| This credit squeeze is bad; not only are many banks | | | | lack of liquidity in the overall credit market; they are not |
| not lending at-all, but the ones that are lending are being | | | | dependant on any markets for their liquidity. |
| ultra conservative. LTV (loan-to-value) ratios have | | | | Most lenders borrow money, using their depositors' |
| dropped significantly; it is nearly impossible to get a loan | | | | assets as collateral, and then lend the borrowed |
| for more than 75% of a properties value now-a-days, | | | | money to you. They then sell the loan to the |
| and underwriting standards have tightened across the | | | | secondary mortgage market in-order to recover their |
| board. | | | | capital and pay their bills. That's how a bank with |
| To have any hope of securing funding from a bank or | | | | $1,000,000.00 in it can make $25,000,000.00 worth of |
| other conventional, institutional lender a commercial real | | | | loans. They need a liquid, flowing credit market to |
| estate deal must posses all of the following attributes, | | | | survive. Portfolio lenders, on-the-other-hand, only lend |
| good location (not in a particularly economically | | | | money they have on deposit; no leverage, no selling of |
| depressed area), good quality (not a-lot of deferred | | | | paper, no securitization, just plain old-fashioned lending. |
| maintenance), low LTV, good sponsor (borrower must | | | | Many portfolio lenders are private financial firms set up |
| have a net worth at least equal to the loan amount | | | | to make a profit by lending money against commercial |
| and must have a track record of success in | | | | real estate assets. These lenders can be organized as |
| commercial real estate), and good cash flow. | | | | LLCs (limited liability companies), LPs (limited |
| (Underperforming buildings, raw land and construction | | | | partnerships), corporations or trusts. Some are actually |
| deals need not apply.) The traditional lenders (banks, | | | | hedge funds or private equity firms. Other portfolio |
| Wall Street & insurance companies) are worried | | | | lenders are really divisions or subsidiaries of regional |
| about their own survival. Regardless of what their ads | | | | and community banks or smaller insurance companies. |
| say, they will not fund your loan unless they are | | | | Portfolio lenders will charge a higher rate and more |
| absolutely sure they can sell it into the secondary | | | | points than conventional lenders do, but they tend to |
| market if they need to. | | | | be more flexible and more responsive to their |
| So where can investors seeking commercial mortgage | | | | borrowers. For many borrowers, private, portfolio |
| loans go to get the financing they so desperately | | | | lenders have become the only game in town and, |
| need? The best chance a commercial property owner, | | | | when faced with the possibility of losing a building to |
| investor or developer has of securing an approval and | | | | foreclosure or missing out on a great deal, the cost of |
| ultimately closing a deal is with a "portfolio" lender. | | | | the loan is a secondary concern. |
| A portfolio lender is a unique funding source that | | | | The key to getting funded is finding the right lender for |
| actually lends its own money for its own account and | | | | your loan. The big banks and other traditional funding |
| holds the loans is makes in its own portfolio. A portfolio | | | | sources are virtually out of the picture; they just want |
| lender need not be concerned with the CMBS | | | | to make it through this. Identifying a lender that still has |
| (commercial mortgage backed securities) market or | | | | the capacity to lend and presenting your loan package |
| with the day to day swings in the mortgage debt | | | | in the most advantages manner possible, represent |
| prices. Portfolio lenders are not constrained by any | | | | your last best chance of getting a loan closed. |