized what it was and mumbled under my breathe that, “they’ve thought of everything here,” my daughter commented, “they must really love dolls here, Daddy.” THAT they must, dear. That they must.

I guess it begs the question: does your business think things out to the nth degree like American Girl? If not, it can be a HUGE differentiator. A doll’s a doll in my opinion, but no other dollmakers that I’m aware of offer quite this kind of experience. Perhaps that’s why they contribute such a significant amount to Mattel’s bottom-line each year.

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A Boost of Optimism for the New Year
  • Friday, January 25th, 2008 at 2:01 pm

I’m a big believer in creating your own reality. Don’t like something? Only YOU have the power to change it for better. When you dig a little deeper, some would call it a belief in self-fulfilling prophecies, though that usually has a negative connotation to it. I have a feeling you share this belief with me . . . most entrepreneurs, as well as their advisors, share this life philosophy. We’ve taken nothing and made it into something. We’ve learned, many times through trial and error, how to make something become reality and how to switch course when needed. (Note: I didn’t say simply think it and it will come true — knowledge and beliefs without action is fairly worthless — as the title of a favorite book of mine suggests, Nothing Happens Without Action). Yet, all around us — in newspapers, on every television — you can cut the thick fog of negativity with a ginzu knife.

The “Impending Recession” may be the most expected in history.

The contrarians among us would think that’s a good thing as economists rarely ever get their predictions correct — you know: get 10 economists in a room and get 23 different predictions, “on the one hand . . . but on the other hand . . . and on another hand” (three-armed economists seem to be common for some reason). But . . .

“THEY want to SELL you on a Recession, so that later you’ll BUY a change of leadership.”

Those were the remarks recently of one of my elite coaching group members. I thought it was rather astute of him, and I fully agree. If we, as consumers and business leaders, buy into that message of the economy going “to Hell in a hand-basket,” then it surely will. If we fight back with the facts, our optimism, and our actions demonstrate confidence in our future, then that has a better shot of becoming reality. It’s really up to us.

Imagine for a moment, if you will:

A country’s GDP grew by 3.9% in the third quarter; it’s worker productivity grew by 4.9% in that same quarter; and this same country added 8.4 million non-farm payroll jobs in the past 4 ½ years, while its GDP is up 18.5% or $1.8 trillion in 7 years. Pretty good, huh? Now, get ready to be knocked-back . . . but that country is the United States.

Here ARE the FACTS:

The GDP grew by 3.9% in the third quarter (“faster than expected,” according to The New York Times). Productivity surged 4.9% in the third quarter, according to the Labor Department, at the fastest rate in four years (“far better than had been expected,” noted AP). According to Investor’s Business Daily (IBD), 8.4 million non-farm payroll jobs have been created since the 2003 Bush tax cuts (1.25 million since this time last year), and GDP is up 18.5% (about $1.8 trillion) since the start of the Bush Presidency. The Wall Street Journal reports: “After the second Bush tax cut of 2003, the budget deficit tumbled to $163 billion in 2007 from $401 billion in 2003.” Record gains in individual tax revenue, tied to income and investment tax cuts, led the deficit lower. Yet, when was the last time you’ve heard ANY of this?!?

Sure, the unemployment rate rose from 4.7% to 5.0% in December, but what all but a few economists have pointed out is that the data was collected during a week where an ice storm hit most of the Midwest. Many of the tens of thousands of workers in that region were unable to get to their jobs due to the storm, and thus were not counted if they didn’t get paid for their missed work (CNNMoney.com). [As I mentioned many months ago in this publication, the unemployment rate estimate is derived from a monthly survey of 60,000 households, while the employment data (from which the job gain numbers come) is derived from a monthly survey or roughly 400,000 medium and large-sized businesses.] The volatile household survey saw an estimated decline of 436,000 employed people, while the estimated labor force rose by 38,000 people to 153,866,000. The estimated number of unemployed therefore rose to 7,655,000 . . . hence the 5.0% jobless rate. I would expect this to move slightly lower in the months ahead (to say nothing of the impending labor crunch we’ll have in this country over the next decade as more Boomers retire and leave the workforce permanently). I’ve often wondered what my Econ 101 professor must think of these supposedly “unrealistic” full employment figures we’ve been below now for several years.

So Who’ll Talk Aspirationally About the Economy?

In this election year, let’s now look at one of the silliest assertions the media and some politicians regularly make: tax cuts don’t stimulate economic growth. Tax cuts, by at least the past four Presidents to enact serious ones, all show the same thing: lower taxes mean faster economic growth AND more revenue in the Treasury’s coffers (which means smaller budget deficits, a stronger currency and a healthier economy). Yet, listening to the recent Democratic Presidential debates (I know, I’m a glutton for punishment), all I heard was variations of the “soak the rich” schemes. Lower taxes stimulate faster economic growth, whether you count them on a nominal basis, an inflation-adjusted basis, or as a share of GDP. It makes no difference. Rebates to pay for higher heating costs won’t do the trick. Forcing the top 20% of achievers in this country to take on more of a tax burden, will only lessen their investments into new enterprises — the very things that create more jobs, generate more GDP and tax revenue, and give our children hope for a brighter future. The top half of taxpayers (where I’d venture to say everyone reading this lies) now pay 96.7% of all taxes, the highest in decades, according to the Wall Street Journal.

