saluki

Now, that's the spirit!

TravelGuy

In spite of the fight that PwrShift seems to want to start-up between me, other “super moderators” and our new forum member, I’ll continue my NICE discussion with DestiFan on credit markets, PE, UR and possibly hugging. (all without humor).

In spite of PwrShift, I don’t believe we’re fighting here. We have differences of opinion on some issues and the facts on other issues are not fully known yet. Having said that, here is further clarification of my thoughts on the current credit markets and how they affect PE/UR:

My original statement (my post #49) and follow-up to your posting about the current condition of the credit market (my post #68) was regarding FINANCIAL INSTITUTIONS as a whole. I don’t mention banks in either post. Your most recent post has now limited the scope of your statements to COMMERCIAL BANKS. I agree with you that commercial banks are far more limited by internal bureaucracy than the many other types of financial institutions. I have personal experience with some larger regional banks that have approved commercial mortgages well into eight figures without any committee approval. In some cases, it is my understanding that several of the high ranking bank officials combined their loan authority to accommodate larger mortgage amounts. I don’t play in the nine figure arena so I can’t comment to the loan process in that thin air.

There is much liquidity and competition for mortgages among the financial institutions outside the traditional commercial banks. These include private equity firms, hedge funds as well as VC funding, individual investors, PPMs, etc. As I previously said, great credit, a sound biz plan, and a good track record make an investment extremely desirable to most solvent financial institutions in this closely watched credit environment.

I stand by my thoughts on the PE/UR merger being of questionable financial soundness if they are blaming the extremely lengthy delay on the current credit markets.

And no, the last thing I want to know is “how big you are”. If you would like the last word on this totally off-the-post-topic subject, please feel free to post it without fear of reprisal (except possibly by PwrShift).

Once more, my recent personal experience is that commercial lending is healthy, even competitive. The vast majority of commercial properties that I’ve been involved with involve cash flows from consumers (retail, office, medical, etc.). I don’t believe there is much of a disconnect between commercial real estate and consumer spending.

Other DCs are continuing to add properties and seem to have sufficient cash flows to keep their credit accessible for expansion. These DCs are using their residential real estate as collateral and are funded by commercial lending institutions. Why would PE/UR have a credit funding problem unlike the rest of the major players in the DC industry? This is what has me suspicious of either A) the reason for the delay of the merger or B) the financial situation of PE and/or UR.

I believe that I stated that my reference to “bail-out” was my opinion, not a substantiated claim.

Thanks for finally giving us some better intel on PE homes and members. I’m concerned that this seems to contradict some other posted info but I’ll take it at face value. I am concerned that you point out that UR, as the more unstable DC, may be a liability for PE with the merger. We’ll see what their cash flow is like once the merger is completed.

Having said all this, I’d like anyone reading this to understand that we should ALL be hoping that the PE/UR merger is successfully completed and that both cubs are fiscally successful. A failure of the merger and/or one of the clubs would have a negative effect on the entire industry. However, at this point, I’m not considering PE for my second DC membership due to the questions raised.


Now, about the flea infested, burnt-orange, shag carpet in the Lauderdale Marriott timeshare …

3DH

...honestly, I don't run THAT fast! Truly, we are simply here to keep things smooth... we don't mean to be harsh toward anyone.

And, welcome DestiFan!

(Just for the record, I believe this has been the most active thread on this forum for some time now...! )

__________________
"Boutique" is better! Another extremely satisfied LUSSO member!

DestiFan

Now we are getting somewhere...and I will explain why. The merger problem, as I understand it, is due to the credit agreement for the combined new LLC. When executing the merger, one would think that the current ender for both - CapitalSource (one of those other financial institutions) - would just approve and move on...here is the issue.

PE and UR chose to pursue CapSource b/c they wanted to make it easy - same lender already - why change? That was their mistake...The combined credit agreement is in rarified air territory - $200MM plus. Because of its size, and CapSource's own problems in residential real estate, CapSource has been very ardous on terms and I know it took both parties by surprise. I believe they should have switched lending sources, but they had a lot of time invested in CapSource, and the CapSource knew the assets from previous deals, so they did not have to catch them up to speed on the collateral.

Here is another problem - I believe DC's hold their properties in multiple LLC's or LP's - often determined by year of purchase or country of residence, etc. This scenario can lead to multiple lending agreements and problems for each individual credit agreement. I may be wrong with this piece of info, but I believe this is how many our structured...Lastly, I do know that when transfer of ownership occurs (merger is transfer by definition) in many of these foriegn areas, taxes must be paid (cap gains) like a sale has occurred - eventhough this is a merger. This, I guarantee, is an issue...and I am sure they were trying to structure legally to avoid these payments which will be very big due to weakening dollar and good investments in RE by UR and PE in some markets - Cabo, Turks, London, Tuscany, etc.

My honest opinion is that this has nothing to do with financial strength and everything to do with poor due dilligence. Not saying that isn't a negative, just not a terrible situation.

The vacation experience with PE has still been first-class, as has all interaction with Escape Planners. I have not regretted my decision once so far, but I too am a frustrated bystander.

Again, we are all Beta testers here...

DestiFan

PS - I am not upset. Never have been...I just write with a tone. None trying to be communicated...work habit.

TravelGuy

DF,

We're all good (except maybe PwrShift).

You're to be congratulated for jumping in so deep with your first posts. It's a great addition to the forum!

TravelGuy

This is all great info that makes some sense. Thanks for the inside info. I didn't bring up CapitalSource and their issues before in my posts since the posts were already seen as against PE. Anyone can see what's happening with CapSource from any financial web site. I don't know if they are any worse or better than about half the financial institutions (or more) at this point. Additionally, I don't believe that most of these financial institutions know how good or bad they are themselves.

Since none of us really know what's going on behind the closed doors, we'll just wait and see. Maybe PE & UR will get tired of waiting also and make another move or get another cap source (no pun intended). As we've all seen recently in the fin markets, no merger or acquisition is easy.