A Need for Speed in CRE

By Gabe Gonzalez

During the 1st quarter of 2013, a number of MCA’s clients have been active in acquiring and repositioning properties.  With the increased availability of capital, especially from a number of aggressive bridge and conduit lenders, property sellers are pushing for quicker closings.  For instance, going under contract with your earnest money hard from day-one with minimal extension options is not uncommon.

need-for-speed-in-creLong-term fixed rate lenders can have a substantial amount of due diligence that is required to address the B-Piece buyer concerns, and sign off by the B-Piece buyer is not always the fasted process.  The more efficient lenders that are in tune with the risk profiles of the B-Piece buyers can quickly assess the hot button issues.

MCA was recently given a time sensitive retail acquisition with a somewhat unreasonable seller who provided less than forty-five (45) days to go under contract and close – no extensions, no exceptions.  The deal had several moving parts as the Borrower wanted to carve out a bank pad from the retail center.  MCA quickly realized that a more flexible conduit lender would be required to quickly work around the timing and collateral issues.

The seller was unwilling to change the Purchase and Sales Contract or to facilitate the change of title to accommodate our Borrower’s request to partition the Bank pad separately.  Thankfully, MCA found a lender who was willing to accept a single P&S agreement and partition the bank pad from the agreement after the fact.

Obtaining the tenant sales, estoppels, and SNDA’s also proved challenging as the Broker wasn’t allowed to contact the tenants directly.  Lenders typically require these documents to be in their specific forms for legal reasons, but they looked passed this and accepted the haphazard forms.

During our due diligence, we found that one of the tenants was under litigation and was potentially filing bankruptcy – the tenant had about 15% of the in-line space.  Instead of overreacting, the lender simply ran a stress test to analyze the loss of income and requested a reasonable clause that triggered a small cash sweep if the tenant filed BK.

Issues also arose at the closing table when the borrower was setting up the lockbox account with the bank.  The borrower entity had a number of foreign investors serving as limited partners where the bank was requiring copies of passports just days before the scheduled closing.  Contacting these investors and obtaining the proper documentation would have proved very time consuming and would not have met the inflexible deadline.  The Lender then suggested using a different Bank to administer the lockbox. This bank had done business with our client before and was comfortable with the entity ownership.  Since time was of the essence, the lender was willing to close without the lockbox set up and instead to have it as a post-closing item.  This long-term fixed rate deal closed in less than forty-five (45) days and is on its way to be securitized.

MCA prides itself on taking on more challenging assignments and knows the risk profiles of the various capital sources to ensure the highest certainty of execution.   To further discuss your next complex financing assignment, go to our website, www.metcapital.com or contact an MCA Director at 972-267-0600.

Posted on by Scott Lynn in Commercial Real Estate Finance 3 Comments