Developer Predicts Steep Increase in Hotel Foreclosures

Developers are apprehensive of a wave of foreclosed hotels entering the market as within a year commercial loans taken by the hotels will mature. There is little chance of these loans being refinanced. Although the hotel industry was one of the first to recover following the crash now the prospect looks bleak.

Hotel developer Robert Sonnenblick has predicted that there will be a “huge increase” in hotel foreclosures in America. There are innumerable commercial properties backed by mortgage security that urgently need refinancing.

The wave is swelling. He thinks that this “is going to be a close-to-catastrophic problem”. Sonnenblick of Sonnenblick Development (chairperson) said while talking in New York at Bloomberg Commercial Real Estate Summit said, “The end result of all of this is you’re going to see a huge increase of hotel foreclosures”.

There are 232 hotels carrying loans worth $21.7 billion. These commercial loans will become due within the coming twelve months and require refinancing as per the findings of Real point. Maximum only a third will manage to be refinanced while the lenders will take over the other properties.

Following the 2008 Lehman Brothers collapse, the hotels, in the real estate group were among the earliest to recover thanks to the rebounding of tourism and travel. According to a recent report of Mortgage Bankers Association the lending to hotels went up 5 times from the 3rd quarter of the previous year.

During the recovery the big hotels in the big cities like San Francisco,Boston and New York have performed the best. The rate of occupancy was 71% for the top hotels till September. For other hotels it was 62% as per the findings of Smith Travel Research of Henderson ville in Tennessee.

Although booking have gone up, financing continues to be a big problem impeding construction and sales said Jason Pomeranc of Thompson Hotels (co-owner). He owns and operates boutique lodging units in major cities. He said, “Traditional lending is still extremely difficult. Buyers want to buy. Sellers will need to sell. Someone is going to have to blink at a certain point”.

The fear that hotels will soon be foreclosed and that these units will soon enter the market is putting off lenders from granting loans for new buildings said Ian Schrager of Ian Schrager Company.

He is in one of the forerunners in the introduction of the concept of boutique hotel. He explained that at this juncture there are hurdles in going ahead with new construction because “everybody’s anticipating there’s going to be a flood of existing assets at opportunity costs to buy”. He has calculated that new hotels can be constructed in New York City for a modest rate – $400,000 for each room.

Developers are planning to construct 50 hotels till the end of 2013 – being three times more than Washington, the second busiest city in America.

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Short-Term Working Capital Funding and Commercial Loans

There are two short-term working capital financing options which are often overlooked by business owners. These involve business cash advances and short-term commercial mortgages.

This article will describe alternatives such as short-term business cash advances and commercial mortgages. With an economic recession impacting business activity adversely, all working capital financing options should be considered. Business borrowers should not overlook short-term choices for commercial loans.

Due to misunderstandings about long-term commercial financing, short-term commercial loans are often not considered properly. Although long-term commercial real estate financing options are often appropriate, there are practical short-term business financing choices that will be more workable and profitable for commercial borrowers.

The most critical short-term commercial financing techniques typically include short-term merchant cash advance and credit card processing programs and commercial real estate loan programs. Both working capital funding approaches are frequently a source of confusion for business owners.

An underutilized commercial financing strategy for businesses is possibly the best commercial loan strategy to secure cash for their business: a business cash advance using credit card processing. Credit card financing is an effective business financing tool that is usually overlooked by any business accepting credit cards as a customer payment method.

The most likely candidates to benefit from this working capital loan strategy are retail stores, service businesses, restaurants and bars. To obtain business cash advances based upon sales volume, this funding strategy uses an under-utilized business asset (credit card receivables). This working capital cash strategy is also known as credit card factoring. Some business owners have used receivables financing or factoring which allows them to sell future receivables on a discounted basis.

