Joel's Twitter Feed
- Multifamily Lenders Share Their Biggest Concerns For The Road Ahead - http://nreionline.com/news/multifamily_lenders_biggest_concerns_0203/
- CMBS Delinquency Could Peak at 12%: http://bit.ly/8GMPdG via @addthis
- Remington Financial Group, Inc. - New Distressed Owner and Debt Opportunities Program, http://hubpages.com/t/db8c6
- Remington Financial has two new webinars are available for brokers to help find and structure new financing options for distressed owners.
- Lack of Bank Liquidity Threatens Commercial Real Estate Market http://www.dsnews.com/s/u-mhn2 #dsnews
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Remington’s Capital Markets Provides Access to Capital
In today’s challenging credit markets it’s important to have a strong capital markets division sourcing your capital. With both institutional and private investors still leary when deploying new money, its important to understand each investors specific investment strategy and guidelines. Here at Remington, our capital markets group works closely with over 500 capital sources up and down the capital stack. Having multiple capital sources available for any particular transaction is crucial because its not uncommon to have to present a deal to 15 or 20 capital sources before one ultimately says “yes”.
It’s no surprise the medical office sector will be the forth front for new construction projects that are obtaining financing. Both debt and equity players are lining up to capitalize on the increase in demand for this property type. It is predicted that an additional 32 million Americans will now be covered by the Affordable Care Act that that was passed in to law, and the current industry won’t be able to handle the influx of demand.
Banks Begin to See Signs That the Recession is Easing
I think everyone from main-street to wall-street are starting to see signs that the recession is easing. In the commercial sector, your seeing money that was sitting on the sidelines through 09′, beginning to be deployed. This is a clear indicator that investors feel property values have bottomed out, stabilized, and will begin the upward trend. Still, the biggest issue facing commercial real estate is the $1.4 Trillion dollars that will be coming due in the next 3 years that will have to be refinanced. Unfortunately neither main-street or wall-street have figured out a viable solution for this.
I’m extremely confident in the individuals that work together to make up our Capital Markets Group here at Remington. In this challenging marketplace experience, work ethic, and relationships are the only things that separate you from the rest. It is our dedicated effort here at Remington to do everything in our power to make your project a successful one. To read more about our Capital Markets Group, please click the link below.
It’s not surprising the Arizona real estate market is one of the hardest hit markets across the county. The aggressive expansion and over building has put a substantial amount of product on the market. This can be seen on both the commercial and residential sectors. So people are asking, when will property values stabilize, how much product is on the market, when will the credit markets recover? In my opinion, it will take 2-3 years for the surplus of product on the market to be fully absorbed. This makes 2010 – 2012 a great time to purchase real estate!
Risky Commercial Real Estate Lending Costs Banks
It is no surprise that the aggressive commercial lending over the last 10 years is the main reason for bank failure. Its stated in a recent article that 140 banks failed in 09′ with over $170 Billion in assets. Please see the entire article below.
New Construction Loans from Remington Are Available
In my Remington newsletter this week I noted the availability from Remington of new construction loans. The positive news about the manufacturing sector brings hope that construction will increase, too.
Borrowers often require follon-financing when a construction loan comes due, and so lenders sometimes offer construction-to-permanent loan programs that provide construction loans during the building phase and longer-term fixed-rate financing that kicks in upon issuance of the certificate of occupancy. This two-in-one loan process tends to be more convenient and less costly for borrowers in that there is only one loan application and one closing, with associated fees, instead of two.
Because of the complexity of construction loan financing, borrowers may find it difficult to compare construction-to-permanent loan financing with the two-loan process. That’s where I can help.
The market-focused expertise of our Structured Finance Group at Remington and our Capital Markets Group with its global network of public and private capital sources takes the guess work out of construction lending. Our commercial real estate clients are able to more often secure the best possible rates and terms consistent with their objectives and market conditions at the time.
Please call me if you’re in the market for a construction loan – we can make your next project a success.
