Anyone complete any commercial refinance deals lately?

9 Replies

Anyone complete any commercial refinance deals lately?

I have a 6 unit office building that I purchased in October 2019. It was rehabbed and fully leased by May 2020. Of course by this time Covid was here so my refinance plan hit a wall. 

Purchase price 275 - Rehab 65K - Bringing in 5100/month before building expenses with annual NOI about 45K.

I shopped refinancing on my own and with a commercial broker but didn't have much luck getting it financed above the original purchase price of 275K. I am trying to get closer to 320K so I can pull most of my rehab investment back out. Banks seem VERY cautious of commercial, specifically office space for obvious reasons.

At this point I am thinking of waiting until 2021 because my tax returns will be stronger and the building will have better seasoning.

Interested to hear about what other commercial investors are experiencing? 

Originally posted by @Jeff Stein :

Local banks and credit unions have always been the best source for me. 

 I havent checked with them in a few years but I do remember one of them wanting me to be a customer in order to look at giving me a loan. Is that usually the case?

Originally posted by @Brock Freeman :

Not surprising that any lender is going to be very wary of any bump in value right now, even one driven by a rehab and forced appreciation. 

Did you try some local credit unions?

 I was thinking about holding out until the 2021 with improved taxes and hopefully some end in sight for Covid.

But with the risk of Covid lasting much longer would you suggest take what I can get now even if its for purchase price? I would hate to leave all that money in the deal but I am paying about 12% on borrowed funds until I refinance. Then possibly I could refinance down the road to eventually pull the cash back out?

@Adam Craig in my market local banks and credit unions are currently lending with attractive rates on that exact product. Each lender has its unique criteria and not all will lend on it but some will. You just have to check around to find which ones have the most appetite for that deal type. And yes, all of them will require you to have accounts at their institution, but it doesn’t mean you have to move all of your business banking there.

Originally posted by @Matt Clark :

@Adam Craig in my market local banks and credit unions are currently lending with attractive rates on that exact product. Each lender has its unique criteria and not all will lend on it but some will. You just have to check around to find which ones have the most appetite for that deal type. And yes, all of them will require you to have accounts at their institution, but it doesn’t mean you have to move all of your business banking there.

 Thanks for the tips I am going to check around then, just having an account is fine. This credit union I talked to a few years ago said it more like - if you bring your banking activity over we will have more flexibility. I wasn't quite ready to do this for a potentially better banker relationship.

Some may require only a new checking account and the amount you deposit doesn't need to always be a lot; depends on the CU. 

Re doing only a rate/term refi and not c/o: if you can refi local, a lot of CU's do not have prepays, so that may be a good way to go to lower your rate. However, don't make the mistake of only looking at rate. Do an actual cost calculation of what keeping the loan for another 9-12 months will cost and then a c/o refi with the adjusted capital basis and what that does for your ROI, versus a refi now and then again in a year or two (don't forget closing costs) and what that will do for your ROI.

Yes...my LLC completed a refinance on a commercial office property in the upstate of SC through a regional bank I have an established relationship with back in early July. But it took MONTHS to get things done due to COVID and PPP loans that bank was inundated with. The building is fully tenanted and my LTV was only around 60%, so they were comfortable with getting it done with a 6 year term (20 year am).