Not all service and retail businesses can document business receivables to obtain a commercial loan. Businesses such as bars and restaurants do not typically have receivables to use for business financing. What these businesses do have in many cases is documented sales activity. It is this documented level of credit card sales activity that becomes a financial asset to the business and its working capital management strategies. Business cash advances from $5,000 to $300,000 can usually be obtained based on a merchant’s sales volume and future sales.

The commercial financing repayment requirement for working capital advances is normally under 12 months. For merchants that need the business cash advance program for a longer time, the arrangement can be renewed on a recurring basis.

There will usually be only a few business financing sources that are regularly successful at executing the credit card financing and processing. There are key difficulties to avoid with a working capital advance, and selecting an effective funding source is essential to an appropriate business cash advance program.

A long-term commercial mortgage is appropriate for many businesses that own commercial property. Commercial property should be financed with an appropriate combination of short-term and long-term funding. It is wise to consider long-term business financing of up to 30 years when a longer-term commercial real estate loan is feasible.

However there will be many commercial mortgage loan situations in which longer-term commercial financing is not appropriate for the business owner. In such circumstances it is important for a business owner to realize that there are viable short-term working capital strategies.

Short-term commercial loans should be explored especially for business owners who want to sell or sell the property within a few years. Most short-term commercial real estate financing will have more reasonable prepayment penalties and lockout fees than typically required with long-term commercial mortgages.

While we will not attempt to describe the technical aspects of commercial loan prepayment fees and lockout fees in this article, we will note that the absence of such fees in most short-term commercial mortgage loan programs is a very positive aspect of these short-term working capital management options. If a business owner needs to sell their commercial property during the time period which would have triggered prepayment fees and lockout fees in longer-term commercial real estate loans, the lack of penalties could mean a savings of 10% to 30% or more.

Although prepayment and lockout fees will typically be avoided with short-term commercial mortgage loans, there are some trade-offs to be made if a business owner selects shorter-term working capital loans. When short-term commercial mortgages are available, they will usually not be readily available for special purpose commercial properties, the interest rate will frequently be in the range of 11% to 13% and the loan-to-value will typically be under 70%.

Multi-family, warehouse, mixed-use, office and retail commercial properties are the best candidates for short-term business finance options. For a typical short-term commercial loan, business owners should be comfortable with a time period of less than three years.

Few commercial lenders are capable of successfully executing short-term business financing. There are also numerous problems to avoid with short-term commercial mortgage programs, so selecting a lender is critical to business owners wanting a short-term business loan involving commercial property.

It is sufficiently important to repeat that a vital key to successful short-term commercial loans and business cash advances is selection of an appropriate lender. Despite the potential benefits of shorter-term business financing, the choice of a lending source cannot be overlooked.

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S1000D – Applications in the Commercial Aviation and Defense Industry

Data documentation is a critical component of the operations in the commercial aviation and defense sectors worldwide. Thankfully, S1000D™ has been developed to become the documentation standard that companies and government agencies can turn to as they streamline the process.

S1000D refers to the set of standards that guide the creation of technical publications. Initially developed by the Association Européenne des Constructeurs de Matériel Aérospatial (AECMA) based on the common technical interests of the aerospace industries of 15 European Union countries, it is now supported by the AeroSpace and Defence Industries of Europe (ASD), the Aerospace Industries Association of America (AIA) and the Air Transport Association (ATA).

The benefits of having these standards in place are immediately apparent, especially within a context that requires frequent regular collaboration between parties from different industries and countries. With S1000D now in place in many European countries, and gradually in America’s military and aerospace industries, partners, suppliers, customers, national and local governments, agencies and organizations can prevent duplications in their information exchange efforts. Furthermore, the documentation operations of a country’s commercial aviation industry can be evaluated and modified in accordance to the interests of the military.

The wider acceptance of S1000D as a documentation standard can be attributed to its data-centric approach, which enables publishers to update the information of technical publications by re-using content modules or authoring new content where applicable. For aerospace and defense industry applications, this concept of content-reuse means building on still-relevant information, where the goal is to produce a databank that can be useful to multiple parties across different industries throughout the world.

