BOULDER, Colorado – (COMMERCIAL THREAD) – Multifamily and light industrial became the most popular asset classes for commercial real estate finance after the pandemic, according to Dan Page, president of Boulder Equity Partners LLC, a national lender for all loans commercial real estate.
“We see growth and security (stability) in these sectors and are ready to be more flexible as a result,” Page said. “Both sectors have a loan to value ratio (LTV) of up to 80%, compared to an average of 65% to 70% LTV in other types of property.”
While other asset classes, like retail and office, remain fundable, they come under closer scrutiny due to underlying factors related to the pandemic that have made them more vulnerable. .
How to get the most funding
The values of some commercial properties have fallen due to the pandemic. While net operating income (NOI) may have been healthy a year ago, the current NOI may not be enough to fund with many banks. This leaves some investors in the cold, especially those who are currently trying to rehabilitate and lease properties for potential business income. But Page says there is a workaround, especially within those strong asset classes.
“If the current value and income are lower than pre-pandemic levels, that doesn’t necessarily have to limit potential withdrawals,” explains Page. “If the potential for future growth is strong, an investor may be able to negotiate a price supplement. Boulder Equity Partners may combine the 2019 NOI with the projected growth. The funds dispersed now would be based on the current value of the property. But additional funds can be set aside and accessed as value and NOI increase rapidly over the next several months, ”explains Page.
The approval of a earn-out (where additional funds are accessible) is based on the confidence that there is strong potential for growth in the asset class as well as in individual ownership. Factors such as the borrower’s experience level and willingness to invest in his own project go a long way in meeting the lender’s requirements. Page recommends that borrowers seeking commercial real estate loans defend their position.
“The best way to gain the trust of the lender is to tell the story,” explains Page. “A loan application and the supporting documentation don’t always paint the picture for the lender. If the project has potential, report it.
As the nationwide lender for all commercial real estate loans, Boulder Equity Partners offers a wide range of loan programs, from long-term low interest rate products to bridge loan programs that can be migrated to long term loans and hard money. Contact us at BoulderEquityPartners.com