Since the last piece of Bush’s tax cuts went into effect in May 2003, real GDP has grown 13% or just over 3.2% per year. Before that, from President Clinton’s final year in office, growth averaged 1.5% — it basically doubled after the tax cuts. From 1921 to 1929, the era of Coolidge’s tax cuts, real GDP rose 59%. It rose 42% from 1961 to 1968, the Kennedy tax-cut era. It added 31% during the Reagan boom, even though Keynesian economists assured us that the U.S. was a “mature” economy and incapable of such growth. So if you want to get things going even faster and grow our way out of the housing mess and $100 oil, cut taxes further and make them permanent so there’s some stability — not some short-term, band-aid attempt like we usually get from the Beltway. That’s a message few on the campaign trail seem to be making.

While I’ve been very critical of politicians in these pages previously, I believe the current Presidential election may be the most important one since 1980. We have much at stake and the sand in the hour-glass that is American Dominance is nearly out unless somewhat radical changes are made quickly. I wonder if we’ll choose the course of a simplified tax code and lower tax rates to stimulate our economy, or higher taxes, perhaps to Old-Europe levels, to solidify dependence on even more social services? I wonder if we’ll get consumer control of health care or choose to enact a de facto socialized system? Will we ever turn Social Security from a liability into an asset by allowing people under the age of 50 to have personal accounts that are owned by them rather than Washington politicians and raise the retirement age to a more appropriate 21st century life expectancy, or will we levy higher payroll taxes and enact lower benefits to salvage what’s left of it? These are just three of the most important domestic issues at stake in this year’s election. Courage on all fronts is called for.

Just remember: nothing is ever nearly as bad as we think it is when in the midst of it. And if you’re a bit contrarian like I think you are, then you’ll realize that with commercial rents rising, commercial property prices coming down (cap rates are rising), and financing at near-historic lows . . . there hasn’t been a better time to buy commercial property. Call us when you’re ready to discuss this. Wealth is made when the Mediocre Majority are screaming about blood being in the streets . . . just ask Warren Buffet.

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Gratitude and Good Tidings
  • Friday, December 21st, 2007 at 1:58 pm

This is my favorite time of year because I’m reminded more than usual to be grateful for all the blessed bounty we have, to give more of myself to my loved ones, and to know with certainty of even better things to come in the future. This is a joyous season in so many ways, and I hope the Spirit of the Season lasts much longer for you than just a few days at the end of every calendar year.

I’ve been feeling creative lately, so I thought I’d share a poem with you to brighten your Holidays . . .

A Christmas Poem with a TWIST…

Twas the night before Closing,
When all through the office –
Not a structure was creaking,
Not even the soffits;
The documents were filed in the cabinets with care,
In hopes that Mercantile soon would be there;
The Borrowers were nestled all snug in their beds,
While visions of Net Worth danced in their heads;
And Geof in his kerchief,
And I in my Gators cap,
Had just settled down [separately] for a long Florida nap.
When out in the lobby there arose such a clatter,
I sprung from my couch to see what was the matter.
Away to the front door I flew like a cheetah,
Twisted open the deadbolt,
Still groggy from margaritas.
The sunrays on the top of our palm tree fronds,
Had a likeness to dollars spread over green lawns;
When what to my failing eyes should appear,
But a miniature bus filled with Mercantile cheer;
With a tall, somewhat young driver,
So lively with repartee,
I knew in a moment it must be Tony Z (ara).
More rapid than Fireballer [IBA and ACE] George,
His lending sleigh, it came,
And he whistled, swore a little,
And called them by name:

“Now Dawn!
Now Sean!
Now Angela and Natasha!
On Robin! On [Nick] Triadis!
On Trey and on [Adam] Wonus!
To the top of the building!
To the top of the balcony!
Dash away! Dash away!
Dash away gleefully!”

As dry leaves that before another hurricane fly,
When they meet with a FEMA staffmember,
Mount to the sky;
So up to the railing-top the mini-bus flew—
A magical vehicle loaded full of commercial real estate deeds, and Tony Z. too.
As I shook my disbelief off and was turning around,
Through the front door,
Tony Z. came in with a bound.
He was dressed all in wool, cotton and silk,
But this being Florida,
Seemed of a peculiar ilk.
A bundle of deeds he had flung ’round his jacket,
But he looked like a bookie covering his racket.
His eyes — how they twinkled;
His stubble — how manly!
His cheeks were so tanned,
His nose like Paul Stanley’s!
His droll little mouth was drawn up like a bow,
And the calculator in his pocket was starting to glow;
The pinch of his chew he held tight in his teeth,
And the aroma, it encircled his head like a wreath;
He had very broad shoulders and quite a fancy belt–
Which served him rather well holding in his belly,
However, it made him look,
Like an old oil painting of Machiavelli.
He was chiseled and level,
As should be an old bookshelf,
And I chuckled when I saw him,
In spite of myself;
A wink of his eye when he coiled his head–
Soon lead me to know I had nothing to dread;
He uttered not a word,
But went straight to his work,
Filling his satchels with documents,
Then reversing with a smirk,
And giving a pleasant nod,
And placing his hand on his calculator,
Out the door he did bolt,
Wearing a necktie of Albert the Gator.
He sprang to his bus,
To his team gave a whistle,
And away they all flew like an airborne Scud missile.
But I heard him exclaim,
Ere he drove out of sight,
“Merry Christmas! Happy Closings!
And to all a Good Life!”


P.S. As you can probably tell by now, we work hard (as evidenced by the accolades we’ve accumulated in only 4 short years) and we play hard (i.e. this silly poem). What can I say? We thoroughly enjoy what we do, and we want others to enjoy what we do, too.