The commercial real estate market in Central Oregon has experienced increased activity in property sales during the past six months. This is due in a large part to the fact that banks are starting to loosen lending standards and are increasing the number of loans being approved.

One bright spot in the lending market is the government-guaranteed SBA 504 loan. If you own a business that is looking to purchase a building for the business, or you already own your building, the 504 has some great options for you to explore.

The SBA 504 loan program is designed as a long-term financing tool. The intent of the program is to encourage economic development in the community. This is accomplished by providing loans that have 10– or 20-year terms and fixed-rate financing that can be used to acquire major fixed assets for expansion or modernization.

The SBA portion of the loan is actually made by a nonprofit Certified Development Company (CDC) that sells debentures that are 100% guaranteed by the SBA.

A typical loan through the 504 program is secured 50% by a bank that is in first position on the loan, 40% by the SBA with a junior lien to the bank and 10% down payment by the borrower.

The proceeds can be used to purchase or construct new facilities, for renovation or conversion of existing buildings and for long-term machinery and equipment.

To be eligible to receive a 504 loan, your business must operate for profit, have tangible net worth of less than $15 million and a net income of less than $5 million after taxes for the preceding two years.

The business must also occupy at least 51% of its property at the time of application for refinance. One limitation is that you may not use an SBA 504 refinance loan to repay an existing government guaranteed loan.

Recent legislation now allows borrowers to use SBA 504 loans for refinancing existing debt on any property that would have originally qualified for a traditional 504 loan. This is great news for many

building owners who need to refinance their existing loans. Businesses can

also use the equity they have built up in their property to pay eligible business expenses.

Recently, we talked to three local banking experts to find out more about the SBA 504 loan program. Here, Neil Bone of

Columbia State Bank, Tim Kiley of Sterling Savings Bank and Paul MacMillian of Home

Federal Bank share their insights into the SBA 504 loan program.

Compass Points: Why would a borrower use an SBA 504 versus a traditional loan?

Tim Kiley: The 504 loan requires less cash down than most conventional or traditional loans. This is attractive to most businesses these days that are looking to preserve working capital. For example, conventional lenders require 25% down for an office/warehouse purchase. For the same transaction, 504 loans only require 10% down. In most cases, the terms for a 504 loan are as attractive, or more attractive, than conventional lending terms.

Neil Bone: Also, the SBA portion of the loan offers a competitive interest rate and will be a 20-year fully amortized loan for a building. You will only need to refinance the bank portion of the loan in the future.

The bank portion offers a 25-year amortization and a 10-year note. Rates adjust at year six for the bank portion. However, there are some 10-year rates. The SBA portion is fixed for 20 years.

If you have the 25% down, the bank loan can be better due to lower fees. The SBA also has higher prepayment penalties if paid off in the first 10 years. There will be some prepayment penalty even on a bank loan.

Paul MacMillian: My simple answer – higher advance

IN THIS ISSUE

Q3 Market Summary

2 Bend office market

3 Bend retail market

4 Bend & Redmond industrial markets

Compass News

5 Tara Duncan named property manager

Compass brokers Peter May and Jay Lyons earn CCIM designation

Nonprofit Spotlight: CASA cares for kids

Top Producer

6 Top 15 deals

7 A lower tax bill on your properties?

Cover story continued

8 504 SBA loans open doors for

owner-users

504 SBA loans open doors for owner-users

Continued on page 8

2 Compass points I Q3 2011 Compass points I Q3 2011 3

NET ABSORPTION BY SUBMARKET — 3RD QUARTER 2011

MARKET AREANO. OF BLDGS.

TOTALSQ. FT.

VAC %3RD QTR.

