Institutionally-Backed Debt Funds Fill a Critical Gap in the Market
Not every Commercial Real Estate project is a bank deal – Rate’s in the 3’s, 70-75% LTV, Non-Recourse.
Many deals have hurdles that carry additional risks and require out-of-the-box thinking both for the sponsor and the lender.
A construction deal may be $1M over budget and the local credit union may not want to extend additional draw proceeds due to leverage constraints, but the project is 75% complete and the sponsor needs to see the project through completion to meet investor returns and give the community the project that was promised.
A developer may be trying to acquire an infill land site, but the seller is unwilling to offer the time needed to finish entitlements/permits/architecture designs, etc., and the deal has a short fuse before someone else buys all cash prior to doing a full equity raise.
Construction or re-positioning of an older asset may present a situation where a portion of the budget is allocated to energy-efficient improvements, which could open-up alternative lending tools.
Suddenly, the market changes overnight and a well-located property goes vacant or tenants stopped paying rent, and the mortgage is still due. (Bridge Money)
An investor is looking to use land-value as additional equity and could benefit from a Ground-Sale-Leaseback to close the gap in a construction project.
Private lenders (levered and non-levered) throughout the United States have no shortage of capital to deploy with different risk tolerances, financial instruments, geographic/market focuses, and other lending perimeters. Private debt funds, credit unions, mezzanine lenders, family offices with discretionary capital are always on the look-out for the next project where they can help sponsors explore different financial instruments to see a successful completion, whatever the situation may be.
2021 is a new year and while most deals face challenges, there will be a lot of opportunities that arise, so it is not a bad idea to understand what financing options are available for your next project.