2016 industry update...• sba 7(a) maximum loan size ‐$5,000,000 • sba 504 maximum loan size...

2016 Industry Update

ICBR UAV (Drone) Update

May 6, 2016

Update Areas

• U.S. Airspace and Regulations

• Risk Management Considerations

• sUAS Capabilities and Trends

Airspace & Regulations• Currently – FAA Section 333 

Waiver Exemption

– Pilot’s License

– Blanket & Special COA

• Future – FAA Part 107

– No License, aeronautical test every 24 months

– Limitations on weight, altitude, speed and daylight

– Promised June 2016

COA Airspace Restrictions

Landmark Center

Monument Circle

Union Station

FAA Overview

• “Disruptive” technology = new rules and regulations

• Primary focus of FAA is safety = aviation knowledge + pilot’s license

• FAA Section 333 Exemption required for commercial operations

• If an individual or a business does not have a 333 exemption, it is ILLEGAL for them to conduct commercial operations and receive payment for the use of UAV technology.

• Section 333 exemption highlights:

– Operators must hold a pilot’s license

– Cannot fly within 5 miles of an airport with a control tower (or 3 miles of an airport without a control tower)

– Must fly within eye‐sight and during daylight hours (one hour before sunrise to one hour after sunset)

FAA Section 333 Exemption

UAV Industry Statistics

UAV Industry Statistics

UAV Industry Statistics

UAV Industry Statistics

NAR Drone Policy Statement

• Approved by the NAR Board of Directors November 10, 2014– The National Association of REALTORS® advises members that the use of unmanned aerial vehicles for real 

estate marketing is currently prohibited by the Federal Aviation Administration. Such prohibited use of unmanned aerial vehicles may lead to the assessment of substantial fines and penalties.

– The National Association of REALTORS® supports efforts to create new federal regulations to allow for the future commercial use of unmanned aerial vehicle technology by the real estate industry.

– The National Association of REALTORS® is committed to working with the Federal Aviation Administration, and any other relevant federal agencies, during the regulatory approval process. The National Association of REALTORS® will continue its ongoing efforts to educate REALTORS® about the current and future regulatory structure for the safe and responsible operation of unmanned aerial vehicles.

www.realtor.org

Risk Management Trends

• Insurance Requirements

– Commercial Liability

– Aircraft Liability

• Limit to Vendors with 333 Waiver

Company Policies

• Many firms have established policies governing the use of UAVs

– $1‐2M Aircraft liability insurance

– Commercial liability insurance

– 333 Waiver in place

• Proof of waiver

• Proof of pilot license

– Moratorium on employees using personal drones

Real World Case

Louisville man charged in Great American Tower drone strike

– Consumers don't have to be certified

– "It's a piece of cake, you can buy them off Amazon,"

– Operator lost control of his radio‐controlled drone, which then shattered a 28th‐floor office window in the tower

– You do the math!

– Being prosecuted for Criminal Mischief & Restitution

– Within 5 miles of Lunken Airport

UAV vs. Suspended Scaffolding Façade Access

Risk Management Issues

• UAV Stabilization and Control

• Automated vs. Direct Control

• Setting Safety Parameters

Failsafe & Geo‐fencing

Technology Trends

• UAV based LiDAR

• EMI Hardened Controllers

– PreNav – Laser based 

navigation

• Extended duration

– Tethered Systems

– Fuel Cell systems

LiDAR

PreNav – Laser Guidance

Tethered System

Fuel Cell System

Q & A

INTRODUCTION

Background

• NAR REALTOR® Party

• NAR developed a multitude of tools and services for associations

• Choosing REALTOR® Champions

PACs Are No Longer Enough

• Changes to traditional support- Citizens United- McCutcheon vs. FEC

• Independent Expenditures

• Grassroots/Member Mobilization

Learning Outcomes• Identify your association’s policy issues and

articulate committee’s goals for the coming year.

• Outline committee’s process and criteria for candidate support.

• Assess a candidate’s chances for winning.

• Identify best practice methods when selecting and supporting REALTOR® Champions.

“If you are not at the table, you are on the menu.”

Political Involvement –Different for Each Association?

• Monitoring City Council meetings

• Endorsing candidates

• RPAC contributions

• Hosting fundraisers for candidates

• Independent expenditures

• Grassroots involvement

Successful Political Programs

Comprised of:

• Candidate Questionnaire

• Incumbent Scorecard

• Interview Committee

• Election Timeline

• Level of Support

Forming the Committee

• Work closely with GAD and/or AE to establish the candidate selection committee

• Members active and knowledgeable about REALTOR® and real estate issues

• Prior experience and understanding of the process

• GAD should be part of every meeting and take lead in developing questionnaires

Identifying Priorities and Key Races

• Resources are finite- Time, money, people

• Choosing races- Winnable- Important

• Selection/Candidate Committee should rank and prioritize races with help of GAD

• Early ranking can change based on filing

Supporting Incumbents

• Incumbents win

• Almost 90% of incumbents that run for re-election win

• Do you support an incumbent because they will win even though they are not great on REALTOR® issues?

