is a publicly traded holding company (OTC PINK: OCFN) which owns various synergistic subsidiaries within the commercial real estate finance and capital markets sectors. Their core operating and wholly owned subsidiary Omega Capital Street LLC is located at 501 Brickell Key Drive, Miami, FL 33131. Phone (305) 537-9661 Website: www.omegapublic.com.
OCFN’s operating arm Omega Capital Street seeks to finance and invest into real property defined as Commercial Real Estate (CRE) using first lien mortgages, mezzanine financing, syndication participation, defeasance, equity positions and opportunistic lending and/or investment strategies within select markets in the United States and certain international markets.
The Core lending strategies are based on collateral, cash flow, credit, and markets using a risk reward returns model. They utilize a combination of third party and retained services for loan servicing with exit positions varying from borrower’s sale of properties, refinancing of loans, defeasance, securitizations, to mortgage notes and investment position sales into the secondary trading market. They may broker loans to other institutions from time to time as well.
Omega plans to provide products and corresponding risk-reward mortgage loans in four sectors; 1) The conservative CMBS lending market with conservative rates 2) Alternative or Alt “A” Loans with mid-level rates, which is the company’s core target lending market 3) Bridge Loans with above mid-level rates and 4) Hard Money Loans with high interest rates.
Returns and income for each one of these sectors will be comprised of origination points, administrative fees, interest income, recaptured income, servicing fees and exit fees with variable fees stemming from secondary market trades and asset sales. They will also produce equity income in the form of asset value spread, interest income, equity participation income and equity position exits.
The US commercial mortgage market is strong and is approaching $3 Trillion Dollars. The market sector of which Omega targets and conducts its business represents an approximate $1 Trillion Dollars in opportunities for Omega’s lending products. (See the Mortgage Bankers Report in the Industry Analysis). A January 7, 2016 Mortgage Bankers Association (MBA) Survey states a strong 2016 outlook: “Commercial and multifamily mortgage lending is expected to increase in 2016, as lenders’ and borrowers’ appetites for new loans remain strong, according to a new Mortgage Bankers Association survey of the top commercial and multifamily mortgage origination firms. A full 90 percent of the top firms expect originations to increase in 2016, with 50 percent expecting an increase of 5 percent or more, and almost two-thirds (61 percent) expecting their own firm’s originations to increase by 5 percent or more. “Commercial mortgage lenders anticipate another competitive year in 2016, as lender desire to make loans remains strong,” said Jamie Woodwell, MBA’s Vice President for Commercial Real Estate Research. “With strong market fundamentals and the 10 year loans made during 2006 and 2007 maturing this year and next, lenders also anticipate strong demand from borrowers.”
Through a macro view analysis of the commercial real estate finance market, TREPP a leading CRE research firm believes that CRE lending has been growing at a solid rate year-to-date. The annualized growth rate for construction and land development was 14.7%, essentially on par with the 14.8% pace realized in the second half of 2016. Multifamily properties’ annualized growth rate for the year to date rose to 15.5%. The annualized year-to-date growth rate for commercial mortgages was near double digits at 9.9%. Commercial mortgage growth has been relatively steady this year, though it had tapered off in May. Multifamily lending growth during the second quarter has been close to the strong rate of growth posted for the full year in 2017.
Furthermore, Forisk Research remains upbeat with the labor market continuing to have a strong long term outlook, thus more people with jobs will traditionally trickle down to help the real estate market as well. According to the National Association of Realtors (NAR), commercial real estate continues to show growth through 2017. In the report released May 18, 2016, NAR did note that large commercial real estate markets could see sales weaken on the investment side, as worries of interest rate hikes could provide jitters to buyers.
NAR: Commercial Real Estate Shows Growth Through 2017
However, in light of the British vote to leave the European Union on June 23, 2016, the uncertainty across the global financial system may push the Federal Reserve to leave interest rates where they stand until further notice. Experts say that in light of the vote and mass selloff across the world, the Fed will most likely put off rate hikes in 2016, and even noted a 12% interest rate cut before the year is over. This could help lift worries of interest rate risk from the large commercial real estate markets across the United States.
