Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
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1. Ask the Right Questions When searching for a lender, borrowers should ask several basic, yet important questions. • How long has the lender been in business? Only consider lend- ers who have demonstrated the staying power to weather tough t timimes aes ass well as the ability to profi t in boom years. • • What is the range of loan products the lender off ers? Ensure the lender has a strong track record with the type of loan required. What is the lender's reputation in the marketplace? T e er's r putation should be sterling — and readily verifi able througgh mugh multiple third-party sources and references. l le ender's re th • H w m h business does the lender do with an investor? Can err va • Howmuc it off er v riety while remaining consistent with the execution? For ex For example, in the multifamily sector, a direct lender and serv er f p servicer for Fannie Mae that utilizes Freddie Mac and HUD/ FHA proA programs expands the lender's capacity to make loans tailored t nd ta ored to the borrower's needs. While Fannie Mae and HUD will len will lend on mobile home communities, Freddie Mac will not ; neit nei her Fannie Mae nor Freddie Mac makes loans for sk mber of loans? Find out how deep the lender's bench is and hnd how much experience it has spanning various lending skilled nursing facilities or hospitals, but FHA does. • Does the lender have the capacity to originate a large num platforms. • Is the lender well staff ed? In busy markets, the lender's band- width can be a make-or-break consideration. • Is the lender up-to-date on what's happening in the industry? Only consider lenders that are engaged in broader industry issues through active involvement in organizations such as Mortgage Bankers Association, and for multifamily lenders, the National Multi Housing Council, Federal Housing Coun- cil, and other industry associations. In addition, the lender should have strong relationships with third-party vendors. 2. Experience Matters Once the pool of potential lenders has been narrowed, bor- rowers should dig deeper into a lender's experience. For instance, the lender should be able to off er customers access to an established lending platform with proven execution. As mentioned, for multifamily lenders, this includes being a direct lender and servicer for Fannie Mae, Freddie Mac, and HUD/FHA programs. Being able to utilize programs such as Fannie Mae DUS and Freddie Mac Program Plus enables the lender to off er the most competitive fi nancing available to property owners, investors, and developers. In addition, by understanding how to leverage FHA-insured mortgage pro- grams, the lender will have access to an even broader range of multifamily and healthcare fi nancing solutions for acqui- sitions, refi nancing, substantial rehabs, and construction. T e lender also should be able to off er unique loan products that are tailored to borrowers' specifi c needs. For example, bor- rowers seeking loans for unstabilized multifamily properties are restricted when it comes to traditional lending sources and the government sponsored enterprises, which focus on sta- bilized properties. Underperforming properties at which the occupancy level is below the minimum required by the GSEs have an urgent need for fi nancing to make improvements or engage better management that will ultimately help to increase occupancy. out the kinks of a venture that does not me fi cation criteria for a permanent loan. T nt er- fi nancing gives new buyers of underper forming properties the capital they need e- CASE STUDY: A CREATIVE SOLUTION FOR TODAY'S MARKET to make renovations and other improve- ments. Borrowers generally have 12 months to 24 months to pay back bridgee loans, which gives them additional tim to improve the property's occupancy andand cash fl ow in order to secure permanent fi n Another advantage of bridge fi nancing s t me Walker & Dunlop's Interim Loan Program recently provided $7 million in bridge fi nancing for Renaissance St. Andrews Apartments, a class A garden-style residential apartment community in Louisville, Ky. Built in 2001, the property includes 216 units and is situated on more than 19 acres. The property was 90 percent leased at closing, and less than 90 percent leased at application. With less than a 90 percent occupancy rate for 90 days, the property could not qualify for permanent fi nancing and needed a creative and alternative lending solution. Having already established a working relationship, Renaissance St. Andrews turned to Walker & Dunlop and was introduced to the Interim Loan Program. After assessing the property and the property's third-party reports, the nonrecourse loan was provided for an acquisition and structured with a one-year term. The loan was closed within 40 days of receiving the borrower's application. The transaction highlights the value of providing complementary product offerings to give borrowers multiple fi nancing options. be nonrecourse, which means that, except inept in certain e aſt er assets circumstances, the lender cannot come a er a a default. other than the property in the event of a de au t. nt fi nancing. is that it can ain t it c A bridge loan can give these types of borrowers time to work meet the quali- T is interim orrowers t me to wor e qu 40 May | June | 2012 Commercial Inv nvestment R al tment Reeal Estateate