Commercial properties good investment: Alaska not touched like the rest of the U.S.

• Author: Carson, Earl
• Position: REAL ESTATE

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Misleading headlines from the Lower 48 need not discourage Alaska business owners or new property investors from purchasing commercial property--even with the credit crunch in full swing. Banks in Alaska do have capital for financing commercial mortgages, and are open for business. In fact, many banks that once focused on residential are now expanding into the commercial sector to maintain origination volume. For this reason, borrowers need to be wary of banks that claim experience in mortgages, but casually refer that their experience is in housing. These banks may not know what they don't know.

"Something happened on the way to the market," is not something borrowers want to hear on the day their commercial mortgage is scheduled to close. Unfortunately it is all too common for lenders inexperienced in the commercial market to make promises they can't keep, not due to lack of ethics, but lack of expertise. However, many borrowers find themselves dealing with smaller financial institutions whose bread and butter is residential mortgages--and may lack the ability to come through with the originally quoted numbers. This makes understanding the process from application to closing even more important during today's credit crunch, when rates and terms can be rapidly moving targets.

Apartment complexes, retail centers and warehouses are all good investments. Alaska tends to operate countercycle, so we have not yet experienced the challenges in real estate plaguing the rest of the country. Historically low interest rates coupled with an uncertain stock market mean that real estate is an advantageous investment for both individuals and businesses. There are financial benefits that small businesses can reap from owning the firm's business-related real estate, including tax benefits and property appreciation. For many small businesses unlikely to move their operations, owning rather than renting the property in which the business operates can be both a profitable and an operationally logical decision. Individuals also may choose this point in the market cycle to invest in commercial property; with interest rates low and the stock market fluctuating, what better place to put investment funds than in a tangible, local investment unlikely to be wiped out by macroeconomic trends? The financing of such investments should not be approached casually. Financial institutions with personnel who understand the commercial mortgage process...