3RD QTR. ABSORPTION

ABSORPTION YTD TOTAL 2010

South 97 18 817,870 17.1% 11,148 18,702 53,968

Central 97 40 667,211 5.8% 10,175 29,558 18,527

North 97 26 1,121,460 4.3% 5,864 (12,329) 15,097

East side 29 578,469 9.5% (728) 865 35,883

West side 53 558,410 10.0% 3,303 14,484 (2,343)

Old Mill Shops 16 221,909 3.5% 960 (4,483) 1,711

Downtown 65 417,167 6.7% (5,886) 640 10,037

BEND TOTAL 247 4,382,496 8.5% 24,836 47,437 132,880

SALE/LEASE: Two remodeled retail/office buildingsGreat investment opportunity/low lease rates in Bend

HOWARD FRIEDMAN OR PAT KESGARD: 541.383.2444

SALE/LEASE: Remodeled restaurant building4,857 SF, high-traffic location in Bend

PAT KESGARD: 541.383.2444

LEASE: Grocery Outlet anchored retail spacePrime exposure, corner of Wilson & 3rd St.

MARLO WILSON OR STEVE TOOMEY: 541.383.2444

SUB-LEASE: Bank branch on Bend’s west sideExcellent exposure on Century Drive

RUSSELL HUNTAMER OR DARREN POWDERLY: 541.383.2444

Compass Commercial Real Estate Services is a full-service commercial real estate firm with expertise in all aspects of the business. Compass Points is published to inform our clients, partners and colleagues of trends, activity and opportunities in the Central Oregon commercial real estate and business markets.

Compass Points is published quarterly by Compass Commercial Real Estate Services, 600 SW Columbia Street, Suite 6100, Bend, Oregon 97702. (541) 383-2444. Subscription is free via sign-up on our website, www.compasscommercial.com. All material in Compass Points is copyrighted, unless otherwise noted.© Compass Commercial, Inc. 2011.

PARTNERS:Howard Friedman, CCIM, Principal BrokerCheryl Gardner, Principal BrokerJohn Keba, CPM, ARM, Principal BrokerBruce Kemp, CCIM, Principal BrokerDarren Powderly, CCIM, PresidentErich Schultz, SIOR, Principal BrokerStephen Toomey, CCIM, Principal BrokerGardner Williams, SIOR, Principal Broker

BROKERS: Russell Huntamer, BrokerPat Kesgard, CCIM, Principal BrokerPeter May, CCIM, Business BrokerJay Lyons, CCIMRobert Raimondi, BrokerRon Ross, CCIM, Principal BrokerMarlo Wilson, Broker

PROPERTY MANAGEMENT:Herb Arathoon, CPM, BrokerShauna Browne, Administrative AssistantTina Castillo, Operations ManagerTara Duncan, CCIM, BrokerCheryl Gardner, Principal BrokerJohn Keba, CPM, ARM, Principal Broker

DEVELOPMENT SERVICESSteve Hendley, Development Services Manager

BUSINESS SALES & ACQUISITIONS

BROKER SERVICES:Michelle Anderson, Marketing CoordinatorSandi Mickel, Administrative AssistantLisa Nielsen, Creative DirectorLupita Wesseler, Office Manager

Analysis and editorial by the management, staff and associatesof Compass Commercial Real Estate Services.

www.compasscommercial.com I info@compasscommercial.com

Compass Newsroom Follow Us on Twitter Facebook Updates

Compass surveyed 197 buildings for the third quarter 2011 office survey. The buildings in the sample totaled 2,359,935 square feet. The citywide office

vacancy rate rose slightly from 20.8% in the second quarter of 2011 to 21.1% at the end of the third quarter.

This quarter, 6,294 square feet of negative absorption took place, compared to 21,669 square feet of positive absorption in the previous quarter and 6,261 square

Bend Office Market

MARKET AREANO. OF BLDGS.

TOTALSQ. FT.

VAC %3RD QTR.

3RD QTR. ABSORPTION

ABSORPTION YTD TOTAL 2010

Downtown 48 484,199 17.3% (12,702) (20,052) 7,354

Hwy 97/3rd St. 55 625,518 29.1% (1,055) (4,204) 14,329

West side 94 1,250,216 18.6% 7,463 53,731 (72,812)

BEND TOTAL 197 2,359,933 21.1% (6,294) 29,475 (51,129)

NET ABSORPTION BY SUBMARKET — 3RD QUARTER 2011

Office Buildings over 3,000 square feet

feet of positive absorption in the third quarter of 2010.

