Remington Capital – Brad Sweet

While Latin America and Asia are still leading in commercial property transactions, the United States is seeing a turn around in commercial property sales. Many economists have stated that inexpensive US property is starting to attract investors for the first time in three years. Few borrowers are attempting to retain control through bankruptcy and litigation, because there is simply no equity value to protect.

One of my team members here at Remington Joel Nathanson has already commented on this week’s report that commercial real estate prices will stabilize within the year. It’s hard to foresee an increase in prices right now with so many foreclosures, lack of liquidity and bankruptcies in the marketplace. But now some experts are predicting that a recovery is right around the corner.

According to this most recent article, while 12-month trailing prices declined across the board during the third quarter, pricing is beginning to inch up for several property types on a quarter-to-quarter basis.

Quoting from the article: “Over the coming year, as the process of repricing and an increasing number of distressed properties create more uncertainty for all investors, commercial real estate will face the greatest challenges that it has seen since the 1990s,” Riggs said. “The hope is that the rapid repricing, which has already occurred over the past 12 months, means that this process may also end more quickly than it has in previous commercial real estate recessions and that prices will not decline much further or fall off the cliff.”

This news is telling many investors that the commercial real-estate market may be at the bottom. Across the board
purchase prices have inched up over the last 2 quarters with multifamily and industrial being the top rated properties for existing investment. Skeptics, though, still look at the number of banks that are just unwilling to negotiate with owners and the number of commercial real-estate owners that are forced to turn in their keys to the lender and go into bankruptcy. It seems that they have no choice once the bank says that won’t refinance that not and they are upside down on their mortgage.

In a preemptive strike to these dire conditions for commercial property owners, Remington launched our Distressed Owner Recapitalization Program which offers the owner options, not foreclosure or bankruptcy. Please call me for more details if you know an owner who is facing a difficult financial situation and needs access to capital.  Thank you!  Brad Sweet.

A commercial construction loan is any loan used to finance the construction of commercial real estate such as office complexes, retail centers, apartments, hotels, warehouses, and other commercial properties. In general, construction loans are short-term and meant to be paid off when construction is completed.

While construction loan programs offer differing features, they also have a number of characteristics in common. For example, construction loans generally require interest only payments during construction; terms typically are for 12 to 36 months; most lenders require a 12-month interest reserve; and pay off occurs when a certificate of occupancy is issued.

Because borrowers usually require follow-on financing when a construction loan comes due, 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 the experts of Remington can help.

The combined market-focused expertise of the 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 so that commercial real estate clients are able to secure the best possible interest rates and terms consistent with their objectives and market conditions at the time.

Let’s discuss construction loans at your convenience. Thank you – Brad Sweet, Remington

One of the timeless dilemmas in commercial lending that we see at Remington is determing loan to cost vs. loan to value.  We’ve been calculating those in commercial property lending since our firm was founded in 1993.

When determining the risk in a particular investment, emphasis will be placed on the value of the collateral. For a new purchase this is a simple process because the borrower will be bringing a percentage of the acquisition price in as a down payment.

However in today’s market, how do we determine the value of a commercial property when it is often being purchased for pennies on the dollar?

An example is a borrower purchasing an apartment building for $6,000,000 from a bank when the apartment building is worth $7,000,000. If the borrower brings a down payment to the purchase that satisfies the commercial lender’s traditional requirements, there is no problem and the loan is approved.  A problem will arise if the borrower wants the difference between value and cost ($1,000,000) to be considered as a down-payment.

Most lenders take the stance that a property’s value is the purchase price. So if a buyer can purchase a property for $6,000,000 it is worth $6,000,000. In situations like this where the borrower is looking to get credit for purchasing under the perceived market value, we must be able to sell the lender/investor on the story that this property is worth more than the purchase price.

Three standard methods for determining the value of an apartment building in this situation would be to

1. Use a gross rent multiplier
2. Use the capitalization rate for the area
3. Determine the value using price per unit

The experts at Remington have long and deep experience is these scenarios and can help borrowers structure commercial lending transactions like this. We have lenders actively pursuing and completing financing deals across the entire range of the capital stack up to 100% Loan to Cost. For further information, apartment financing or any other types of commercial transactions please feel free to contact me directly.

Thank you!  Brad Sweet – Remington

In the challenging capital market of 2009, Remington is a strategic partner with an enviable record of success, especially for projects previously not funded from conventional sources.

Remington is ideally situated as an intermediary between the client in need of financing – especially those with problematic projects – and the hundreds of private and institutional sources of commercial capital with whom Remington has strong, active and productive relationships.

The experts at Remington also have in-depth knowledge, market expertise, and a commitment to client advocacy that translates into the kind of creative, value-enhancing insight needed to help evaluate, restructure, and customize previously difficult-to-fund transactions into new financing opportunities.

Remington also has our industry’s first fraud policy that protects our clients and partners from fraud, scam and other challenges that sometimes have plagued our industry. We are committed to eliminate fraud. Read more about the Remington fraud policy here:  http://www.remingtonfinancialgroupfraudpolicy.com/

Debt Financing

Since our founding in 1993, Remington has been advising clients on the use of leading-edge financing strategies to help secure short- and long-term debt. We have extensive expertise in distressed debt transactions, bridge loans, and permanent loans, as well as forward takeout and standby commitments. The special access of the team at Remington to domestic and international private and institutional capital sources is a source of unique differentiation in our industry.

Contact me today and we can discuss the options that are just right for you. Brad Alan Sweet, Remington