Commercial and Industrial Real Estate Funding
For Funding Needs Or Investment Opportunities
Money For Troubled Deals
experienced and well-known real estate developers and investors now recognize
that they are about to “drown’ in the current credit crisis.
Making matters even worse, many institutional lenders had covenants in their lending agreements that are being activated due to the deteriorating financial situation at many large firms. Like margin calls with the stock market, these will further
impair the commercial real estate market.
These situations have yet to be factored into the industry!
Blumberg Capital Partners, one of the nation's leading investment fund managers, said in mid October 2008 that extensive research by its commercial real estate staff
suggests there is significant price erosion
in the market. They show prices off by as much as 15% in 2008 across many markets and
said that figures would climb to 20% in 2009 as debt obligations mature and refinancing options dry up.
According to the company's CEO and Chairman,
Philip Blumberg, "a number of commercial property investors who bought since 2005 are now finding that they overpaid and are overleveraged, with few avenues to refinance."
It turns out that this estimate was much too optimistic. Ultimately, this price
erosion in many geographical areas has caused some properties to change hands
for literally pennies on the dollar. And this decline is probably not finished.
Other highly knowledgeable individuals further corroborate this picture. It is
common knowledge, for instance, that commercial real estate executives
are postponing new hires and preparing
for major middle-management job cuts by the end of the year.
"While hiring trends are down somewhat, the worst is yet to come," said Anthony
Lo Pinto, CEO at Equinox Partners. Worse, Lo Pinto went on to say, "the return
to credit-based debt products with rigorous underwriting based on conservative
real estate fundamentals, low-loan-to-value structures, and the 'R' word,
recourse, requires a different breed of lender with deep real estate knowledge
and credit skills."
So what are you to do if your current real estate project or even your company
is currently or about to be facing potential disaster scenarios? The answer is
Extra Capital For "Once-in-a-Lifetime" Deals
The current situation in the marketplace offers unprecedented opportunities to
obtain fantastic deals. All that is required is to know what constitutes a good
deal , to know how to structure the deal advantageously, and to have access
(often creatively) to the funding needed to "make it happen."
Yes, opportunities are there to be grabbed in a desperate market… but you need
cash to bring them home!
In the 1970s, New York City was down for the count and in as bad an economic
situation as we have with the current credit crunch. The discovery came in 1974
that the city was broke. Its history of fiscal irresponsibility had finally
caught up with it after decades of wild spending on social services that could
not possibly be afforded along with City Hall's fiscal gimmicks to keep itself
afloat. This house of cards collapsed when banks refused to lend New York any
more money. Bankruptcy loomed.
Having no choice but to swallow its pride, the city asked the Federal Government
for a bailout. President Gerald R. Ford told it to take a hike. Three years
later, it still was not clear if the city would make it out of its problems, and
the real estate market was at the bottom of a major barrel.
By 1977 most serious investors wanted no
part of real estate in New York City. But Paul Reichman had a different
perspective. He saw that this was the right time to buy! The Reichmans
were vaulted into the ranks of the superrich in a few years' time after their
firm, Olympia & York, bought eight skyscrapers from Uris Building Corp. for
about $334 million--with only $46 million down! O&Y paid $30 a square foot for
about 10 million square feet of office space. When the market peaked in the late
1980s, the properties were worth $300 a square foot, or $3 billion. But it never
would have happened if they did not have the $46 million to put down.
Even today, the big boys play this way. In May, 2008 Real Estate Fund
manager, Blackrock, agreed to buy a $22 billion portfolio of distressed US Real
Estate from UBS. But they were only paying $15 billion for it (about a 33%
discount) AND borrowing 75% of the actual cost. That means getting $22 billion
for putting up only 3.75 billion of "earnest money." But remember, they
still needed to have the earnest money to complete the deal.
Could you be that creative? For help
acquiring the funding you need to make your opportunities happen,
The Why And How Of Successful Real Estate
Done right, real estate financing can even provide a major asset to most businesses, even those that are
not real estate based. From manufacturing facilities to corporate service centers, such an asset can provide tremendous savings to a business (rent/lease payments are often a business' largest operating expense).
Further, new revenue streams can be attributed to the property itself through rental income coming from additional space being rented to other businesses. In addition, not only are there valuable tax deductions in owning property, but the property could very well be the only asset on your books that appreciates in value! Plus, when you are ready to move, all the improvements to the property that would have been leasehold improvements for someone else are now yours to calculate in your increased sale price. It has been correctly said that a number of successful restaurant chains are not really about the food part but about the real estate.
Then there are those businesses that are totally dependent on the real estate. Construction and development of property are the heart of such businesses as residential and real estate developments, industrial parks, shopping centers and malls, the hospitality industry, infrastructure projects from airports to ship yards, amusement parks, etc.
Unlike the almost cookie-cutter mentality of residential real estate, each commercial and industrial real estate project requires a unique strategy to match its individual
funding needs. Besides the type of property, nature of the business and the degree of risk involved, a variety of other factors such as business permits and licensing, zoning, environmental factors, vacancies, and local government attitudes toward the business
all affect the lending or equity situation.
Other considerations include whether the property is single-purpose,
mixed, or multi-purpose in nature, and
the stage of development.
Properties can need funding to develop projects from the raw land stage to various stages of project development.
There is a world of difference in real estate loans and
joint venture situations
granted to developers who want to build a hotel compared to real estate loans
joint venture situations
given to a company
for expanding a successful hotel property. There are
many types of loans such as construction
loans, take-out loans, refinancing, and bridge loans to name a few.
Additionally, there are many ways equity or joint venture funding can be
applied- either as a stand alone situation or with additional debt funding
Finding the right real estate lender
or joint venture partner on your own means working through a maze of possible funding sources. Of course, there is also for the business person a confusing variety of types of sources. They range from private venture real estate sources and hard money lenders,
to pension funds, life insurance companies thrifts and finance companies.
Additionally, you should not forget foreign investors who have always loved owning prime American real estate.
Finally, many real estate funding
sources not only specialize in certain types of projects, but also give
preference to those projects that meet some special criteria.
don't have to maneuver your way through this mine field on your own.
CAPS Interactive Corp. offers the following services to help secure funding
for major real estate projects:
- Organize your project so that it makes the most sense to the right funding sources
which funding sources are potentially the “right” funding sources for your project
- Open the doors to many real estate funders in its network
- doors that could very well be closed to you as an individual or private company
- Get the best deals from the variety of sources possible
CAPS Interactive Corp.
is able to offer these services to its clients
because of the professional relationships it has established and continues to
expand with the highest quality commercial mortgage brokers, bankers, and attorneys.
Our relationships are both with institutional and non-institutional funding
sources. Our sources are both domestic and international in scope, and their
interests cover property situations worldwide. They cover not only ways to
achieve harder-to-accomplish debt deals, but also those deals that are more
suited to where a joint venture partner would be appropriate. We are well aware that many projects have serious time constraints, as well as various non-disclosure considerations.
Your privacy is extremely important to us. Please note that all
information submitted through this form will remain confidential until
you authorize us to contact funding sources on your behalf.
If you feel that your company has a situation that we might be able to help with please contact us. Complete our
Real Estate Funding Sheet below and either E mail us the information using the Submit button on the form, or print and fax the
fax form to 212-656-1054.
(Please do not send any information or pages other than the supplied form or we will
be unable to respond.)
For more information, please contact us at