The survey results show that approximately 498,243 square feet of space is now available for lease. Still, we are now 29,475 square feet ahead of the end of 2010 thanks to positive absorption in the first two quarters of this year, especially Q2.

Downtown submarket

Compass surveyed 48 downtown office buildings totaling 484,199 square feet for this quarter’s survey. The downtown office

Bend Retail Marketand the Former Spotted Mule building that now houses Boot Barn, taking up 12,175 square feet. The downtown and east-side submarkets lost ground with almost 6,600 square feet of new vacancies reported led by the Bourbon Street restaurant’s closing, which left 4,500 square feet dark in its downtown location.

In the North Hwy 97 submarket, Cellular One closed its doors in the third quarter, leading to a vacancy of 5,072, and the downtown area saw another 2,800 square feet come available in the 1051 Bond Building when the Bond Street Grill went out of business. However, the Jackalope Grill has signed a new lease in Putnam Pointe, absorbing nearly 2,900 square feet. Good activity has been reported on both the Bourbon Street and Bond Street Grill restaurant spaces, so we suspect that those will be absorbed sometime in Q4.

No significant leases or losses were reported in the Old Mill submarket and the vacancy rate remains the lowest in town, standing at a healthy 3.5%.

Compass surveyed 247 retail buildings totaling over 4,382,000 square feet for the 2011 third-quarter retail survey. The three-month period dropped for the second

quarter in a row to a vacancy rate of 8.5% compared with 9.1% for second quarter 2011 and 10.3% against the third quarter of 2010.

The market absorbed 24,836 square feet in the third quarter after gaining 24,537 square feet for the previous quarter and has gained 47,437 square feet year-to-date 2011. This indicates that the retail market remains strong, having seen positive gains in five out of the last six quarters.

Once again, five of the seven retail market areas surveyed experienced positive absorption over the quarter, while two lost ground. The south and central Highway 97 submarkets showed the best absorption (more than 21,300 square feet) led by Bend Factory Stores’s new 9,118 square feet of occupancy

SELECT RETAIL LISTINGS

vacancy rate increased again for the fifth quarter in a row and went from 14.7% to 17.3% during the quarter, showing a net loss of 12,702 square feet. The biggest vacancy resulted from High Lakes Health Care’s relocation from near the downtown Post Office to the Bonnett Point Building on the west side. Compass is listing the former High Lakes space of nearly 8,100 square feet for $1.25 triple net. Another 6,000 square feet went dark in the 1195 NW Wall Street building, now also for lease by Compass Commercial.

Hwy 97/3rD street submarket

The Hwy 97/3rd Street corridor also lost ground, recording 1,055 square feet of negative net absorption in the third quarter. The vacancy rate rose from 28.9% to 29.1% compared to the second quarter of 2011, with five buildings showing higher vacancies than previously reported and four buildings showing positive absorption out of the 55 buildings surveyed. No significant leases of more than 2,600 square feet were recorded.

west-siDe submarket

The west-side submarket again reported positive absorption in the third quarter, for the third quarter in a row. Overall, the west side gained 7,463 square feet of net positive absorption. The vacancy rate fell from 19.2% to 18.6%. Out of the 94 buildings surveyed, 11 reported new leases signed during the quarter while only four showed more vacancies than the second quarter of 2011. Like the Hwy 97 corridor, no significant leases or vacancies over 2,700 square feet were reported.

ABSORPTION

VACANCY

LEASE: Pioneer Park BuildingOffice space with river views and Pioneer Park access

DARREN POWDERLY OR ERICH SCHULTZ: 541.383.2444

LEASE: Class A medical/office space2,000 – 6,500 SF on Medical Center Dr. in Bend

PAT KESGARD OR HOWARD FRIEDMAN: 541.383.2444

SELECT OFFICE LISTINGS

ABSORPTION

VACANCY

Visit our website to see Central Oregon’s

largest inventory of commercial real estateand bank-owned properties.

www.compasscommercial.com

4 Compass points I Q3 2011 Compass points I Q3 2011 5

NET ABSORPTION — 3RD QUARTER 2011

Industrial Buildings over 3,000 square feet

The third quarter Redmond

Industrial survey included

75 buildings totaling 1.45

million square feet. The vacancy rate fell slightly to

29.1%, compared to 29.9% in the second quarter of 2011 but up from 27.1% at the end of 2010.

