All Forum Posts by: Jolene Desmond

Notes:   'A' Note Debt (Senior Debt) - Lender holds a first lien position.   'B' Note Debt - Lender holds a second lien position.    Mezzanine Debt - Lender holds the Single Purpose Entity as collateral for their loan.   // All notes are secured. 

My news feed today has been full of Residential Investors posting pictures of their properties which were trashed by filthy tenants, and discussions of the legal hurdles needed to evict tenants. 

This is just another reason why I love Commercial Real Estate ;)

Kabir,  I could look at this.  Do you have access to copies of the Leases and the actual Operating Statements from the last few years?  Also, do you already have a term sheet with a Lender?  

@Account Closed.  You asked about rate fluctuation from the index.. I assume you are talking about an Adjustable Interest Rate - but your original message appeared to be a fixed interest rate.   Adjustable Interest Rate Loans usually will require a Rate Cap Agreement, which is insurance against LIBOR exceeding a certain value; whereby if LIBOR exceeds a certain amount the Rate Cap Provider would pay the difference.  Hope that helps provide you some comfort. 

Ah, yes.... And Assisted Living Facilities, too!

It all comes down to your lender and the commercial real estate financial markets as a whole, and what the capacity for lending looks like when it comes time to refinance.  A result of the 2007/2008 crisis was that lenders were unable to sell their loans and move them off their balance sheets as quickly as they had been able to before and so they stopped bring more debt onto their balance sheets (meaning they stopped lending).. and it became harder to obtain refinancing.  When the Borrower was unable to repay their loan at maturity than the lender is either going to take your property, you are going to give up your property, or you both will agree to new terms in order to keep everything going if that is in the best interest of your lender.    

You are an investor. There are risks and rewards.  Make sure that your due dilligence outlines all potential risks, and that your management systems focus on managing those risks and ensuring the quickest re-coop of your investment and a return.   There is more to Commercial Real Estate than just economics and physical property.  The financial markets are important to understand. 

THE BASICS SERIES: WHAT IS COMMERCIAL REAL ESTATE, and WHAT ARE ASSET CLASSES?

Commercial Real Estate are income producing properties. There are various types, called asset classes.

1. Retail (aka Strip Centers)

2. Warehouse (aka Industrial)

3. Office

4. Hotels

5. Resorts & Casinos

6. RV & Mobilehome Parks

7. Churches (occationally)

8. Multi-family (5+ Units). Some consider multi-family its own animal. (I recently posted in Bigger Pockets about this as well to see where everyone else's head is at with this) Not quite residential, not quite commercial.  We all know 5+ units results in commercial underwriting, but some see a grey area as far as what they need to know to manage their investment. I consider this strictly an asset class of commercial real estate. Does not have to be under the same roof. I have seen a complex of 180 duplexes underwritten as commercial.

9. Mixed-Use. A mix of any of the asset classes. I.E. Retail on bottom and multi-family on upper floors. Or Warehouse with office space, etc.

I have always considered Multi-Family to be an asset class of Commercial Real Estate... But I see more and more Investors who consider Multi-Family to be neither Residential or Commercial - something of its own.  It also seems that some consider Multi-Family to be the gateway between the two - a way to transition into Commercial Real Estate.  

What are your thoughts??