Remington Capital – Joel A. Nathanson

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.

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It’s never been a better time to approach Remington because we know so many brokers and owners NEED HELP to find the right financing to hold onto their investments. Our access to capital is unmatched, and our DOR (Distressed Owner Recapitalization) Program provides a lifeline to our community to get the needed financing in a difficult time.

Now when you thought things couldn’t get worse, they are. Insurance companies will be increasing premiums, applying additional pressure to struggling property owners.

Since 2006 insurance companies have cut their rates 6-16 percent for policy holders with premiums higher than $1M. Due to all of these cuts it has greatly affected the profitability of these companies. With declining vacancies in almost every sector of the industry, it’s putting ever increasing pressure on the property owner to service its current debt.

This development can only increase delinquencies and force more properties into foreclosure or in need of non-traditional sources to recapitalize their deal. That’s where Remington comes in – we can help!

Thank you. www.remingtonfg.com

2010 is shaping up as a “good news, bad news” type of year for commercial real estate owners if what industry experts are saying proves to be correct. At least there’s some good news, eh?

The good news they say is that transactions are likely to pick up speed in 2010, while new commercial development will remain pretty dead in the water for right now.

The worst news concerns owners of highly leveraged commercial properties who financed them at the 2005-2007 market peak and can no longer pay back the soon-to-mature loans. The worst-case scenario is that tight credit and plummeting property values will force thousands of them across the country to sell out (if a buyer for an underwater property can be found), declare bankruptcy or recapitalize. The upcoming proliferation of distressed owners – and their need for Recapitalization – will keep brokers busy in the coming year. 

For brokers, distressed owners represent a new business opportunity. It is a crisis – and as the Chinese say – every crisis is filled with danger AND opportunity.

At Remington, one way we’re taking advantage of the opportunity on behalf of our client brokers is through our relatively new Distressed Owner Recapitalization (DOR) Program. With the DOR Program we partner with brokers and distressed borrowers using the Remington global network of private sources of capital for investment in troubled properties.

We do all the work. And you share in the benefit, earning 25% of the closing fee for every referral. To find out more about the Remington DOR Program and how it can work for you, give me a call at Remington and let’s talk!

Thank you – Joel Nathanson

This week I started 2010 with a newsletter on mezzanine financing.  If you’re interested in signing up for my personal newsletter, please contact me.  An abridged version is shown here.

Whatever type of mezzanine financing you may need, the professional advisory team at Remington has the know-how and experience to successfully structure any type of transaction and provide access to the best access to mezzanine financing available via its global network of private and public sources of capital.

Mezzanine Loans: The most common type of mezzanine financing is straight debt. It is also the easiest to understand. With straight debt, the mezzanine lender is in a subordinate position, usually up to 85% LTV, with no equity participation in the cash flow and no management participation. Depending on the amount of leverage, the type of project, and owner history, yields will typically fall within the 9-13% range, with terms similar to the senior debt.

Participating Loans: If higher leverage is the objective and borrowers are willing to give up some cash flow or equity for it, a hybrid form of a participating debt instrument may be the way to go. With such debt, borrowers can usually boost LTV up to 90%, while lenders generally receive a slightly lower coupon rate on the note but may receive an exit fee when the property sells. Given the increased risk assumed by the lender from the amount of leverage involved, a higher overall yield is required from the combination of the coupon rate and the equity obtained in the transaction.

Preferred Equity: With preferred equity, the borrower and lender usually enter into a partnership or joint venture agreement. This typically results in the investor gaining some project control, a greater equity position, more risk and a greater return than that provided by a participating loan, and the ability to take over the project in case of default. The borrower, on the other hand, gives up some control in exchange for not having to commit substantial capital to the project.

At Remington we have access to all three of these sources of capital as well as other creative structuring. Please call me at the office and let’s discuss.

Happy New Year!  Joel Nathanson – Remington

This week in an online article for Mortgage Bankers, there is a review of global hotel investor rewards and losses for the year. And along with continued peril in hospitality, there are some optimistic signs for the future.

http://www.mortgagebankers.org/tools/FullStory.aspx?ArticleId=9759#full

I’m predicting a steady increase in financial transactions for the hotel sector in 2010. A large part of the increase will be due to international investors that are looking to purchase properties at significant discounts from their 2007 peaks. The article above states that the hotel sector has been one of the hardest hit, with property values down 50%.