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Counterfeit Parts In Aerospace And Defense

The automotive, electrical, military and aerospace industries have faced a huge increase in counterfeiting and have been waging a long battle against counterfeited products. In the electrical, military and aerospace industries the impact of counterfeiting goes far beyond intellectual property protection or trademark infringement.

The electrical, military and aerospace industries have been a relatively easy target for counterfeit components. Their inadvertent use can have catastrophic consequences when undetected. Uncertified parts are often passed off as authentic and their use doesn’t become immediately evident.

Aerospace, space and defense products are desirable targets for counterfeiters as the systems used are intended to last over an extended period of time. They become vulnerable to obsolescence of parts, materials and technologies. Difficulties are encountered in securing the same part from a manufacturer to replace original parts. Due to parts unavailability from the original manufacturer, industries are forced to turn to independent distributors to source replacement parts.

The impact of the use of counterfeit parts or materials in the aerospace and defense industry ranges from monetary losses in the form of project cost overruns, liability, lack of availability of products, loss of customer trust, erosion of brand and image to potential and actual loss of life.

There is a long history of counterfeit airline parts which are unapproved and substandard being sold to unsuspecting airline companies. The US have discovered a lot of fake products showing up in their navy and airforce aircraft. Going back to the 1970s the Federal Aviation Administration found counterfeit systems in Boeing 737 aircraft.

In 2008 airline parts were reportedly found on sale at online consumer auction websites offering gears, flanges, gauges, radar parts and valves to buyers. Russian police have discovered criminal operations producing and selling civil aircraft parts. Back in the 1980s United States investigators discovered bogus spare parts in numerous helicopters in service in with NATO forces.

Boeing recently reported that parts like rivets, nuts and fluid bolts are components which are easily replicated and sold. Other electronic components like semiconductors, resistors, capacitors, electronic assemblies, pumps, actuators, batteries, integrated circuits and materials such as titanium and composite chemicals are also commonly counterfeited.

There are a wide variety of sources of counterfeit parts and materials ranging from original manufacturers, through to authorised distributors, after-market suppliers, test houses, and component source facilities. There are many ways that counterfeit parts can infiltrate the supply chain.

The military have been particularly vulnerable as they no longer use military-specific parts, relying nearly exclusively upon commercial manufacturers when sourcing parts for military applications.

It has been recognised that there is a pressing need for supply chain controls to be implemented so that the provenance of a part is traceable through all the possible links in the supply chain back to a credible and verifiable trusted source. A quality assurance process is being developed which is based on commonly agreed upon rules in the aerospace industry to try to stem the tide of counterfeit products making their way into the supply chain.

The semiconductor industry is also at war with counterfeiters producing dangerous counterfeit parts and components. Many semiconductor counterfeits emanate from China. The Semiconductor Industry Association (SIA) and the National Electronic Distributors Association (NEDA) are both aware of the need to prevent substandard and counterfeit components from infiltrating aerospace and military applications. An SIA Anti-Counterfeiting Task Force (ACTF) was set up in 2006 to establish a program to reduce the incidence of semiconductor product counterfeiting.

To this end SIA is co-operating with a special STM International Tracability Committee in developing a standard encouraging the use of authentication service providers. Manufacturers would be required to place an encrypted plate on labels affixed to each box of chips so that potential purchasers can make inquiries using this identifier. Given the technologies available today and the nature of the products used in the industry it seems conceivable that RFID enabled solutions combined with cryptographic techniques may be suitable for tracing products as part of the product authentication process. Although more commonly used in logistics and asset and inventory management, it remains to be seen what kind of scale of investment and suite of tools and protocols will be required to meet these very serious threats posed by counterfeited products.

