Avatar's Blog

Bridge loans are saving the day for some businesses in the areas hit by the recent hurricanes. I have been reading on msnbc financial news about companies who are receiving very short term bridge loans to help pay for rehab of properties and, perhaps equally important, to get over the lack of business in the area while the town rebuilds itself. ....So goes the line.

The economy in general does seem to be trucking along. NPR was touting our national economic health just this morning again, "...despite Hurricane Katrina, other storms, and War in Iraq," said the newscaster, "our economy is showing signs of remaining robust in the coming months." That's all fine and well for those of us who don't live in Katrina stricken Baton Rouge or the State of Louisiana for that matter.

There is an uncomfortable underlying current of lack of health and inability to revive in Baton Rouge that many seem to be ignoring. I don't see hard money loan requests coming from that region at all. That's troubling. The raison d'etre for hard money is to be a source of funds when wolves are at the door, and the banks won't, don't or can't fund. We at Avatar expected to be deluged, as did other hard money lenders. But they have not matieralized. The only bridge loans I am hearing about are very short term (30-90 day) coming from government sources. They are designed to help businesses stay alive while there are no patrons.

No patrons? The city is still deserted? In short, yes. Huge tracts of what used to be a bustling city is still unoccupied and unlivable - they cannot be occupied. People are losing their homes and commecial properties to investors. They're still in property buying mode. It's going to be months and years before these investors are ready to take their profits by reselling to those who will build and those built-out properties are sold in turn to those who will manage and rent them, live in them, or run their own businesses in them.

The cycle is a lot longer than 30 -90 days. Nobody is moving back to town by February. So where will the funds come from in 90 days when these loans come due? I expect many will default.

When the story is reviewed in 5 -10 years, I think we are going to read a couple of feel-good stories about those that 'made it through' the tough times. But mostly, this area, whether those in power choose to move upstream or to build where the old city stood, this city is not going to be re-built. It will be built new - built by those who are snapping up properties from the devesatated now. The new owners will design how the town looks in the future. And there will be new business startups. What was, is dying. What is to be, will be new blood. Tomorrow - who left, who stayed, and who's coming to town.