Thank you – Joel Nathanson, Remington
Remington Has Funds to Recapitalize Even CMBS Deals
Banks and commercial lenders will continue the deleveraging trend throughout 2010. The trend is starting to be seen in secondary and tertiary markets hardest hit with increasing vacancies and decreased cash-flow.
The CMBS market shows a 4.5% default rate on their entire portfolio, with lodging at 11%, and multifamily at 7%. CMBS transactions that are in risk of default are being turned over to special servicers to ultimately make a decision to either do a work-out or foreclose and auction off assets. The CMBS transactions will be the hardest to recapitalize due to the amount of red tape that borrowers will need to go through.
The good news is that Remington has funds that are being deployed to recapitalize these types of transactions. Please give me a call and let’s discuss. In addition to our expert advisory services, we are your best access to commercial capital.
Thank you – Joel Nathanson, Remington
More on Mezzanine Financing from Remington
We are actively deploying funds for mezzanine financing opportunities. Please contact me for more informatioin about these new opportunities.
Mezzanine financing falls between senior bank financing and equity financing. It can serve brokers well in a variety of situations. Mezzanine financing is semi-permanent capital like equity, so the borrower does not have to make monthly or quarterly payments of principal. It usually has a 5 to 7 year term.
Senior lenders like banks look at mezzanine financing as equity because it is semi-permanent capital and subordinated to bank debt. The bank gets paid first in the case of a problem.
Mezzanine financing looks like debt to owners because it often does not dilute the ownership of the company like selling stock would do. So a new investment of mezzanine debt can pay off some of the burdensome other bank debt with a more patient capital that doesn’t come with a reduction in ownership like selling equity brings.
Mezzanine lenders that Remington works with are extremely busy these days because their product is a perfect fit for this market. A well-structured mezzanine investment will reduce an owner’s leverage, improve immediate cash flow, and preserve the equity of a business for a sale down the road.
Mezzanine loans are a little expensive. Compared to a bank loan, mezzanine financing carries an interest rate in the range of 12% to 14% depending on the deal. That’s more expensive than a bank, but the cash flow is often better because the principal does not need to be repaid until the end. And those interest rates are less expensive than selling ownership shares in a company with depressed valuation. Sometimes mezzanine transactions include an “equity kicker” that gives the lender options to buy stock at a fixed value so that there’s an extra return when selling down the road. That’s not a bad thing because it brings in an experienced investor who shares the goal of a good exit event.
If your bank is making you nervous, or if you are making them nervous, or if you just want to strengthen your balance sheet as you wait for the market to recover, mezzanine financing could be the answer. Let me know if you have questions, and let’s talk about whether a mezzanine solution is in your future.
Thank you! Joel Nathanson – Remington www.remingtonfg.com
More on Bridge Loans from Remington
A couple weeks ago I provided a general summary of several financing options from Remington including bridge loans. Today I’d like to elaborate a little more on bridge loans as an integral part of your financing strategy.
The bridge loan is a form of financing that “bridges” the gap between funds needed now and when longer-term financing becomes available. It can be a key component in an owner’s long-term financing strategy, particularly for those faced with a here-and-now opportunity or other shorter-term situation such as improving or selling a property.
Real estate owners often use a bridge loan to purchase a second property before the sale of the first property closes. Then the proceeds from the sale are used to pay off the bridge loan. This illustrates the important “exit strategy” borrowers must have before an investor makes a bridge loan. In this example, the investor would need to see a signed sales agreement spelling out where, when, and how the bridge loan will be repaid.
Bridge financing almost always needs to be arranged and closed quickly. Such loans tend to be for 6 to 12 months with a possible 12-month extension. They are usually structured as simple interest only loans with no pre-payment penalty and all principal due in full at maturity. Risk to the investor is minimal since the loans are underwritten based on existing equity in the property and the exit strategy is defined.
Because of the owner’s need for timeliness, banks and other institutional lenders are not usually effective when it comes to bridge loans. That’s why the Capital Markets Group at Remington provides access to investors capable of making on-the-spot decisions. Included among them are hedge funds, private equity groups, mortgage pools and other sources of private capital. Let’s talk!