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Recent Aerospace and Defense Expansion in Alabama Guarantee the State’s Technology Position

Alabama’s growing technology base, skilled labor force, low cost of doing business, lucrative state and local incentives and friendly environment has drawn numerous automotive companies into the state. These same traits are now beginning to cause a tremendous expansion in Alabama’s aerospace and defense industries.

Northrop Grumman, known as a world leading defense company, currently employs around 1,200 people in the Huntsville, Alabama area near Redstone Arsenal. In a continued commitment to the community, Northrop Grumman will be building a new five building, $80 million complex in Huntsville to consolidate its various offices, laboratories and R&D centers.

Crestview Aerospace, based in Florida, plans to open a new facility in Fairhope, Alabama to build and modify rotary wing aircraft for existing contracts. Much of Crestview Aerospace’s growth can be attributed to an increased demand for the high-tech modification of military aircraft and a partnering with Boeing, Lockheed Martin, Northrop Grumman, Bell Helicopters and others.

When looking for a U.S. home for its expansion, European Aeronautic Defence and Space Company (EADS), based in France, was recently drawn to Alabama’s aerospace industry. EADS’s new facility in Mobile, Alabama will produce aerial refueling tankers. The state’s incentives and Mobile’s easy access to a deepwater port made the decision to move to Mobile an easy one, according to EADS representatives.

GKN Aerospace announced in July that it will expand its Tallassee, AL facility by 120,000 square feet by 2007. GKN is known for designing, testing, manufacturing and assembling a wide-range of composite structures for civil, military and commercial and space programs. As part of the incentive package for the expansion, the state contributed $1.5 million and the city of Tallassee contributed $250,000 towards the expansion, with GKN investing $250 million. In an Expansion Management article, Paul Crocker, VP and General Manager of GKN Aerospace in Alabama, said “The work force in Alabama is about the best I’ve worked for in 35 years.” And “The work ethic of the whole work force is tremendous. They work hard and they work well.”.

With offices located near Huntsville and Birmingham, The Technology Suits is well associated with Alabama’s growing position in the technology, defense and aerospace industries. Many in the country view Alabama as the deep South and behind the times, but this could not be further from the truth. Alabama does have a strong cultural heritage but has seen huge advances in higher education and technology related business in the past few decades.

The aerospace and defense industries have been in north Alabama for decades. However, the relatively recent entrance/expansion of the automotive industry by Honda in Talladega, Mercedes Benz in Tuscaloosa and Hyundai in Montgomery has helped to really push the next-generation industries in the state. This new wave of aerospace and defense expansions will help to ensure that Alabama keeps its new position as a leader in technology.

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Hardware Components Dominate the Aerospace and Defense C-Class Parts Market

C-class parts are small in size and have low cost, but are one of the most critical components used in an aircraft. They are situated across the aircraft including fuselage, wings, landing gear fittings, control surfaces, flight control actuating systems, and air-intake areas near the engine.

Hardware components constitute nearly half of the c-class parts used in the aircraft industry and constitute parts including fasteners, bolts, screws, nuts, rivets, springs, valves, washers, etc. Fasteners, the largest category of hardware components, include a wide range of highly engineered aerospace parts that are designed to hold together two or more components. Bearings mainly include airframe control bearings, rod ends, ball bearings, needle roller bearings, bushings, and precision bearings. Electronic components include mainly connectors, relays, switches, circuit breakers, and lighted products. Machined parts mainly include brackets, milled parts, shims, stampings, and turned parts.

Changing dynamics in the global aerospace and defense industry have an impact on the c-class parts market. For instance, major OEMs, such as Boeing and Airbus are incorporating high amount of composite materials in their next generation aircraft. Composites rich aircraft generally require fewer c-class parts than an aircraft made of traditional non-composite materials. The parts used in next generation aircraft are generally priced higher than c-class aerospace parts used in non-composite aircraft structures.

