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| | Condo Conversion
Loans - Continued...
The
condominium conversion loans market represents a fairly stable market
sub-set of the multifamily lending market in general.
In
developing your approach to funding a commercial real estate development
program that focuses on condominium ownership interests (also called
"air rights" sometimes) as the mainstay of the project, will
require you to present a business case summary that encompasses the
following issues:
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Equity.
You will need considerable equity resources in order to shepherd the
project from the drawing boards to reality. The amount of equity
required is based upon the lending source, to wit:
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Commercial
Banks - this industry group will want an overall Loan-To-Value
Ratio of no greater than 65% and will want to cross-collateralize
assets equal to at least 150% of the loan amount to as much as
350% of the loan amount. |
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Pension
Plans - this industry group will accept a slightly higher LTV
ratio than commercial banks, but you must bear in mind that
pension plans have significant losses from buying secondary market
CMBS products. Accordingly, pension plans may demand more
equity stays on the table longer than in days gone past. |
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Bond
Funds - this industry group will be the most aggressive, but will
also be very picky about which loans (and which borrowers) they
are likely to succeed with. This means your project team
will have to have experts all around the developer. |
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Pre-Sales.
Most lenders will allow for a loan closing once pre-sales equal 100%
of the loan origination amount. In today's market, be prepared
to accept (and offer!) up to 125% LTV with respect to pre-sales.
Pre-sales are defined as contracts with non-refundable deposits.
Transactions with "reservation lists" are no longer
acceptable for underwriting. |
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Cost.
The days of low points/no points are, by and large, gone and are being
replaced with up to three (3) points for origination and placement. |
| Deal
Size. If the transaction has less than an estimated six (6) month
supply for the local market area then 100% pre-sales will be a likely
requirement. |
There
are additional issues to be sure. Find out where you're
headed. Get going forward. Call Rainmaker Marketing
Corporation. | |
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Do
You Know The Secret?
When it comes to commercial real
estate development finance, it doesn't matter whether you need to raise
$5 million or $50 million, the out-of-pocket costs, advance fees and
project due diligence costs will always require the same relative
investment dollars the promoters have to fund. Do you know what
that amount is? Do you know the Secret? |
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