Move-ins exceeded vacancies by 11,972

MARKET AREANO. OF BLDGS.

TOTALSQ. FT.

VAC %3RD QTR.

3RD QTR. ABSORPTION

ABSORPTION YTD TOTAL 2010

Redmond 75 1,451,647 29.1% 11,972 (25,035) (32,730)

NET ABSORPTION BY SUBMARKET — 3RD QUARTER 2011

Industrial Buildings over 3,000 square feet

MARKET AREANO. OF BLDGS.

TOTALSQ. FT.

VAC %3RD QTR.

3RD QTR. ABSORPTION

ABSORPTION YTD TOTAL 2010

Southeast 132 1,623,799 17.3% (8,362) (13,952) 31,547

Northeast 116 1,833,074 18.3% (28,927) 7,080 (52,236)

Central 36 349,040 23.7% (1,683) 9,296 20,108

West side 9 178,144 1.0% (659) (1,710) 3,420

BEND TOTAL 293 3,984,057 17.6% (39,631) 714 2,839

Bend Industrial MarketCompass surveyed 293

buildings for the third

quarter 2011 industrial

review. The buildings in

the sample totaled just

under 4 million square

feet. The citywide industrial vacancy rate

increased from 16.6% to 17.6% over the last

quarter. Approximately 701,633 square feet

of space is now available for lease.

The negative absorption for the third quarter

of 2011 was the second losing quarter in a

row after two quarters showed positive gains.

The third quarter negative absorption was

39,631 square feet, with all four sectors

losing ground. Still, 2011 year-to-date

shows positive absorption of 714 square

feet, thanks to a strong first quarter that

reported over 63,000 square feet of positive

absorption in the industrial market.

The two biggest losers were a building on

Layton Road that reported a 14,400-square-

foot vacancy and a building on Armour Road

that lost 14,100 square feet. Also, 9,600

square feet of negative absorption was noted

in a building on Corporate Place and another

8,100 square feet became available on 9th

Street. These statistics support the fact that the northeast sector was the biggest loser in occupancy reporting nearly 29,000 square feet of loss, followed by the southeast sector which lost over 8,000 square feet.

As noted, the southeast submarket recorded

8,362 square feet of negative net absorption

in the third quarter. The vacancy rate rose

slightly from 17.1% to 17.3% as a result.

There were no significant leases signed in the southeast sector in the second quarter.

The northeast submarket recorded negative

net absorption of 28,927 square feet in

the third quarter, the second quarter in a row with a net loss of over 25,000 square feet. This was after positive gains from the previous two quarters. This resulted in a vacancy-rate rise from 16.7% to 18.3%.

There were 11 reported losses and six

gainers in the sector for industrial buildings.

The central submarket also reported a loss

in the third quarter, recording 1,683 square

feet of negative net absorption after posting

a significant gain of over 20,000 square feet

in the second quarter. The vacancy is now 23.7%, up from 22.9% at the end of the second quarter. There was only one vacancy

of 2,630 square feet and one lease of 947

square feet signed in the central submarket.

And finally, the west-side submarket lost an

additional 659 square feet of occupancy,

making the total vacancy in that sector 1,710

square feet, or 1% of the total reported.

On the sales front, a 4,270 square foot

building on Lytle Street, formerly home

to East Cascades Security, traded hands

in July. The reported sale price was

$350,000, or $81.97 per square foot for

this mixed use property.

Also in July, a 20,000 square foot industrial building at 1315 S.E. Armour in Bend sold to an owner/user for $725,000, or $36.25 per square foot.

Compass Commercial brokers Peter May and Jay Lyons have each earned the Certified Commercial Investment Member (CCIM) designation from the CCIM Institute. They received their professional pins at the CCIM Conference, held October 12 – 14 in Phoenix.