• Dilemma: REALTOR® member running against incumbent that supports real estate

REALTOR® Candidates

• Difficulties occur when members run against friendly incumbents

• Formal process and policies help

Resource Allocation

• Finite resources

• Determining who to support, when and with what

• Well researched selection process provides ability to make educated, effective decisions

CHAPTER 2:FINDING REALTOR® CHAMPIONS

What is a REALTOR® Champion?

• No, one answer

• Sponsor a key bill

• Behind the scenes in committee

• Freshman champion vs. Speaker of the House

• Each local/state association must define

Create Questionnaires

• Identifies where candidate stands

• Questions related to the office sought

• Stick to core issues

• Questions assigned numeric value for scoring

• Short, “Yes” or “No” answers

• Include deadline to return form

• Send to all registered candidates

How Will You Win?

• Why are you running for office?

• Does he/she have a plan?

• I.D. fundraising goals

• I.D. money in the bank

• Door-to-door canvassing?

• Website, digital strategy?

Candidate Evaluation

• Develop a ranking system

• Weighted questions/answers

• Key issues take priority

• Tally and rank candidates for interviews

Exercise 2: Create a Candidate Questionnaire

• Break into small groups

• 10 campaign-specific questions

• Examples: - Do you support eliminating MID?- What is your thought on a local sign

ordinance?- Do you have a fundraising goal?

• Share feedback

Chapter 2 Summary

• Questionnaires assist the interview committee in making decisions

• Include 5-7 policy issues

• 5-7 campaign specific questions

• Consider creating a scorecard

CHAPTER 3: CANDIDATE INTERVIEWS

Associations should ask every candidate ,

“Why are you running for office?”

Interview Committee

• Establish before candidate filing period

• Between 5-7 people

• RPAC Trustees, Government Affairs Committees

• Staff play crucial role

• Determine who has final vote(this committee or Board of Directors)

The Interview

• Opportunity for deeper dive

• What candidate stands for and why

• Key = listening

• Ask open ended questions

Key Campaign Plan Elements

• Is it on paper

• Targeting

• Strategy

• Tactics

• Timeline

• Budget

• Research

What Kind of Support• None

• RPAC contribution

• Host candidate fundraiser

• Independent expenditure- Direct mail, phone calls, digital ads,

radio, newspaper

• Member mobilization

Independent Expenditure• When to communicate to the general

membership

• Know the law

• Most states coordination is not allowed

• IE committee members need to sign confidentiality agreement (see appendix)

• REALTORS® don’t “go negative”

• Prepare for blowback from members

Member Mobilization

• REALTOR® Door-to-door canvassing - Door-to-door most effective voter

contact

• REALTOR® Phone banks- Targeted phone calls are great for

getting out the vote

CHAPTER 4:NAR RPAC 

FEDERAL PROCESS

NAR Federal Process

• A partnership – local, state and federal

• Support is mutual–NAR and Candidates

RPAC’s policy is to support incumbents who have been supportive of real estate and NAR.

NAR Candidate Support

• Through direct contributions

• Candidates must meet extensive criteria

Levels of Support

• Candidate serves on key House Committee and has been supportive of NAR

• Candidate does not serve on key Committee but supports NAR

• Candidate not on key committee and not supportive of NAR

Types of Candidates

• Incumbents

• REALTORS®

- As challengers- For open seats

Politicians Never Forget

• Politicians remember who supported them in their first race

• Be thoughtful with decisions

While a good relationship with the candidate is important, the decision must be based on an objective evaluation of the candidate’s past actions, as well as their stated positions on federal housing issues.

Opportunity Races

• Grassroots-based

• Encourages REALTORS® to get involved in NAR-supported races

• “Opportunity” to make a difference

• Levels 1, 2, & 3

Independent Expenditures

• FEC maintains strict rules

• No coordination with the candidate

• State RPAC Trustees must request a Level 1 Opportunity Race

• NAR RPAC Trustees determines IE candidate campaigns from the list of Level 1 Opportunity Races

CONCLUSION

2016 Financing Update

Who is the SBA Guy?• 275 + SBA loans booked

– Purchase– Ground Up – Tenant Improvements– Refinance

• 15 years with Wells Fargo– $325,000,000 + in Loans Closed

• 98% Loan Approval Rate

John Randall“The SBA Guy”Wells Fargo SBA Lending

(317) 977‐1159John.Randall@wellsfargo.com

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Market Update

• Competition is back• Lenders are getting aggressive again• Rates are low• New lenders are entering the market• Borrowers are benefiting• Be careful!