International and domestic investors are using real estate as a hedge against inflation, which we can expect to lurk in the shadows ready to reveal itself over the next couple of years. 2009 has had its own set of challenges, and the key to success moving forward for investors is that the problems that got us here aren’t necessarily the ones we’ll be facing in 2010.

At Remington over the last few months we have been quietly expanding our connections to active lending sources, which now total several hundred. If you’re looking for mezzanine, senior debt or any sort of commercial financing, I encourage you to contact us to see how we can help.  We are very active in the hospitality sector but we are also connected to all commercial sectors as well. Thank you – Joel Nathanson

Participants in commercial real estate lending are many and varied.  Remington plays an important role in the process of securing financing for commercial real estate.  We are a powerful resource to the broker community because of our significant deal flow and best access to lenders. 

Once source of capital is government loan programs. I’ve explained more about these below.

1. U.S. Small Business Administration:  The U.S. Small Business Administration (SBA) was created in 1953 as an independent agency of the federal government to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of our nation.  The SBA offers numerous loan programs to assist small businesses.  It is important to note, however, that the SBA is primarily a guarantor of loans made by private and other institutions and does not offer loans to small businesses. 

7(a) loans are the most basic and most used type loan of SBA’s business loan programs.  Its name comes from section 7(a) of the Small Business Act, which authorizes the Agency to provide business loans to American small businesses.  All 7(a) loans are provided by participating lenders.  Not all lenders choose to participate, but most American banks do.  There are also some non-bank lenders who participate with SBA in the 7(a) program which expands the availability of lenders making loans under SBA guidelines.  7(a) loans are only available on a partial guaranty basis.  The lender and SBA share the risk that a borrower will not be able to repay the loan in full.   Under the guaranty concept, commercial lenders (Agency Lenders) make and administer the loans.  7(a) loans may be used for such business purposes as real estate acquisition or expansion, purchase of business, machinery and equipment, furniture and fixtures and working capital

The CDC/504 loan program is a long-term financing tool for economic development within a community.  The 504 loan program may be used for such business purposes as real estate acquisition or expansion and purchase of machinery and equipment.  A Certified Development Company is a nonprofit corporation set up to contribute to the economic development of its community. CDCs work with the SBA and private-sector lenders to provide financing to small businesses.  There are about 270 CDCs nationwide, with each covering a specific geographic area.  Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from the CDC (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business being helped.

2. United States Department of Agriculture:  The mission of the United States Department of Agriculture (USDA) is to increase economic opportunity and improve the quality of life for all rural Americans.  USDA Rural Development is working to eliminate substandard housing from rural America by helping rural people buy, build or rent decent housing.  They also create jobs by funding the growth and creation of rural businesses and cooperatives.  Other Rural Development programs help rural communities build or improve community facilities, such as schools, health clinics and fire stations.  To accomplish its mission, USDA Rural Development often works in partnership with state, local and tribal governments, as well as rural businesses, cooperatives and nonprofit agencies.  USDA offers loans up to $10 million through its Business and Industry program.  These loans may be used for such business purposes as real estate acquisition or expansion, purchase of business, machinery and equipment, furniture and fixtures and working capital.  The USDA B&I program bolsters the existing private credit structure through the guarantee of quality loans which will provide lasting community benefits.  It is not intended that the guarantee authority will be used for marginal or substandard loans or for relief of lenders having such loans.

3. U.S. Department of Housing and Urban Development (HUD):  HUD’s mission is to increase homeownership, support community development and increase access to affordable housing free from discrimination.  HUD offers several programs targeting multifamily and healthcare facilities.  Within HUD, the Federal Housing Administration (FHA), provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories (Agency Lenders).  FHA insures mortgages for the acquisition, new construction, refinancing or substantial rehabilitation of multifamily housing, including senior and student housing as well as manufactured home communities.

4. Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a stockholder-owned corporation chartered by Congress in 1968 as a government-sponsored enterprise (GSE), but founded in 1938 during the Great Depression.  The corporation’s purpose is to purchase and securitize mortgages in order to ensure that funds are consistently available to the institutions that lend money to home buyers.   FNMA provides multifamily financing for affordable and market-rate rental housing, and operates nationally, in all multifamily markets and under all economic conditions.  Eighty-nine percent of the rental housing financed by FNMA lenders is affordable to families at or below the median income of their communities.  FNMA provides financing through a nationwide network of Delegated Underwriting and Servicing (DUS®) and other lenders (collectively, Agency Lenders).  They also increase the availability of affordable multifamily housing through investments in properties that qualify for federal housing tax credits.  Working with nonprofit and for-profit sponsors, FNMA makes funds available for affordable housing through investments in individual properties or groups of properties.   FNMA loans may be used for the acquisition, new construction, refinancing or moderate or substantial rehabilitation of multifamily housing, including senior and student housing as well as manufactured home communities.

5. Federal Home Loan Mortgage Corporation (Freddie Mac):  In 1970, Congress created Freddie Mac with a few important goals in mind:

• Make sure that financial institutions have mortgage money to lend
• Make it easier for consumers to afford a decent house or apartment
• Stabilize residential mortgage markets in times of financial crisis

To fulfill this mission, Freddie Mac conducts business in the U.S. secondary mortgage market and works with a national network of mortgage lending customers.   Freddie Mac provides a full range of competitively priced, reliable mortgage products for the acquisition, new construction, refinancing or moderate or substantial rehabilitation of multifamily housing, including senior and student housing as well as manufactured home communities.

As you have questions about government lending programs, please give me a call.  Joel Nathanson.

Commercial real estate is edging toward disaster.  CMBS delinquencies were up to $32.55 billion in September from $5.39 billion a year ago, a five-fold increase.

We’re doing something about it. Thanks to the leadership of our Chairman Andy Bogdanoff, Remington is working with brokers and owners on a solution option. It’s called the Distressed Owner Recapitalization (DOR) program. It’s a new financing program and is focused solely on helping distressed owners recapitalize troubled properties that banks can’t or won’t refinance. Key to the DOR program is the Remington global network of active public and private sources of fresh, new capital available for investment in troubled properties.

Recapitalization of distressed properties can be a market opportunity for all the involved parties. Recapitalization offers the distressed owner something that selling the property or declaring bankruptcy cannot. It allows the owner an opportunity to stay in the game and to participate when market values turn around.

Give me a call and I can explain further. We’re helping owners to get out of impossible situations, and brokers to close more transactions.

Thank you!  Joel Nathanson – Remington

The maturity of typical mezzanine loans tends to range from six to ten years, with principal payments commonly deferred until senior debt is retired. And while, by its nature, mezzanine financing has no hard and fast terms or structures, there are a few terms commonly used in commercial real estate transactions. The most common type used with stabilized properties is straight debt, where the lender receives no equity and has no management participation. On the other hand, when looking to increase LTV to 90%, borrowers may have to give up some cash flow equity and upside potential to lenders through the use of a participating note. With preferred equity, owners give up some control and more equity than with a participating note.

Because of the complexity of terms, costs and suitability of mezzanine and other forms of financing, real estate owners, developers and brokers across the country have come to rely on the experts at Remington for their expert advisory services and ready access to its well-funded global network of public and private sources of capital.

Remington professionals are equally adept at securing financing for virtually any general business purpose, with or without the involvement of real estate, including loans and equity for business expansion, working capital, operating capital, investment capital, etc.  Whatever financing you need, the professionals at Remington can help you get it.

Call me and let’s discuss whether this approach is a good fit for you.  Thank you, Joel Nathanson.

There was an compelling article in today’s Mortgage Bankers newsletter.

http://www.mortgagebankers.org/tools/FullStory.aspx?ArticleId=9305#full

I’ve come to believe that delinquencies for CMBS loans will continue to rise due to aggressive lending practices especially in the hospitality sector. With vacancies increasing and cash-flow decreasing, commercial real-estate owners are forced to pledge additional cash to service the loans. There are other negative factors including investors overleveraging, lack of available short term debt, and a lack of personal liquidity. . . all forcing more properties to become delinquent at an ever-alarming rate. In too many cases many owners are simply turning over the keys to the property, OR, they are finding a way to recapitalize the capital stack.

At Remington we are experts in working the capital stack to our clients’ benefit. In addition our access to commercial capital is unmatched. When working with Remington you can be assured of fresh access to capital. Please give me a call and I’d be happy to discuss your financing options.  One new financing program introduced by our Chairman Andy Bogdanoff is for distressed owners – and we’re helping people every day find a way to successfully navigate these challenging times.

Thank you.  Joel Nathanson