The CCIM title is often referred to as the master’s degree of commercial real estate and requires extensive coursework, portfolio submission and a final exam. Only an estimated 15,000 real estate brokers internationally

Compass Brokers Peter May and Jay Lyons earn CCIM designationhave earned the CCIM title.

May joined Compass in 2007 with 15 years of sales experience. In addition to real estate, he specializes in business sales and acquisitions and is president of the Bend Business Group. He holds

a master’s of business administration from Colorado State University.

Lyons worked as a real estate and investment analyst for five years before joining Compass Commercial as a broker earlier this year. He

Peter May, CCIM,Business Broker

Jay Lyons, CCIM,Broker

ABSORPTION

VACANCY

ABSORPTION

VACANCY

square feet over the last 90 days, welcome news after three straight losing quarters. Currently, approximately 422,000 square feet

of space is available for lease.

Leasing activity slowed a bit with six buildings

reporting new leases signed but only three

reporting additional vacancies.

Rental rates remained steady in the $.25 – $.45 per square foot per month range.

Redmond Industrial Market

Tara Duncan, CCIM, has joined Compass Commercial Asset and Property Management as a full-time property manager.

Previously, Duncan had worked as both a broker and property manager with the company. In

this new role, Duncan will help oversee and optimize the company’s management

Tara Duncan named property manager

Tara Duncan, CCIM, Property

Manager

portfolio of 1.2 million square feet, which includes retail shopping centers, office campuses and industrial parks.

Duncan joined Compass in 1997 and has specialized in the leasing of office, retail and mixed-use properties. She’s a member of the International Council of Shopping Centers (ICSC) and currently serves on the board of the Commercial Investment Division (CID) of the Central Oregon Association of Realtors (COAR).

— M.A.

Erich Schultz,SIOR, PARTNER,

PRINCIPAL BROKER

Congratulations to tHe

Top Producer3rd Quarter 2011

July, august & september

holds a master’s of science in real estate and construction management from the University of Denver.

“Compass has made continuing education a priority,” said Compass Commercial Sales Manager Bruce Kemp, who is also a CCIM. “We encourage all of our brokers to pursue professional designations as a way to better serve our clients.”

Compass Commercial now has nine CCIM designees, two Society of Industrial and Office Realtors (SIOR) designees, two Certified Property Managers (CPM) and an Accredited Residential Manager (ARM).

— M.A.

By Pam F

Compass Commercial is proud to support and spotlight local nonprofits that make our community a better place. This month we’d like to introduce you to CASA.

Each year, approximately 400 children in Central Oregon are caught in the court and child welfare maze because they are unable to live safely at home.

Imagine what it would be like to lose your

parents, not because of something you did, but because they can’t or won’t take care of you. Now, into these children’s lives come dozens of strangers: police, foster parents, therapists, social workers, judges, lawyers and more. Hopefully, one of these strangers is a Court Appointed Special Advocate (CASA) volunteer.

Volunteers are appointed by judges to watch over and advocate for abused and neglected

children to make sure they don’t get lost in the overburdened legal and social service system. They stay with each case until it is closed and the child is placed in a safe, permanent home. For many abused children, their CASA volunteer will be the one constant adult presence—the one adult who cares only for them.

Continued on page 6

nonprofit spotligHt

CASA cares for kids CASA of Central OregonA voice of hope for abused and neglectedchildren in Central Oregon.

6 Compass points I Q3 2011 Compass points I Q3 2011 7

SALE: Aircraft manufacturing facility90,000 SF at Bend Municipal Airport

GARDNER WILLIAMS OR ROBERT RAIMONDI: 541.383.2444

SALE: Bank approved short saleLand zoned M1, light industrial, in Redmond

HOWARD FRIEDMAN: 541.383.2444

LEASE: Industrial warehouse/office space3,200 SF w/office and generous yard in Bend

HOWARD FRIEDMAN OR ERICH SCHULTZ: 541.383.2444

SALE: Lot 7 Airport Business CenterWell priced lot in upscale Redmond business park

RON ROSS: 541.322.1230

SELECT INDUSTRIAL LISTINGSA lower tax bill on your properties?By Herb Arathoon, CPM,Compass Commercial Real Estate Services

Property tax season is upon us, and

39% of taxpayers will be surprised to see that, for the first time in memory, their

property taxes have gone down from previous years. Not by much, but taxes are a bit lower.

