Mid Atlantic Real Estate Journal — June 14 - 27, 2013 — 15A
www.marejournal.com
C reative F inancing
By Brenner Green, Real Property Capital, Inc. You’re Gonna Need a Lawyer…
O
ne plus about the current commercial mortgage market is
swered and it was apparent I had dialed a home phone line. I explained who I was and that I had documents to email over. I politely asked for her husband’s email ad- dress and the response was “he doesn’t really do email.” I knew right then that we were in for a bit of a battle, but after a lot of “hand holding” and about a month tacked onto the process the loan did ultimately close. The second deal involved a client who tried to save money by keeping his attor-
ney on the sidelines, which in the end wound up costing him additional legal fees. First he hired one attorney to provide the legal opinion and stated that he would be reviewing the loan docu- ments himself. When this proved to be too onerous, he brought in a second attorney who performed a limited re- view of the deal and recom- mended some changes to the ownership structure, largely undoing all of the legal work that had been done to that point. The lender required an ad-
ditional legal deposit which the client paid. Following that, he autho- rized his counsel to do a full review of the loan docu- ments and unearthed some language that was poten- tially a “deal killer,” after the lender’s attorney had billed nearly $20,000 of time. For- tunately we were able to find a workaround and get the deal done, but it was an ugly situation that could have been avoided by biting the bullet up front, and it added time as well as expense. Closing a non-recourse
loan in today’s market can be a fairly complicated process from a legal standpoint. It is always a wise move to hire experienced counsel to rep- resent you and it will almost always save you time and money in the end. R. Brenner Green is a 15 year veteran in commer- cial real estate finance and president of Real Property Capital, Inc., a full service commercial mortgage banking firm based in the Philadelphia suburbs. n
that a wide array of non- r e c o u r s e f i n a n c i n g opt i ons i s ava i l ab l e , particularly in this pub- l i c a t i o n ’ s trade area.
Brenner Green
Lenders are routinely offer- ing non-recourse financing for multifamily properties up to 75-80% loan-to-value with commercial property loan-to-value ratios topping out around 70-75% for select properties. This type of lend- ing is a relatively new (and growing) phenomena on the part of banks, as even at the height of the pre-recession market getting a non-re- course loan from a bank was somewhat of a rare thing. Meanwhile, CMBS lenders continue to charge ahead and are aggressively seeking to place non-recourse loans, including ever smaller trans- actions as low as $2 million. What this means for bor- rowers, aside from the myr- iad benefits of not being required to personally guar- antee their loans, is a set of requirements from the lenders that many smaller borrowers may not be accus- tomed to. While there are al- ways a few exceptions to the rule, do not expect a lender to make you a loan without a personal guarantee and print the documents out on laser pro (a canned software pack- age that many community and regional banks use for loan documents) while you sit across the desk in your banker’s office. With a non- recourse loan typically comes a broader set of requirements and expansive custom tai- lored loan documents from an experienced law firm hired by your lender. Recently, we have closed a few non-recourse loans where our client, either through inexperience or an effort to pinch pennies, hired an unqualified attorney or tried to limit his attorney’s involvement in the deal with the result you might expect. In one example, when appro- priate, I called the attorney to introduce myself and to provide a status update on the refinance. His wife an-
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Real Property Capital is a Philadelphia based full service commercial mortgage banking firm with a regional focus and national capabilities. Our business model emphasizes client satisfaction through a high-touch, analytical approach that distinguishes us from the competition. Learn more about our distinct approach and proven track record of success at www.realpropertycapital.com
FOR MORE INFORMATION: R. Brenner Green, President 75 East Butler Avenue • Ambler, PA 19002 610-456-9644 • bgreen@realpropertycapital.com www.realpropertycapital.com
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