All Forum Posts by: Eric Schleif

@Jay Hinrichs I have been surprisingly busy in Memphis this year with 2 large deals. One in downtown and one in Whitehaven. The Whitehaven deal has been difficult. No banks whether local, regional, or national will touch it when they hear the address. And this is for a very strong sponsor with excellent opportunities for repeat business and deposits who just completely rehabbed and stabilized the property. That left the client with 3 options:

1. Agency

2. FHA

3. CMBS

The problem with FHA is the 6 month (if your lucky) closing timeline. Even the FHA lender was hesitant to offer a bridge loan at first. They eventually came around and we negotiated no prepayment penalty for the borrower so that was a win. But a tough deal all around.

It seems like everyone covered the section 8 issue on this thread. I just wanted to bring up a quick point on the financing side as you stated you will be using a bridge loan for the rehab. Definitely talk to lenders or a broker first and don't assume you'll get a bridge loan. Which neighborhood is the property located in? There are certain areas, like Whitehaven, where you will be hard pressed to find a bridge lender.

Jacob Pereira There is no particular lender I always go to. My firm arranged $36 billion in financing last last year spread over almost 4,000 transactions with 210 different lenders. We certainly used some more than others but what really drives a deal and which lenders to use really depends on the market, the asset, the client needs, etc.

Not sure what type of assets you have financed in the past, but I usually find better deals/terms with non local lenders. I would always reach out to local lenders to have all my bases covered, but they usually are not as competitive in my experience.

What type of building do you own?

Anthony Chara post was a great explanation on how to value the asset. Have you actually reviewed the detailed I&E and rent roll? Do you know the actual occupancy today? Make sure you review all the expenses and see if there are any out of line expenses. I've seen I&E's where the owner includes depreciation, mortgage payments, profit payments to himself, cap ex etc that should not be included to derive an NOI. If it's a truly distressed asset and your looking at a value add play then just make sure what your financing terms will look like before you make an offer. Banks will lend on in place income. Bridge lenders will lend on the ARV but will obviously be more expensive than the bank. Good luck.

Also contacts are everything. The hardest thing is getting the right person from the bank on the phone. If you're able to get a decision maker on the phone like a senior vice president, managing director, etc. then you'll have a much more constructive conversation.

@Mike Dymski It's difficult to throw out general loan terms since no two deals are the same. But here it goes anyway...if you're looking at smaller portfolio deals in secondary and tertiary markets then your major players will be the local banks and credit unions. I'd imagine they are going to be pricing loans in the mid to high 4% range with 20 year amort on a 5 year term. Things I've negotiated in the past with the small local banks is:

1. Increase the amortization to 25 Years 

2. Going from a standard bank rate to a SWAP rate. Last one I did lowered the rate by 75bps from 4.50% to 3.75%.

3. Getting release provisions in the loan documents allowing you to sell the properties without paying off the entire loan.

4. Getting partial or no recourse.

5. Lower or eliminate the bank's commitment fee.

Numbers 1 & 2 on my list have been fairly to negotiate in the past while numbers 3 & 4 have been very difficult to negotiate in the past. And it's been my experience in that the banks will generally lower or eliminate the commitment fee if you push them. A lot also depends on the Borrower. Are they local? Are they experienced? How are they financially? Can they offer large deposits to the bank or use other banking products? etc etc. 

Loans over $1MM-$2MM are a different story.

Rich, I've arranged a few deals recently in your area of PA and also closed a portfolio deal on 7 properties a couple of months ago. If I can be of any help let me know. I'm assuming your going to a local lender. My main issue with the local players in PA is they typically will lend up to 80% LTV but with 20 year amortization. Most clients don't like that as it cuts into their cash flow. Best of luck.

Guido Kaelin PM me. I've done a few in East Orange. Depending on the loan size it may be worth having a call and going over the deals.