Issue link: http://read.dmtmag.com/i/155925
Credit Window Opening At the Vineyard Economics Seminar, a panel of the some of the industry's most active lenders joined John Mackie, managing partner at Carle, Mackie, Power & Ross LLP, in delivering a snapshot of the current and near-term lending environment. obstacles to lending. "Prudential doesn't require appraisals and that reduces the time between a loan rate lock and documenting a loan to about 10 days," she said. When it came to predicting market behavior, Mackie set the stage with the likelihood that the Federal Reserve will begin tapering its A panel of leading industry lenders addressed attendees of the Vineyard Economics Seminar. With greater confidence on behalf of buyers and historically low interest rates still in effect, the market in Northern California has been described as "red-hot." Panelists Bill Rodda, vice president at American AgCredit; Rachelle Schlesinger, principal at Prudential; and Catherine Vyenielo, vice president/relationship manager for Rabobank, N.A., brought different perspectives to the discussion, based on the lending requirements of their institutions. For commercial lenders like Vyenielo, a shortage of appraisers and appraisers working under nondisclosure agreements has slowed down the loan process. "Rabobank has hired several in-house appraisers to speed things up on our end," she said. "We also rely on the assessors and we're seeing that property values have been lagging." Vyenielo noted a bottleneck created by title companies that had downsized during the last few years and are now finding themselves short-staffed. "The demand for loans is very strong," said AgCredit's Rodda, who attributed internal delays to the sheer number of loans being processed and a "buried" appraisal department. "Customers are seeing delays with county regulatory and permit issues; the permit process is being elongated," he said. Schlesinger noted few, if any, w w w. v w m media.com Quantitative Easing (QE) bond purchases from $85 million to $65 million by October. "Borrowing at low interest rates for the short term will be OK," he said. "Once the government buys less than $85 million in bonds each month, we can't expect fixed interest rates to continue." The slowdown or tapering effect by the Federal Reserve points to an increase in interest rates that will affect long-term borrowers first. With interest rates fluctuating as much as 20 base points during the weeks prior to the conference, Schlesinger noted, "The market is bumping around." Given the cyclical nature of lending and the presence of more than two dozen lenders at the conference, Vineyard & Winery Management asked Mark Freund, managing director for Silicon Valley Bank, for his take on the lending landscape: "The lending market for the top deals is very competitive and the credit window for second-tier deals is opening," he said. "If you're credit-worthy, it's an attractive environment." Freund noted that prior to 2008, banks would lend into projections – something they're less inclined to do now. "If there's a good indication a company can grow sales by 10%-13% and service its loan, lenders will be willing to stretch." According to the June 2013 USDA Farm Service Agency's list of 32 California counties that have now been declared primary natural disaster areas, as much as 30% of the state's grape acreage is under threat of drought. Winegrowers in Paso Robles are taking a particularly proactive stance in managing their use of the groundwater table and in helping San Luis Obispo County project future demands on water resources. "We're the last large groundwater basin in California that doesn't have a water district," said Dana Merrill, vice chairman of the Paso Robles Agricultural Alliance for Groundwater Solutions (PRAAGS) and president of Mesa Vineyard Management in Templeton. Grapes are the No. 1 agricultural crop in San Luis Obispo County, and when asked about the impact of the drought on growers, Merrill cited cases of homeowners with shallow wells that don't recharge easily going S e p t - O c t 2 0 13 | V I N E YA R D & W I N E RY M A N A G E M E N T 13