BEST Rates on Commercial Loans Right Now?

Question

Hey guys,

I've been shopping rates for a client hard for the last couple weeks and haven't found rates/terms that were that great for a Commercial Refi. Also pulled up the BP list of commercial lenders and not having a ton of luck there either.

The building and lease:

Concrete tilt up, single tenant industrial building. Estimated value 5.1M. Fully paid off. 5 year lease/5 yr option with a really high credit, nationwide tenant.

I'm looking to do a cash out Refi for 3M with a sub 4% locked rate amortized over 15-25 yrs.

I'm starting to look a lot more at the insurance money out there but I'm still learning as the Commercial Lending sector is new to me.

Any advice or points in the right direction?

Thanks!

-ND

Joel Owens · Answer

Many tenants are credit rated but their is a difference between investment grade and non-investment grade of a credit rated tenant.

5 years is nothing on a lease with a 5 year option.Lenders do not like this as it is high risk.The 5 year option however small the chance could not be called and now the lender has a problem.

Who will go in there to fill the whole space or will they fill only partial space and the owner/investor now has a hard time servicing the debt.

Lenders see less risk in a loan period that matches a guaranteed lease  instead of 5 years on a 25 year loan and then you do not know what happens after that.

GSA's on leases are in the high 4's right now and that is rockin it for rates on commercial.

I do not know where you are getting this sub 4 stuff. Your client might want lots of things but it sounds like a pipe dream to me.Industrial you have to be real careful as you have some of the lowest  per sq ft lease rates.

If the industrial is located next to  a port or a railroad that will help it's value.

A line of credit might be more realistic.

Jeff S. · Answer

Call some large commercial sales brokers. They need deals to close and will know where the good money is.

Darryl Dahlen · Answer

To be honest, I don't think you're going to find what you're looking for at an insurance company. Reason being, this request is not only outside the realm of what I consider to be their appetite for loans at the present time.

If it were me, I'd readjust my expectations regarding the terms you are seeking and then take the first lender who made me an offer that was in the ballpark.

It's going to be a challenge to find a conventional lender who will offer a cash-out loan of 3MM on a single-use property. Have you had genuine interest from any banks?

I suppose you could explore a line of credit against the property as those tend to have good rates, but not so much on the amortization

John Mireles · Answer

Commercial is such a tricky beast. My suggestion is to work with a community bank to get the loan. It really helps to have a sales and underwriting team that knows you and your area. If that doesn't work, try the branch of a bigger bank in your area. I'd also talk to your current banker to see what they say. Finally, if that doesn't work, call up a commercial broker whose signs you see a lot of in your area and see if his/her office will recommend a commercial loan broker.

I'm in the middle of refinancing my commercial loan. I'm pushing the bank to do 75% LTV. It helps that I was able to get the loan officer out to the property, show him how good it was, let him hear from my tenants and show him the development that was taking place in the area. Now he can go back to the underwriter and sell him on me and my property. (With my old local bank - that went under a couple of years ago, I could (and did) have had that conversation with the underwriter.) Relationships matter so much.

Ivan Gerrity · Answer

Hello Nic, I'm looking at buying a commercial building, can you provide the contact info for your lender?

Thanks!

Nic DeAngelo · Answer

Hey guys,

I appreciate all the feedback I got. It definitely taught me a lot and gave me a different perspective on what I was trying to do.

I did end up securing a loan. Here are the details:

- 10 yr fixed rate at 4%
- 25 yr amort, 1.5 plus LIBOR after 10 yr fixed period
- 5 year prepayment penalty
- 50% LTV
- No compensating balance

Let me know your thoughts and any professional input is greatly appreciated.

Cheers

Nic DeAngelo · Answer

So far I've check the deal out with about 30 different lenders. Many were through google searching and lists from Real Estate sites that I trust. Also spoke with 3 or 4 commercial loan officers and sent over the lease and audited financials of the tenant. In the I ended up getting back many more questions than answers from the loan officers

So far from directly calling lenders I'm seeing:

-60% LTV but with a 10% compensating deposit (which is crap. They want to charge you for 60% and lend you 50%? Sounds like robbery) but with decent rates
-Poor rates but 15-20 yr amortized
-Fantastic rates but with a 15/20 yr term and only a 5 yr fixed rate

Now if I could just find a lender that will do all of the good with none of the bad...

Either way thanks for the input Darryl. I'll definitely look into a line of credit and see if the owner would be interested. If anything comes to mind definitely let me know

Anyone else have a lender they prefer for this kind of commercial lending?

Nic DeAngelo · Answer

I appreciate the response Darryl.

You would know better than I would as I'm new to this market. Any direction you could point me in? Maybe some insurance companies that are aggressively lending at the moment?

-ND

Darryl Dahlen · Answer

Personally, I think you're looking for some very aggressive terms given the nature of the property, nature of the loan, size of the loan, and length of the lease that's in play.

BEST Rates on Commercial Loans Right Now?

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