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“There was a time when financing a commercial real estate transaction, or financing a corporate transaction, was a relatively simple matter”
An overview of how to navigate the commercial capital markets
There was a time when financing a commercial real estate transaction, or financing a corporate transaction, was a relatively simple matter. There were very few lenders to choose from and even fewer choices to make about process and structure. That time has long since past as the number of considerations that must be evaluated when selecting a capital provider are virtually endless.
In order to increase project velocity, improve operating efficiency, conserve internal capital, increase leverage, and lower the overall cost of capital, it is essential that a sponsor develop an integrated capital formation strategy surrounding acquisition / refinance / development initiatives.
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American City Homes Financial Services, LLC
An overview of how to navigate the commercial capital markets
There was a time when financing a commercial real estate transaction, or financing a corporate transaction, was a relatively simple matter. There were very few lenders to choose from and even fewer choices to make about process and structure. That time has long since past as the number of considerations that must be evaluated when selecting a capital provider are virtually endless.
In order to increase project velocity, improve operating efficiency, conserve internal capital, increase leverage, and lower the overall cost of capital, it is essential that a sponsor develop an integrated capital formation strategy surrounding acquisition/refinance/development initiatives.
Among the many things commercial borrowers in today's marketplace need to address when seeking capital are:
• The selection of the appropriate capital provider• Level(s) of the capital structure to be addressed• Operating considerations• Control provisions• Rate, term, pricing and structure• Closing time frame• Third party requirements• Certainty of execution• Recourse provisions• Exit and pre-payment options• Inter-creditor or other multi-party agreements• Post closing servicing issues• The effect of the capital acquired on tax, balance sheet, future projects or portfolio considerations Possessing knowledge and understanding of the commercial capital markets is a critical factor not only in determining the eventual success of a single transaction, but also an entire portfolio or operating business. The first thing that borrowers must understand is that all capital providers are not created equal. There is a definite hierarchy within the world of capital providers and understanding the value-ads offered by different capital providers is important in choosing a relationship.
While many borrowers believe financing simply to be a commoditized offering, the selection of a capital provider should take into account far more than rate and term considerations. In choosing a capital provider, the goal of any borrower should be to develop a close relationship with the firm that can provide not only the broadest access to capital, but more importantly, a firm that offers best-in-class subject matter expertise, certainty of execution, and as many value-added benefits and services as possible. Capital providers can most easily be broken-down into three groups: Direct Lenders, those that lend their own funds; Indirect Lenders, those that place funds on behalf of others; and Hybrid Lenders, those that do both.
• Direct Lenders• Investment Banks• International, national, regional and local banks• Life Insurance Companies• Agencies (Fannie, Freddie, FHA)• Pension Plans• Real Estate Investment Trusts (REIT)• Mutual Funds, Hedge Funds, Opportunity Funds• Credit Companies• Private Lenders• Indirect Lenders• Financial Intermediaries• Investment Advisors• Syndicators• Mortgage Bankers• Mortgage Brokers• Hybrid Lenders• Certain Investment Banks• Certain Investment Advisors• Certain Banks• Certain Credit Companies• Certain Financial Intermediaries
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