August 17-September 6, 2016 —
COLORADO REAL ESTATE JOURNAL
— Page 23
Finance
B
y nature, I am a very
optimistic person but at
the same time, it’s also
prudent to be realistic. So use
this information to look ahead
and don’t get caught standing
on the sidelines while the savvy
commercial real estate investor
plows right through.
Commercial lending is tighten-
ing. That’s reality! It’s not meant
to sound alarm bells but, simply
put, lenders have quietly become
more selective on the loans they
close. When asked why, they
say it’s getting late in the cycle
and they would rather miss an
opportunity than get caught
with a bad loan. At some point, if
you keep preaching slowdown,
then eventually it becomes a self-
fulfilling prophecy.
Furthermore, the loans that
are getting closed are requiring
much more equity in the game.
Even the most experienced real
estate developer with a prov-
en track record can only secure
financing at 65 to 70 percent
loan-to-construction cost. Only a
select few who already are exist-
ing clients of the lender are able
to attain 75 percent LTC. At the
same time, equity investors are
becoming more cautious for the
same late-in-the-cycle reasons,
making it even more difficult
to complete the capital stack. If
you are a multifamily developer,
there is an option that always has
been available but seldom used!
Nationally, the Federal Hous-
ingAdministration/U.S. Depart-
ment of Housing and Urban
Development commercial lend-
ing platform is one of the most
successful in the country. Some
of the most successful multifam-
ily developers have used this
platform to build right through
a slowdown when conventional
lenders are pulling back. Plus,
there is less competition in the
marketplace because other
developments
get put on the
shelf.
Why
so
s k e p t i c a l ?
Are you rely-
ing on just
what you’ve
heard about
the
FHA/
HUD
pro-
cess? Sure, it
takes patience
and planning,
e s p e c i a l l y
the first time
through, but that’s what sepa-
rates the field. Start by syncing
up your entitlement process with
your FHA loan process. By the
time you have your site approv-
als and your building permits,
you will likely have your HUD
loanapproved.Onceyoubecome
an experienced FHA borrower,
you may never process another
conventional recourse loan. Why
would you?
FHA New Construction or
Substantial Rehabilitation (221(d)
(4)) loans are 40-year fully (inter-
est only during construction)
amortizing nonrecourse loans at
85 percent LTC for market-rate
apartments. That’s right, this loan
program applies to market-rate
apartments. Don’t be misled; this
is not just an affordable lending
product. If you add an affordable
component, you can potentially
increase your loan proceeds to
90 percent LTC while also low-
ering your mortgage insurance
premium. That solves a big part
of your equity problem. Two
years of interest only during con-
struction and then shortly after
certificate of occupancy, it auto-
matically converts (no lease-up
requirement for conversion) to
a 40-year fully amortizing, fully
assumable, nonrecourse loan.
(D)(4) loans also are assumable
for significantly less than the tra-
ditional 1 percent assumption
fee. They also offer great prepay-
ment flexibility with a limited
or no lockout period and then
declining percentage prepay
thereafter through year 10. After
year 10, the loan can be paid
off at par at any time through-
out its term. Where else can you
find a 40-year nonrecourse, fully
amortizing loan that can be paid
off after 10 years but with the
option to hold for another 30
years? Not convinced yet? As
we go to print, the all-in interest
rate, including mortgage insur-
ance premium, is in the 4 percent
range, fixed for 40 years plus a
two-year interest-only construc-
tion term. Additionally, there
is the option to include green
features into the construction,
which can lower the MIP from
65 basis points to 25 bps, thereby
decreasing the all-in rate to less
than 4 percent and increasing
either loan proceeds or cash flow
to the property.
This (d)(4) loan program also
is eligible for substantial rehabili-
tation on existing projects with
these same terms. There also
are eligible repair programs for
existing product under the 223(f)
acquisition and refinance pro-
gram that don’t quite meet the
definition of substantial rehabili-
tation. Even if you already have
an FHA/HUD loan in place, you
can lower your existing interest
rate and increase your mortgage
proceeds.
The bottom line is that there
are alternative lending platforms
out there formultifamily through
FHA/HUD. Don’t sit idle and be
subject to market whims. If your
development is based on sound
fundamental principles, then it
can be successful in any market.
All it takes is a little due dili-
gence, planning and guidance.
