Posts Tagged ‘industrial real estate’

Economic Development: Packaging A Loan in Today’s Market

Wednesday, July 15th, 2009

Economic development organizations are stepping in to help plug the credit hole.  We all know what the economy is like today, and it is unlikely that the industrial and commercial real estate markets will soon turn around. As anbroken_piggy_bank_0 economic developer, I see another side of the economy where both communities and businesses are seeking opportunities and looking at alternatives ways to secure capital.

Aside from the federal stimulus incentives, municipal, state governments and educational institutions offer a variety of incentives to encourage businesses to remain in their jurisdictions. Here’s an example:

I am currently working with a printer, a cutting-edge small business with Fortune 500 customers, to preserve more than 100 good-paying jobs in a small municipality. The company’s primary obstacle: borrowing money for new equipment and other capital improvements. The deal requires $1.5 million, all of it collateralized.  Because the company was in financial straits, an angel investor recently purchased the company and is investing heavily.  Even with this influx of new capital, lenders consider the company a high risk. To make the deal happen, we are using state, county and municipal revolving loan funds to underwrite $750,000 of the project to add to the $750,000 conventional bank loan. The lender has virtually no exposure and has first position on all assets, including building and land that are free and clear of debt.

A key player in putting the deal together is the Illinois Department of Commerce and Economic Opportunity’s Participation Loan Program, one of the few available state incentives until Illinois adopts a capital budget. For more information about the program, contact Stanley Luboff, Capital Programs Manager at stanley.luboff@illinois.gov.

Chris Manheim is our guest blogger.  He is the President of Manheim Solutions, Inc., a consulting firm specializing in community, workforce and small business economic development programs.

The Other Fuel Price

Wednesday, March 26th, 2008

The current debate about spiralling fuel prices uses the price of gasoline at the pump as the belwether of energy prices. In the real estate industry, the energy metric commonly raised is electricity. But another spike is more striking: Diesel fuel prices soared 26.75 cents, or 7 percent, to an average $4.0630 per gallon from $3.7955 two weeks earlier, according to a report by Reuters, Sunday, March 23, 2008. While gas prices hit us directly, diesel is the fuel of our macroeconomy, driving the global supply chain — from trucks to trains, ships, boats and barges, not to mention farm and construction equipment Worldwide demand has been increasing because of emerging economies like China and India, as well as Europe — all of which has tightened global refining capacity. Also, the Federal excise tax on diesel fuel is 24.4 cents per gallon — a full nickel higher than the tax on gasoline. Time will tell what impact this will have on the industrial real estate sector which remains strong — in part because manufacturing output in the U.S. has never been higher and continues to expand, helped by the weakening dollar which has buoyed a good deal of outbound trade. Also, retail remains solid, particularly the indy grocers and big-box retail which fuel so much of the warehouse/distribution construction in our country. Will the rising cost of fuel cause a shift in the supply chain? Perhaps the most compelling proofs of the impact of diesel prices may be anecdotal and personal. Take trucker Charles Monroe, a driver for more than 30 years. During an interview with WDEF in Chattanooga, TN, Monroe said, “Since I’ve been driving fuel prices have tripled at least. It’s about $600 to fill this one up if she’s empty.” With diesel prices at almost $4 per gallon, many drivers are cutting back. Independent trucker Jessie Smith says , “If they got three or four trucks they’re parking them and running just one and doing short hauls. The rate of the freight is not going up with the fuel prices. I’m doing mostly short hauls. They pay a little bit more per load and per mile and that helps with my fuel bill.”