SBA National Top 7(a) Lenders FYE 2015Ranking by $'s Units Dollars Mkt Share

Wells Fargo 7,254 1,918,439,200 8.13%

Live Oak Banking Company 966 1,148,420,300 4.87%

U.S. Bank 3,977 776,361,900 3.29%

JPMorgan Chase Bank 4,040 753,770,300 3.20%

The Huntington National Bank 4,337 672,841,800 2.85%

Celtic Bank Corporation 1,586 499,432,500 2.12%

Ridgestone Bank 475 474,329,200 2.01%

SunTrust Bank 575 364,656,500 1.55% Newtek Small Business Finance, Inc. 391 355,661,700 1.51%

Seacoast Commerce Bank 325 293,551,200 1.24%

SBA Lending Overview

• SBA 7(a) maximum loan size ‐ $5,000,000

• SBA 504 maximum loan size ‐ $12,500,000

• Size limitations – Most businesses qualify• Net profit < $5MM 2 year average, • NW less that $15MM

• Personal guarantees – any owner > 20%

• For‐profit businesses only

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• Flagship Program• Utilized for many purposes:

• Real estate purchase, construction and refinance• Business acquisition / partner buy‐out• Equipment purchase, expansion • Working Capital, Inventory• Leasehold Improvements• Combination of all – with one loan

Overview of SBA 7 (a) Loans

• Real Estate Purchase/Construction or large fixed assets only

• Lenders work with a local community development corporation (CDC)

Overview of SBA 504 Loans

3 Way ComparisonProperty Cost: $1,000,000 Property Cost: $1,000,000 Property Cost: $1,000,000

Loan amount: $928,463 Wells Fargo 1st Mortgage: $506,281 Loan amount: $750,000CDC 2nd Mortgage: $416,025

Due In: 25 yrs Amortized (WF 1st Mtg): 20 yrs Amortized ov er: 20 yrs Amortized (CDC 2nd Mtg): 20 yrs Due In: 10 yrs

SBA 7(a) interest rate:* 5.05% Interest Rate (WF 1st Mtg):** 4.85% 10 y ear fixed interest rate: 5.15%*2 5 y ea r fix ed r a te Interest Rate (CDC 2nd Mtg): 4.31%

Blended interest rate: 4.61% Monthly pay m ent: $5,455 Monthly pay m ent: $5,889 Monthly pay m ent: $5,012

Property Down Pay m ent: (10%) $100,000 Property Down Pay m ent: (10%) $100,000 Property Down Pay m ent: (25%) $250,000

SBA 7(a) Related Fees: Wells Fargo & SBA Related Fees: Wells Fargo Related Fees:Guaranty Fee $2,363 CDC Fees (2nd mtg) $1,225 Wells Fargo Loan Fee $0Packaging Fee $0 Wells Fargo Fee (1 st mtg) $253

T hird Party Related Fees: $800 T hird Party Related Fees: $1,000 T hird Party Related Fees: $8,000

Total Cash Out of Pocket $103,163 Total Cash Out of Pocket $102,478 Total Cash Out of Pocket $258,000** Repr ices ev er y 1 0 y ea r s

Also av ailable on 1st Loan: Also av ailable:

25 year fixed at 5.45% 5 year rate lock of 4.55%

7 yr rate lock at 4.50% 30 y ear amort with 10 y ear maturity at 4.99%

10 y r rate lock at 4.7 0% 20 y ear amort with 3 year rate lock at 3.90%

SBA 504 loan scenario

No Cov enants, No Monitoring

Fixed and Floating Rate Options

One loan closing

Temporary Collateral May be Required

Fixed and Floating Rate Options

SBA 7(a) loan scenario(90% Loan to Value)

MUCH simpler process - 1 lender v s. 2

Out of Pocket Portion of Total Cost

Most loans close in 35-45 day sWorking Capital, Equipment, & Fees can be financed

Rate not fixed till after closing

Conventional Loan Specifics:As little as 10% down payment

Most loans close in 40-50 days

(90% Loan to Value)

Cov enants/Montioring ApplyTwo Loan Closings

Prepayment penalties apply

Conventional fixed rate loan scenario

Out of Pocket Portion of Total Cost

(7 5% Loan to Value)

