In the regular course of our business we are constantly talking to capital sources, whether it be lenders, institutional equity investors, or high net worth investors and family offices. It’s imperative that we stay on top of what they are doing so that we can inform our clients of the ever-changing market and direct them to the best capital available for their projects.
This week we caught up with a regional bank that we have done several deals with over the past 10 years and we found out their program had recently changed dramatically! We were shocked to learn that they have lowered leverage across the board, lowered their max loan size, reduced their geographic lending footprint, eliminated asset classes (office & special use) and require a relatively sizable deposit from new borrowers. I can’t remember their program ever changing this much in the past.
In years past this bank was one of our go-to lenders for deals in secondary and tertiary cities throughout California. They were great for specialty properties such as gas stations, car washes and STNL retail because their rates were competitive and they could offer 75% leverage. Now, they won’t even quote those loan requests.
If you are a property owner out there that has used the same relationship lender over and over again it might be time to look around. The market has changed so much in the past 12-18 months you really have to be sure you are getting the best deal available for your project and your investors.
On that note, I’d like to share some details with you on a deal we recently marketed. This past year we refinanced a mixed use office campus near Santa Rosa, CA which is a secondary market north of San Francisco. The challenges of the financing were the location (secondary market), asset class (office), and the fact that the property had sizable lease rollover in the coming few years.
To combat these challenges, we marketed the loan opportunity to 25 different lenders to assure our client that we were getting them the best interest rate and most loan proceeds available for their property. Our lender list included regional banks, national banks, life insurance companies, mortgage REIT’s, credit unions and CMBS. We ended up obtaining 7 quotes to provide financing for the property.
Once the quotes were in, we reviewed them with our client and selected the top 3. These lenders were invited back to a “best and final” round of loan quote offers after which we picked the absolute best offer. By creating a market and making lenders compete with one another we saved our client approximately 60bps in rate and achieved $4MM more in proceeds!
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About Schelin Uldricks & Co.
Schelin Uldricks & Co. is a firm offering investment banking services with a focus on providing capital solutions to real estate companies and other mid-sized businesses.
Headquartered in Huntington Beach, CA, Schelin Uldricks & Co. embodies a progressive entrepreneurial culture focused on integrity, transparency, execution, and ingenuity. The founding partners bring over 35 years of collective capital markets experience in investment banking, private equity, and real estate finance. The company offers a broad array of services, including debt and equity placement, M&A, GP advisory, divestitures, and financial restructuring.