03/14/2024
Episode 1 of Capital Conversations:
Compartmentalized Financing
I have been told by some of my colleagues that I don't share enough about some of the extraordinary transactions I fund, so I am now making time for some "capital content"! Highlights from a recent term sheet for a borrower that was in a tough situation. He was and is a good real estate investor who just came up on a rough patch of circumstances.
Deal 1: With a 580 score this eliminated all bank options, so we knew we had to go with a commercial mortgage bank, but even those guys normally want to see 600-620 +. Realizing the property was a shore property we located a commercial mortgage bank that has a high appetite for Jersey Shore properties, so this was a big compensating factor that got us a credit exception for the deal to get approved. Consequently, our client had new derogs that happened in the process where his scores dropped to a 510...smh...however we knew we had another compensating factor...this was a property had a small current mortgage balance compared to the value, with the new mortgage our the ltv was still very low. A 60% LTV 425k Cash-out refi at 12% (5yr fixed) with a 510 score and no tax returns. He will now have o er 250k to payoff existing debts to help stabilize credit and make some property upgrades to increase rent/air b n b income for upcoming season.
Deal 2: In the middle of the first deal, the client calls me and asks if I have a lender who can get him a quick $50k to handle another time sensitive debt that came up. Even though this client has a deep portfolio, my 1st commercial lender has a client threshold, they wont hold multiple mortgages with a borrower under a certain credit score. Fortunately, as a member of the National Association of Commercial Loan Brokers I get access to a portal where I can just put the scenario details and then get lender possibilities. Found a Bridge loan lender who did not care about credit scores, did not have a cashout capp up to approved ltv, waived appraisal, and enough cash to pay remaining tax debt, complete renovations to subject property and 2 other hotels. 775k bridge loan with a 510 score!
Over $1m in 3-4wks.