From the desk of Roel Hoekstra October, 2006
Since my last newsletter in July we’ve seen the Dow Jones Industrial Average take off and hit a new
all time high. The broader market and the technology heavy Nasdaq market are up but continue to
lag the Dow.
So what does this mean for my readers … hope you are invested in large cap stocks? Well for
investment advice talk to your financial planner as that is not our deal. What we do is help you take
some money off the table without selling your stocks. You get to use the cash now, remove the risk of
a margin call and continue to earn any future capital appreciation.
I have fielded several questions recently asking about examples of stock loans so I’ve provided a
case study. Since we take client confidentiality very seriously, I’ve changed the names to protect the
innocent. Check out our web site often as I will add additional case studies as I write them up.
Special thanks to John Zimmerman of Advertising Collaborative here in Philadelphia for helping us
with our logo and first full fledged advertising campaign. Word of mouth has worked great these past
3 years but with our exciting products it is important that we get the word out aggressively. For your
educational and viewing pleasure you can see all our newsletters and advertising materials can be
found on the newsletters page of our web site.
In this newsletter I will cover two items;
• Case Study
• One more look at our original no margin call stock loan program
Stock Lending – Case Study
The Real Estate Barron
My good friend Joe had the opportunity to purchase a 10 unit apartment building just outside of
Philadelphia for $1,000,000. The building generated $175,000 in rent each month and after
maintenance and insurance, it grossed $150,000.
His bank would give him a 20 year mortgage for $800,000 at 7% (accounting for $100,000 of P&I plus
taxes leaving $50,000 in free cash flow) and he needed $200,000 for the down payment. Since he
had several high performing stocks he was not worried about the down payment. That is until he had
to decide what to sell in order to raise the $200,000.
So instead of selling stocks he was excited about and confident would continue to appreciate, he
came to us for a loan. Since these were high quality stocks and the loan amount was modest, out
STAR loan was perfect. We wrote the loan as a 4 year loan. The interest rate was 9% (prime +1) and
he got 85% LTV.
What this meant for Joe was that at the end of 4 years he has the potential of having the apartment
building, and the stocks while building equity in both. And unlike borrowing on margin, there is no
margin call so if the stocks go down he would not face a liquidity crunch and be forced to sell the
stocks low or have to sell the entire building quickly.
Product Profile - The Flagship Loan
As exciting as our STAR loan is with a variable rate and line of credit features, our original no margin
call loan program called the Flagship loan is still going strong. For large cap stocks, especially ones
with low basis, the program offers the highest LTV available at 90%, fixed loan terms, no margin calls,
and the interest can be accrued to loan maturity. The Flagship loan can also handle the jumbo loans
and most international stocks.
This means you get to use practically all the cash in your stock for a fixed term with no downside risk.
And at loan maturity when you pay off the loan you get all your stock back so all the capital
appreciation is yours. If the stock is worth less than the loan payoff amount you can just default
without penalty. These are non-recourse loans so there is no impact on your credit (a default is
considered a sale).
Follow-up and contact information
I would be delighted to talk with you about your stock loan needs any time. Give me a call at
215.858.8659 or send an email to Roel@globalstocklending.com.
Regards,
Roel Hoekstra
Managing Partner
Philadelphia, PA
215.858.8659 phone
215.827.5414 fax
Since my last newsletter in July we’ve seen the Dow Jones Industrial Average take off and hit a new
all time high. The broader market and the technology heavy Nasdaq market are up but continue to
lag the Dow.
So what does this mean for my readers … hope you are invested in large cap stocks? Well for
investment advice talk to your financial planner as that is not our deal. What we do is help you take
some money off the table without selling your stocks. You get to use the cash now, remove the risk of
a margin call and continue to earn any future capital appreciation.
I have fielded several questions recently asking about examples of stock loans so I’ve provided a
case study. Since we take client confidentiality very seriously, I’ve changed the names to protect the
innocent. Check out our web site often as I will add additional case studies as I write them up.
Special thanks to John Zimmerman of Advertising Collaborative here in Philadelphia for helping us
with our logo and first full fledged advertising campaign. Word of mouth has worked great these past
3 years but with our exciting products it is important that we get the word out aggressively. For your
educational and viewing pleasure you can see all our newsletters and advertising materials can be
found on the newsletters page of our web site.
In this newsletter I will cover two items;
• Case Study
• One more look at our original no margin call stock loan program
Stock Lending – Case Study
The Real Estate Barron
My good friend Joe had the opportunity to purchase a 10 unit apartment building just outside of
Philadelphia for $1,000,000. The building generated $175,000 in rent each month and after
maintenance and insurance, it grossed $150,000.
His bank would give him a 20 year mortgage for $800,000 at 7% (accounting for $100,000 of P&I plus
taxes leaving $50,000 in free cash flow) and he needed $200,000 for the down payment. Since he
had several high performing stocks he was not worried about the down payment. That is until he had
to decide what to sell in order to raise the $200,000.
So instead of selling stocks he was excited about and confident would continue to appreciate, he
came to us for a loan. Since these were high quality stocks and the loan amount was modest, out
STAR loan was perfect. We wrote the loan as a 4 year loan. The interest rate was 9% (prime +1) and
he got 85% LTV.
What this meant for Joe was that at the end of 4 years he has the potential of having the apartment
building, and the stocks while building equity in both. And unlike borrowing on margin, there is no
margin call so if the stocks go down he would not face a liquidity crunch and be forced to sell the
stocks low or have to sell the entire building quickly.
Product Profile - The Flagship Loan
As exciting as our STAR loan is with a variable rate and line of credit features, our original no margin
call loan program called the Flagship loan is still going strong. For large cap stocks, especially ones
with low basis, the program offers the highest LTV available at 90%, fixed loan terms, no margin calls,
and the interest can be accrued to loan maturity. The Flagship loan can also handle the jumbo loans
and most international stocks.
This means you get to use practically all the cash in your stock for a fixed term with no downside risk.
And at loan maturity when you pay off the loan you get all your stock back so all the capital
appreciation is yours. If the stock is worth less than the loan payoff amount you can just default
without penalty. These are non-recourse loans so there is no impact on your credit (a default is
considered a sale).
Follow-up and contact information
I would be delighted to talk with you about your stock loan needs any time. Give me a call at
215.858.8659 or send an email to Roel@globalstocklending.com.
Regards,
Roel Hoekstra
Managing Partner
Philadelphia, PA
215.858.8659 phone
215.827.5414 fax