The County Assessor’s Office uses two different values to set property taxes, including Real Market Value and Total Assessed Value.

The Real Market Value is what the County appraiser estimates you could have sold your property for on January 1, 2011.

The Total Assessed Value is the result of Measure 50 that was passed in 1997 to help regulate the fluctuations in Real Market Value. When Measure 50 passed, the prediction was that real estate prices would continue to go up every year, so the amount was capped by 3% per year.

In the boom years we experienced from 1997 to 2007, the gap between Real Market Value and Total Assessed Value kept growing, so the rise of your Total Assessed Value by 3% a year was a given. Now Real Market Value has dropped and, for some taxpayers, it is actually below the Total Assessed Value

If the Real Market Value is lower than the Total Assessed Value, the taxes are calculated on the lower of the two numbers. A slight drop in the tax rate has also taken place due to bonds expiring.

Many taxpayers think that, since values have dropped drastically, property taxes have not gone down as much as they should. As a property owner, you have the right to appeal, however the burden of proof is on you to show that the value is too high. The easiest way to do this is to have an appraisal done. If the result is lower than the Total Assessed Value

in your Property Tax Statement, the taxpayer can go to the county with that evidence.

Compiling a list of comparative sales is another way to provide proof. If you are going to get “comps,” make sure they are as close to the January 1, 2011, date as possible. If the building next door to you sold in September of this year for a low price, that comp will probably not be accepted because the Total Assessed Value in your tax statement is based on the January 1, 2011, date.

Another way to appraise the value of your commercial building is the income approach. Calculate the net operating income (NOI) of your property, divide it by a realistic cap rate, and that will give you the building’s value. Make sure that, if you use the income approach, you are using market rates and that the vacancy rates fall in a market average for that type of property.

If you plan to appeal your property tax, the County Assessor’s Office suggests you talk to the office first. If you feel you still have a case, make sure you file your appeal by January 3. Please remember that just because you are filing an appeal does not mean you don’t have to make your tax payments, starting with the first payment by November 15, 2011. If you feel that the Real Market Value of your property in the Tax Statement is too high, talk to the County Assessor’s Office and make sure that number is closer to the real market value of your property, even if that does not lower your actual tax.

Other things to consider before making an appeal are your mortgages and lines of credit. The banks sometimes use the county numbers as reference for the value of your property on which they base the mortgage and lines of credit. If your loan-to-value ratio is high, lowering the value of your property might trigger the bank to reconsider your loans.

And above all, make sure to consult your attorney and certified public accountant before you make a move. Everybody is in a different financial or legal position and it is a good idea to consult the experts before making such a decision.

Top 15 deals of Q3, 2011Compass closed 67 deals in the third quarter with a total consideration of nearly $25 million. Below are the some of the significant transactions for July through September. This is a sampling of our deals. We hold some transactions in confidence per the wishes of our clients.

1) Deschutes Ridge Office Park, office sale, $5,155,000

Seller: WBCMT 2007 C33 Disk Drive, LLC, represented by Gardner Williams, SIOR

Buyer: Deschutes Ridge Business Park, LLC, represented by Howard Friedman, CCIM, and Erich Schultz, SIOR

2) Highland Marketplace, retail sale, Redmond, $2,325,000

Seller: Sterling Savings Bank, represented by John Keba, CPM, ARM, Krista Polvi, Broker, and Bruce Kemp, CCIM

Buyer: Richard L. Carpenter, represented by Bruce Kemp, CCIM

3) 320 SW Upper Terrace Drive, office lease, $1,640,934

Lessor: River Bend Investors, represented by Gardner Williams, SIOR, and Robert Raimondi, Broker

Lessee: Wells Fargo Advisors, LLC, represented by Erich Schultz, SIOR

4) NW Shevlin Park Road, Bend, residential land sale, $1,425,000

Seller: Columbia State Bank, represented by Ron Ross, CCIM

Buyers: Randy and Robin Smith

5) 815 SW Bond, office lease, $1,409,990 Lessor: River Bend Investors,

represented by Erich Schultz, SIOR, and Gardner Williams, SIOR

Lessee: The American Red Cross, represented by Gardner Williams, SIOR, and Darren Powderly, CCIM