The global aerospace & defense c-class parts market offers a healthy growth opportunity of 4.4% CAGR during the forecast period of 2016 to 2021 and reach US$ 12.1 billion. Increasing commercial and regional aircraft deliveries, technology advancement, and growing aerospace & defense fleet size are the key drivers in the global aerospace & defense market.

Hardware components dominate the global aerospace & defense market in 2015, followed by bearings, electronic components, and machined parts. North America is expected to remain the leading region in the aerospace & defense c-class parts market since it is the manufacturing hub of major tier players and aerospace & defense OEMs.

The supply chain of this market comprises raw material manufacturers, c-class part manufacturers, distributors, tier players, aerospace OEMs, and airline companies. The key distributors are Wesco Aircraft, Kellstrom industries, and Aviall Services and the key aerospace OEMs are Boeing, Airbus, Comac, Bombardier, Embraer, ATR, Lockheed Martin, Cessna, and Gulfstream.

The key aerospace & defense c-class part manufacturers are Precision Casts Parts (PCC) Fasteners, Arconic Fastening Systems, Lisi Aerospace, RBC Bearings, Stanley Black & Deker, Eaton Corporation, and Amphenol Corporation. New product development, collaboration with tier players and OEMs, and long term contacts are the key strategies adopted by the major players to gain competitive edge in the market.

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Understanding the Aerospace and Defense Industry

The term ‘aerospace’ is uses to refer to the Earth’s atmosphere above our planet. In other words, this is the part of atmosphere through which commercial, personal and military vehicles fly. Aerospace is often used to refer to the research, designing, manufacturing, operation and maintenance of vehicles that can fly. Defense, on the other hand, is a military action that is concerned with the protection of the country against an attack. Therefore, the term ‘aerospace and defense’ refers to the use of flying vehicles and aircraft to protect the borders of a country against an offense.

The Aerospace and Defense (A&D) industry is a critical business area that is more than just a business. Of course, there are businesses that are concerned about production, sales and profits, but this is one area of operations where countries take active interest because of their need to protect themselves.

Recent Changes In The Aerospace And Defense Industries

In recent times the A&D industry has gone through many changes, and some of them have been positive for the business and some not so positive.

Firstly, in the last decade or so, the perception of threat has increased – international terrorism has made it worse. Nations of the world have had to strike against Iraq and Afghanistan. There have also been instances of regional political tensions in China, India, Pakistan, and in other parts of the world. Countries are always trying to get the latest machinery so that they can remain armed and can face any contingencies. Because of this, the demand for A&D has only risen.

It also needs to be remembered here that this is a high technology industry that changes rapidly with scientific and technological breakthroughs. What this means is that, countries need to upgrade their facilities as new technology makes the old redundant. In other words, if your political enemy has upgraded, your defense abilities may fall short and you must also upgrade your resources.

This, of course, means that the aerospace and defense industry can keep selling to the same customer over and over again. But not everything is that good. In fact often, there are a great number of challenges. The main threats are from uncertainties concerning the supply of oil and the steep price hikes, political uncertainties and a worldwide credit crisis because of which countries are worried whether they will be able to meet the high prices of the A&D companies or not. There have been, after all, instances of default. There have also been instances where countries have had to take a loan to meet their defense needs.

The A&D Business And Industries Worldwide

These are big businesses and contracts can run into billions of dollars. Naturally there is a lot of competition among companies. There are usually two kinds of contract. Firstly, there is the contract of sale and second there is the maintenance contract wherein engineers of the company maintain the facilities, train government staff to maintain them, or do both.

Some of the biggest companies in the aerospace and defense industry are based in the European Union (BAE Systems, EADS, Dassault, Finmeccanica and Thales), China (the manufacturing and research facilities are located in Nanchang, Shenyang, Shanghai, Chengdu, Xian and Beijing), India (HAL in Bangalore), Russia (United Aircraft Building Corporation and Oboronprom), the UK (BAE Systems) and the US.

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Opportunities in Real Estate Market Segmentation

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