Out of Pocket Portion of Total Cost

At least 25% Down Pay mentFixed and Floating Rate Options

Fees can be financed if cov ered by Appraisal

SBA 504 Loan Specifics:

Temporary Collateral May be Required Balloon pay ment options available

Also av ailable: 3 y r rate lock at 3.90%,

SBA 7(a) Loan Specifics:As little as 10% down pay ment

25 Y ear amortization/termNo balloon pay ment

Prepay ment Penalties ApplyVery limited prepay ment penaltyMost loans close in 60-90 day s

Recently Closed Transactions

• Marketing Firm Purchasing Office/Video Production Space– $560,000 Commercial Real Estate Loan– 10% cash equity– 25 year fixed rate loan– Rec’d Application 12/29 closed 2/9 – 42 Days

Recently Closed Transactions

• Online Training Vendor– $560,000 Office Building Purchase– SBA 7a Loan, 90% Financing + $100,000 in furniture and $15,000 in working Capital, and a $25,000 Line of Credit

– 25 Year fixed rate financing– Submitted 2/11, Closed 3/17– 35 days

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Recently Closed Transactions

Fort Wayne Industrial Building Purchase

$750,000 Purchase Price

$185,000 Improvements

$250,000 Equipment for new space

$1,185,000 Total Project

Loan Amount of $1,130,000 or 95% of total project.

REL appraised at $920,000, 102% LTV on Real Estate!

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Recently Closed Transactions

• Injection Molding Company– $4,025,000 Real Estate Purchase with Construction

• WHY SBA?– Lowest Down Payment– Longer Amortization/Lower Monthly Payment– Fully Amortizing (No Rate Resets, Maturities, Etc)– No Covenants, No Monitoring– No Personal Liquidity Limit

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Recently Closed Transactions

Downtown Ad Agency

$450,000  Purchase Price$340,000  Improvements$100,000  Equipment$125,000  Working Capital$1,015,000  Total Project

$957,000 Loan Amount

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Recently Closed TransactionsGym

• $385,000 Real Estate Purchase

• 25 Year Note at 90% LTV

• Plus Equipment

• $372,500 Loan Amount• Submitted 1/23

• Approved  1/28

• Closed         3/7

43 Days…typical for non construction

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Recently Closed Transactions

Family Entertainment Center• $589,000 in equipment• $875,000 in TI’s• No Real Estate as collateral!

WE CAN HELP ON LEASE PROJECTS!!!!

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Recently Closed Transactions

Dental Office

• $590,000 Real Estate Purchase

• 25 Year Note at 90% LTV

• 10 Year Note Unsecured…$59,000.………What’s better than 90% financing?

MD’s, Dentist, Veterinarians, & Optometrists         …Complete Financing!!!

Why there’s never been a better time for an SBA Loan

• More companies than ever are eligible– Tangible net worth <$15MM– Net profits <$5MM in each of last two years– No more personal liquidity test

• Interest rates are at all time lows

• Permanently increased lending limits• 50% Fee waiver for Veterans

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Why SBA?

• Lower Down Payment• Low Monthly Payments• Long‐term Fixed Rates • Flexible Prepayment Terms (3 years (7a))• No Covenants/Monitoring

Ways to Close Faster

Ask for all critical documents right away– Prior Phase 1 or Phase 2 Environmental Reports– Prior Appraisals– Prior Surveys– Floor Plans– Lease Agreements, Rent Rolls, 2 Yrs Operating Exp.– Request a Preliminary Title Report right away

Ways to Close Faster

• Be Ready to Recommend:– A good attorney or CPA to set up new entity’s (Articles, Bylaws/Operating Agreements, Tax ID #’s)

– A good insurance agent to get a policy in place– A good contractor, architect, or designer who can get into the building FAST

Ways to Close Faster

• Find out if buyer has any:– Moving expenses– Signage needs– Equipment or furniture needs

A Good Lender Can Probably Help!

Ways to Close Faster

• Sniff Test– Save Time, don’t take an offer until a lender you trust has talked to the buyer, seen financials and tells you they are okay.

– Let your lender discuss • Cash Flow• Personal Credit History• Criminal/Legal History• Source of Down Payment

– It should only take a good lender 24 hours to do this and issue a proposal/prequalification letter

– A good lender will give a quick yes and a fast no.

Ways to Close Faster

• Have a sense of urgency in every conversation:– Buyers ‐Environmental Vendors– Sellers ‐Lenders– Title company ‐CPA’s– Appraiser  ‐Insurance Agents– Attorneys  ‐Contractors, etc.

Close Fast before Fear and Doubt Creep In…Time kills Deals!

Questions?