6) 601 N Broadway St, Post, retail building sale

Seller: Richard Lesser Properties, LLC Buyer: Pine Tree Livestock, Inc.,

represented by Erich Schultz, SIOR

7) 27th Court, Redmond, $1,050,000 Seller: Columbia State Bank,

represented by Ron Ross, CCIM, and Robert Raimondi, Broker

Buyer: Undisclosed, represented by Jay Lyons, CCIM, Bruce Kemp, CCIM, and Darren Powderly, CCIM

8) 541 NE Dekalb Ave., Bend, office building sale, $952,500

Seller: Living Purpose Church, represented by Robert Raimondi, Broker

Buyer: The Salvation Army, represented by Bruce Kemp, CCIM

9) 1558 SW Nancy Way, Bend, office building sale, $755,000

Seller: Nancy Building, LLC, represented by Russell Huntamer, Broker, and Darren Powderly, CCIM

Buyer: Tim G. Elliott and Philip R. Anderson

10) 1315 SE Armour, Bend, industrial building sale, $725,000

Seller: Dewey Family Revocable Trust, represented by Darren Powderly, CCIM, and Russell Huntamer, Broker

Buyer: Undisclosed, represented by Darren Powderly, CCIM, and Russell Huntamer, Broker

11) 80 NE Bend River Mall Dr., retail building sale, $700,000

Seller: Verizon Wireless, represented by Gardner Williams, SIOR

Buyer: University of Oregon Bookstore, Inc.

12) 62970 18th St., Bend, industrial land sale, $527,990

Seller: SA Group Properties, Inc., represented by Darren Powderly, CCIM, and Bruce Kemp, CCIM

Buyer: Brewery Holding, LLC, represented by Erich Schultz, SIOR

13) 3295 W Antler Ave., Redmond, $525,000

Seller: Home Federal Bank, represented by Peter May, CCIM, Darren Powderly, CCIM, Erich Schultz, CCIM, and Bruce Kemp, CCIM

Buyer: VPS6, LLC

14) 2253 NE Doctors Dr., Bend, office building sale, $496,000

Seller: David Coutin Family, LLC Buyer: Dr. Ripdeep Mangat, represented

by Darren Powderly, CCIM

15) 52670 N Hwy 97, La Pine, $400,000 Seller: James Rathbone Buyer: Scott Asla, represented by

Russell Huntamer, Broker, and Steve Toomey, CCIM

CASA cares for kids

Continued from page 5

In 2006, the U.S. Department of Justice Office of the Inspector General conducted an audit of the National CASA Association, as required by Congress. Highlights of the findings include:

• ChildrenwithaCASAaresubstantiallyless likely to spend time in long-term foster care;

• whenaCASAwasinvolvedinacase,both children and their parents were ordered by the court to receive more services;

• cases involving a CASA are morelikely to be permanently closed that cases where a CASA was not involved; and

• childrenwithaCASAaremorelikelyto be adopted.

Unfortunately, on any given day, there were 50 to 80 children without a CASA due to lack of funding. In Central Oregon, a $1,070

investment can help serve a child with a CASA volunteer for one year.

Editor’s note: To learn more about CASA, please visit www.casaofcentraloregon.org or call (541) 389-1618.

2010 Casa of Central oregon aCComplisHments

• 114 tri-county CASA volunteers advocated for the best interests of abused and neglected children in foster care

• 374 children received advocacy in the tri-county area

• 37 new volunteers completed 34 hours of training

• Volunteers dedicated more than 4,700 hours and drove 36,500 miles to advocate for their CASA children, valued at $95,175

8 Compass points I Q3 2011

an additional approval requirement from the SBA. The Bank will have its typical requirements (loan to value, debt-service coverage ratio, covenants, financial reporting, guaranties, etc.), which could be in-line with the SBA, or in some situations, with more complex operating companies or borrowing entities, could be enhanced.