As global investors search for places to put their money as global uncertainty hits, the National Association of Realtors sees international demand for U.S. commercial real estate helping to drive demand and prices higher. This helps the secondary lenders’ industry in the real estate business. One firm that stands to be a long-term contender in the U.S. commercial and residential real estate lending business is Omega Commercial Finance Corporation. (OTC Pink: OCFN).
Overview of Omega Commercial Finance Corporation. (OTC Pink: OCFN)
The international accounting firm Deloitte states the following in their 2016 Commercial Real Estate Outlook paper: “Disruptive forces have the potential to redefine the current property market segmentation of primary, secondary, and tertiary, and consequently, valuation” and goes on to state: “There are a number of dynamics that have great potential to fundamentally change the commercial real estate (CRE) business over the next decade. Market disruptors in technology—including cloud computing, mobile, social media, and analytics—have primed the sector for some of the most important shifts in its history.”
Consequently, Omega positioned itself by building its lending and equity investment platform in providing CLOUD computing reports and status’s, social media and analytics of clients’ loans and equity investment data for each client over the course of their loan and or equity life in Omega. Collaborating these market disrupters with Omega’s core alternative lending products mixed with a balance of CMBS and Hard Money type loan-products gives Omega a completive edge over legacy lenders who have not yet addressed new market disruptors and products.
Accordingly, Omega has broaden its ability to capture brand market share in the CRE market through its acquisition of the real estate holding company VeriTrek Inc. and its subsidiaries Summit Real Estate Group, which is a CLOUD BASED real estate sales platform spread out over 7 states with over 400 agents working in real estate brokerage and sales and L&W, a real estate title company.
OCFN: Focusing on Synergistic Acquisitions:
Omega Commercial Finance Corporation acquired VeriTrek Inc. in October 2014 with the intention of using VeriTrek’s 400 agents to market its CRE lending platform and to eventually penetrate the residential lending sector in order to expand and diversify its lending business. However, delays arose stemming from the merger in obtaining PCAOB documents to prepare the financials for VeriTrek Inc. Hence, once Omega Commercial Finance Corporation completes the 2013 and 2014 audit of VeriTrek Inc they can formally file an 8-K coinciding with effectively consolidating VeriTrek Inc. to the balance sheet of OCFN, plus with both 2015 10-Qs and 10-K forms filed, and the required YTD 10-Q’s, Omega Commercial Finance Corporation will once again be fully reporting and compliant with the Securities Exchange Act of 1934. Omega Capital Street’s CEO Eran Danino says Omega Commercial Finance Corporation should be complaint and back to a full reporting status within 45 to 60 days from June 2016.
When this reporting situation is corrected the new synergized and consolidated platform is forecasted to post $6-7 million in revenue and hold $3 million in assets.
In June 2015, Omega Commercial Finance Corporation acquired 20% of Branca Ribeiro Representacoes Ltd. (BRR). BRR operates as a timber and forest holding company with 345,453 acres of forest in Brazil. As of 2014, BRR’s land holdings were valued at around $393 million. Subject to this valuation this could give Omega Commercial Finance Corporation access to around $76-million in timber assets that can then be used as leverage to generate lending capital to fund future loans and other related business capital requirements.
In May 2016 through a lease to purchase contract, Omega FLK Property LLC, another subsidiary of Omega Commercial Finance Corporation purchased a hotel and marina property in the Florida Keys with an initial $80,000 down payment and $25,000 monthly payments moving forward over the next five years. The marina has a dock and 20 boat slips and is currently being operated as monthly rentals with close to a 100% occupancy rate, which generates consistent monthly revenue. In addition, the hotel property is being repositioned to a four-star destination resort with the perfect ability to capture vacationers to the Florida Keys area.
