Commercial Loans Blog

Marketing the Large Commercial Property

Posted by George Blackburne on Sat, Jan 17, 2009

If You're Trying to Sell a $5+ Million Commercial Property, Consider Real Capital Markets

If you are trying to sell or lease a large commercial property, consider the following: Real Capital Markets assists in the sale of a whopping 30% of all commercial properties worth over $10 million! This includes all property types, including multifamily, office, retail, industrial, and hospitality.

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"Is Real Capital Markets a real estate broker?"

No. In fact, it is the listing commercial real estate broker who usually recommends to his client that he hire Real Capital Markets to assist with the sale.

"So what exactly does Real Capital Markets ("RCM") do?"

The two big services that RCM performs are marketing and supplying a document storage/display room to share the financial info with prospective buyers (more on this in a bit).

First of all, in order to sell a large investment property, you need to find a buyer. And just like a fisherman needs bait, the seller and the listing broker needs a very attractive Executive Summary (aka: teaser) to dangle in front of potential buyers. RCM prepares this teaser for the seller. I've seen a few of these teasers prepared by RCM, and they are gorgeous.

A stunning looking Executive Summary is great and all, but its not a lot of help if no one ever sees it. Therefore the next marketing service that RCM provides is a huge email list (2,000 to 4,000) of potential buyers, including opportunity funds, fund advisors, REIT's, trusts, developers, money managers, real estate operating companies and wealthy principals.

You can't send out all of the financial data at once to these prospective buyers because some of these data files are as large as 4 gigabytes. RCM therefore sends out the teaser by email, together with an encrypted link to a "virtual war room" containing the data. The encryption is 120-key ADS, the same level of encryption used by the National Security Agency. The prospective buyer first signs a confidentiality agreement before enjoying access to the property's financial data.

From the point of view of the listing broker, the email marketing system used by RCM is awesome.  A broker can view in real time just which prospective buyers nibble on the data, allowing the broker to make targeted follow-up calls.

The second major service provided by RCM is the virtual war room, where the listing broker stores the 30 to 50 data files on the property's financial condition. There are rent rolls, operating expense histories, leases, property photo's, Argus runs, and scores of other important but private documents. The listing broker, using the RCM service, can allow one potential buyer to have only a limited access to documents and another potential buyer to have full access to all of the documents. Access for each buyer can be set to low, medium or high, and of course the broker can see who is downloading which documents.

RCM is no longer just used in connection with the sale of commercial real estate. Increasingly banks are using RCM to assist in the sale of large mortgage notes on commercial properties. REIT's and large real estate operating companies are also using RCM to store all of their financial documents on all of the properties in their portfolio's. This way the data is easily available to branch offices, shareholders, equity partners, JV partners, staff and outside attorneys, investors and shareholders.

It's no wonder that that the services of Real Capital Markets is used in connection with the sale of 30% of all commercial properties worth $10 million or more.

But what does this service cost? Surpisingly, very little. The cost is typically only $2,500 to $4,500, depending on the level of service provided by RCM. Please be sure to tell Real Capital Markets that you found out about them from C-Loans because you get a 5% discount.

You can reach Real Capital Markets by calling Jay Knowles, Real Capital Markets, 760-602-5080 x 232.

Do you need a commercial real estate loan? You can apply to 750 different commercial lenders in just four minutes using And C-Loans is free!

Topics: commercial property marketing, commercial property sales, commercial real estate broker

Commercial Second Mortgages

Posted by George Blackburne on Wed, Jan 14, 2009

Only SBA Lenders and Hard Money Lenders Make Them

In the early 1990's commercial real estate nationwide suffered through a depression. Commercial real estate values fell by 45%.

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Prior to the early 1990's there were lots of commercial lenders who would make second mortgages and second trust deeds on commercial real estate. The commercial real estate depression on 1991 wiped almost all of them out. Since then very few commercial lenders have been willing to take the risk of making a second mortgage.

Certainly very few banks will make commercial second mortgages these days ... unless the loan is guaranteed by the SBA. If your company occupies more than 50% of your commercial property, you should definitely apply to C-Loans for an SBA second mortgage.