Make sure to have your banker discuss the following:

• Costsassociatedwiththe504loan;

• structureoftheloans,asitisdifferentfrom a traditional bank loan;

• guaranty requirements with both theBank and the SBA; and

• the prepayment penalty associatedwith the SBA portion of the loan.

CP: How does the SBA 504 loan process differ bank to bank?

Bone: It is very similar from bank to bank. All banks use the same group of CDCs. Some examples include Evergreen and COIC.

Different banks do, however, have different underwriting standards. For the most part, the SBA will accept the underwriting standards of the bank. Columbia State Bank is a preferred lender. This means the bank approves the loan in-house. The bank will receive a slightly lower guarantee from the SBA.

Kiley: The SBA approves the loan structure and therefore most loans will mirror each other regardless of the lender. The difference in process typically falls in the level of service provided to the borrower. Banks with SBA lending departments, such as Sterling, are experienced and understand that nuances of SBA lending and thus provide faster turnarounds and less borrower headache.

CP: What type of property qualifies and are there differences between types of properties?

Bone: The property must be an owner-user property, and you can also do any fixed-asset purchase, including equipment. Specialty buildings can be difficult. These include restaurants and bowling alleys. The SBA has done some restaurants lately. You can

504 SBA loans open doors for owner-usersContinued from page 1

rate than a traditional bank loan and the fact the second trust deed (TD) with the SBA is fixed for the life of the loan, typically 20 years. The downside – closing costs are higher and the prepayment with the second TD is typically 10 years.

CP: How does the process work to qualify for an SBA 504 loan? What information will the borrower need to provide?

Bone: It’s the same as for any commercial loan. The borrower needs to confirm the cash flow of the property, collateral, tax returns and financials for the past three years. The loan is structured as 50% bank loan, 40% SBA and 10% down by the borrower, and the SBA always requires a personal guarantee. Columbia State Bank has a dedicated SBA department, but all 504 loans are done locally.

Kiley: Generally speaking, the borrower must also meet the following criteria to be eligible for a 504 loan:

• Beafor-profitbusiness;

• occupy 51% of an existing buildingand 60% of a newly constructed building;

• putaminimumof10%down;and

•meet at least one goal around jobcreation, public policy or community development through the project.

The borrower also needs to provide three years of personal and corporate tax returns, interim financial statements, executed purchase contract, personal financial statements on principals with 20% or more ownership in the business. In addition they need to complete various forms provided by the lender, such as credit authorizations and management resumes.

In addition to selecting a bank experienced in SBA lending, the borrower should also select an experienced Certified Development Company (CDC). The lender will normally recommend a CDC that has a proven track record.

MacMillian: The process will work just like a traditional bank commercial real estate loan, with some added paper work and

do a 504 loan as a construction loan, also. However, in this case the owner would need to occupy 60% of the building to qualify.

Kiley: Almost all property types qualify for 504 financing. To qualify for 504 financing, the borrower must occupy 51% of the building for a purchase transaction and 60% of the building if it is new construction. Maximum loan-to-values vary on the type of commercial real estate. For example, a general-purpose building is eligible for up to 90% financing; a special purpose building is eligible for up to 85% financing; and a single purpose building is eligible for up to 80% financing.

MacMillian: The SBA may have additional restrictions on certain special-use property types, so make sure to check with your banker. The SBA is constantly making tweaks to its programs, so do not hesitate to ask questions.

CP: How long does it typically take to complete a real estate purchase using a 504 loan?

Kiley: It usually takes 45 to 60 days. The lag in timing is mainly due to the SBA approval process. The SBA will not approve a 504 loan until the appraisal is complete.

MacMillian: The process should take anywhere from 60 to 90 days, depending upon both the bank and the SBA’s workloads and the turnaround time on third-party reports, such as the appraisal and environmental.

Bone: It can also depend on the amount of the loan. SBA can typically do 60 days from the start of the process to funding. Getting the SBA approval can be another 90 days after the original 60 days. However, the borrower gets the money in the first 60-day period and the bank does a bridge loan for the SBA portion until they get paid by the SBA.