OCFN: Valuation & Competitor Analysis
Turning to valuation, Omega Commercial Finance Corporation has a market cap of $821,338, as of June 2016. Furthermore, the commercial real estate company posted unlimited authorized shares, 4.11 billion shares outstanding, and a float of 1.6 billion shares. As noted earlier Omega Commercial Finance Corporation is still in the process of becoming a fully reporting company as required by the Securities Exchange Act or 1934. However, the company does note that previous years’ audits are being completed and coming along at a quick pace.
The last full year reported in 2014, Omega Commercial Finance Corporation reported total revenues of $470,000, but a net loss of $2.54 billion during 2014.
Here are five closely related companies that operate in the commercial real estate market, along with other financial lending companies that can help assess long-term valuation for Omega Commercial Finance Corporation:
Capital Financial Global, Inc. (OTC Pink: CFGX) provides an alternative method to help provide funding and credit solutions that are unlike traditional banking loans. The financial firm uses asset-backed loans to obtain higher liquidity. As of June 2016, Capital Financial Global, Inc. (OTC Pink: CFGX) had a market value of $178,628. Furthermore, the asset-backed lender listed 2 billion shares authorized, 1.8 billion shares outstanding, and a share float of 1.4 billion shares, as of May 2016. During full year 2015, Capital Financial Global, Inc. (OTC Pink: CFGX) reported total revenue of $332,000, but a net loss of $2.02 million.
NewStar Financial, Inc. (NASDAQ: NEWS) is a commercial financial company that offers a variety of financial solutions such as senior-secured cash flow loans, second liens, acquisitions, recapitalizations, refinancing, working capital financing, and more. As of June 2016, NewStar Financial, Inc. (NASDAQ: NEWS) posted a market cap of $476.03 million. Furthermore, the finance company lists outstanding shares at nearly 47.7 million and a float of 17.32 million shares. During full year 2015, NewStar Financial, Inc. (NASDAQ: NEWS) posted total revenue of $220.14 million and net income of $16.9 million.
HFF, Inc. (NYSE: HF) is a commercial real estate company that provides capital market services ranging from debt placement services to investment sales services and mergers and acquisitions. HFF, Inc. (NYSE: HF) has a market cap of $1.17 billion, outstanding shares of 38.1 million, and a float of 35.22 million shares, as of June 2016. During full year 2015, HFF, Inc. (NYSE: HF) reportedly saw total revenue of nearly $502 million and net income of nearly $84 million.
Kennedy-Wilson Holdings, Inc. (NYSE: KW) is a real estate investment company that owns, operates, and places investments in real estate through its own sources or its investment management business segment. The company primarily focuses on commercial real estate and multifamily homes in the U.S., U.K., Spain, Italy, and Japan. As of June 2016, Kennedy-Wilson Holdings, Inc. (NYSE: KW) had a market cap of $2.3 billion, outstanding shares of 113.7 million, and a float of 93 million shares. Furthermore, the real estate investment company posted total revenue of $603.7 million, and net income of $171.1 million.
On Deck Capital, Inc. (NYSE: ONDK) focuses on small business loans through its online platforms. The company offers a variety of loans, ranging from short-term to long-term, and flexible lines of credit. While the company does not have dealings in the real estate market, the company is a lender, which can sympathize with to the other lenders on the list. As of June 2016, On Deck Capital, Inc. (NYSE: ONDK) carries a market value of $386.82 million, outstanding share count of 70.72 million and a float of nearly 29 million shares. During full year 2015, On Deck Capital, Inc. (NYSE: ONDK) reported total revenue of $179,600, but a net loss of $1.3 million.
Overall, Omega Commercial Finance Corporation is primed to reach full reporting status over the next 45-60 days. Once this barrier is lifted and shareholders are able to gain a better sense of the company’s performance and earnings, the stock could see upside pressure. Omega Commercial Finance Corporation’s acquisitions of BRR and the Florida Keys resort and marina will help diversify the company to help generate more revenue and cash to fund further acquisitions. Furthermore, with commercial and residential real estate continuing to be relatively strong in the U.S., the economic environment continues to be favorable to secondary commercial real estate operators and lenders.