Make it happen!
s
David Treadwell
Vice president, CBRE
Capital Markets,
Debt and Structured
Finance, Denver
for construction and has the poten-
tial to be converted into a perma-
nent loan, he said.
Winkler’s group, including his
equity partner, New York-based
Clarion Partners, already had pur-
chased the property, he said.
“We are really excited to bemov-
ing forward on this andwe would
like to do more with FirstBank,”
Winkler said. “We just lovedwork-
ing with them.”
Other News
n
Fountainhead Commercial
Capital
provided a $3.39 million
loan to
Interstate 17 Inc.
for its
purchase of the 77-unit Comfort
Inn & Suites inWestminster.
Interstate 17 Inc., which accord-
ing to the Colorado Secretary of
State’s office is headed by Ky Tru-
ongofAurora, paid$6.7million for
the hotel at 12085 Delaware St.
Interstate 17 plans to renovate
the hotel and change its flag to
Quality Inn and Suites.
The 40,000-square-foot hotel is
on a 2-acre site near Interstate 25.
Fountainhead’s fixed-interest
loan, at approximately 50 percent
loan-to-value, provides financing
for the purchase of fixed assets,
such as real estate, furniture and
fixtures.
“We are so pleased to assist the
Truong family with financing the
latest edition to their hotel portfolio
with a Fountainhead conventional
loan,” said Chris Hurn, CEO of
Fountainhead.
“The hotel will be improved
in the very near future and offer
a new option to travelers in the
Westminster area of greater Den-
ver,” Hurn said.
n
Los Angeles-based
Liberty
SBF,
in its first loan in Colorado,
provided $3.05million in financing
to
John
and
Shefali Millea
and
San Francisco-based
Siena Invest-
ment Holdings LLC
for their pur-
chase of a 60-key, limited-service
Quality Inn hotel in Pueblo.
The U.S. Small Business Admin-
istration 504 financing was for
entire acquisition cost of the hotel.
The deal was closed in 33 days.
The buyers, local hoteliers, had
requested a quick closing and the
speed of the closing exceeded their
expectation.
Liberty SBF financed the loan
though its National First Lien SBA
504 wholesale program.
Liberty SBF worked with Den-
ver-based
Colorado Lending
Source
as the certified develop-
ment company on the loan to
quickly gain SBA approval and
expedite the loan processes.
“Through our partnership with
Liberty SBF we were able to get
SBA approval in place and meet
the borrower’s closing timeframe
in short order,” said
Kamry Bow-
man,
a loan officer at the Colorado
Lending Source.
“We found Liberty SBF to be a
great partner throughout the pro-
cess,” Bowman said.
“The perception in the market-
place is that closing an SBA loan
is a lengthy process,” said
Alex
Cohen
CEO of Liberty SBF.
“We have proven that with the
right team, a tailored SBA504 loan
can be closed quickly and efficient-
ly under a strict deadline," he said.
Siena was in a 1031 exchange
and that “presented a stressful
and tight timeline to find our next
financial investment,” said
John
Miller,
president of Siena.
“Liberty SBF understood our
challenge, helped identify the best
loan package and secured compet-
itive financing for our hotel within
deadline,”Miller said.
“They came through for us in a
big way,” he said.
s
FirstBank
FIND FINANCING
I N D U S T R Y D I R E C T O R Y
COMMERCIAL REAL ESTATE
LENDERS
Arbor Commercial
Mortgage, LLC
Bank of America Merrill
Lynch – Commercial
Real Estate
Bank of Colorado
Bank of the West
Berkadia Commercial
Mortgage, LLC
Bloomfield Capital
Partners, LLC
CBRE|Capital Markets
Chase Commercial Term
Lending
Citywide Banks
Colorado Business Bank
Colorado Lending Source
Commerce Bank
Essex Financial Group
Fairview Commercial Lending
FirstBank Holding Company
Front Range Bank
Grandbridge Real Estate
Capital LLC
Hunt Mortgage Group
JCR Capital
JVSC-CBRE Capital Markets
KeyBank N.A., KeyBank Real
Estate Capital
Merchants Mortgage and
Trust Corp.
Midland States Bank
Montegra Capital Resources,
Private Lender
Mutual of Omaha Bank
NorthMarq Capital, Inc.
RNB Lending Group
TABS
TCF Bank
Terrix Financial Corporation
U.S. Bank – Commercial
Real Estate; SBA Division
Vectra Bank Colorado, N.A.
Westerra Credit Union
@
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