The SBA, however, will not guarantee commercial loans made on residential investment real estate, like apartment buildings and mixed used properties (for example, apartments over storefronts).

The only other type of lenders that might consider a commercial second mortgage or a commercial second deed of trust is a hard money lender. Hard money lenders will typically charge between 13% and 15% and five to eight points for a three to five year interest-only second mortgage. Like the old joke says, their apples may be expensive, but at least they have apples.

There is a very important ratio that applies to commercial second mortgages. It's the Old-Money-to- New-Money Ratio. In this ratio, the old money is the existing first mortgage. The new money is the gross amount of the new second mortgage. The ratio of old money to new money must never be greater than 3:1.

The reason why is that the second mortgage has to keep the first mortgage current as it forecloses; otherwise the foreclosure of the first mortgage will wipe out the second mortgage (very few buyers in real life ever bid at commercial foreclosure sales). If the second mortgage is too small in comparison to the first mortgage, then the second mortgage lender will have to keep far too much money sitting around uninvested and ready to carry the first mortgage for 18 months to complete the foreclosure and possible Chapter 11 bankruptcy of the borrower.

For example, if a lender foolishly makes a $100,000 second mortgage behind a $1 million first mortgage, the second mortgage lender may have to advance $180,000 (18 months of $10,000 per month payments on the first mortgage) in order to protect a measley $100,000. The ratio of old money to new money should never exceed 3:1.

You can apply to scores of commercial second mortgage seconds in just four minutes using C-Loans. And C-Loans is free.

Topics: Commercial Mortgages, Second Mortgages

Commercial Loans and Credit Unions

Posted by George Blackburne on Sun, Jan 4, 2009

Credit Unions Are Becoming an Important Source of Commercial Real Estate Loans

The commercial mortgage-backed securities industry virtually disappeared in late 2007 and 2008.  Commercial banks have fortunately stepped up to make a fair volume of commercial real estate loans; but unfortunately they are not approving a huge volume of commercial deals.

As a result, credit unions are beginning to emerge as non-trivial players in the smaller commercial real estate loan market.

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Credit unions have several advantages when it comes to commercial real estate loans. First of all, credit unions were not involved in the meltdown of the sub-prime residential mortgage-backed securities market. Therefore they are, as a group, financially healthier than many of the larger banks.

Secondly, credit unions are portfolio lenders. As a result, they can make fixed rate commercial loans with prepayment penalties far less onerous than the defeasance prepayment penalties required by life companies, CMBS lenders and many commercial banks.

But doesn't the borrower have to be a member of the credit union in order to borrow? Yes, but in 1998 the Federal government relaxed the rules for credit union membership. Prior to 1998 only the largest companies had credit unions. In 1998 the Federal government changed the law to allow credit unions to accept members from outside their core group, as long as those people come from companies or groups with fewer than 3,000 people. Credit unions can also apply for exemptions to accept even larger groups.

The banks howled in protest. Credit unions are exempt from Federal taxation, and the rapid growth in credit union membership cut into their deposit-taking and loan markets. In 1999, however, a Federal appeals court rejected the legal challenge filed by the banks. Credit union membership has grown sharply since 1999.

As a practical matter, therefore, a great many borrowers now fall within some small group that would allow them to join a nearby credit union. Commercial loan borrowers and commercial mortgage brokers should therefore consider local credit unions when trying to place a commercial loan.

Right now credit unions are small players in the commercial real estate loan market. Fewer than 4% of all commercial real estate loans originated in the past twelve months were originated by credit unions. However, ten years ago this figure was less than 1%, and in three years it would not be surprising to see this figure grow to 7% or 8%. Credit unions are indeed becoming an important source of commercial real estate loans.

You can apply for a commercial real estate loan to scores of credit unions, as well as hundreds of banks, using, the free commercial mortgage lender databank.

Topics: commercial loan credit union, commercial loans credit union, commercial mortgage credit union, commercial mortgage loan credit union, commercial mortgage rates credit union, commercial real estate loan credit union