All Forum Posts by: Eric Schleif

So the loan has already matured? Has the current lender granted you an extension? What is the loan amount you are seeking to refinance? What is the occupancy and cash flow for the building? How do the lease rolls look and how do the current rents compare to the market? 

These terms do not sound that great to me, but would need a little more info on the deal. 

@Jane G. To help answer your question...What is the rate being offered on the 10 year loan vs the 5 year ARM? Is the amortization on the 5 year deal also at 30 years or at 25 years with no balloon?

What is your acquisition price and loan amount?

We are seeing more and more banks require deposits when making commercial loans. Definitely negotiate this upfront with the bank. If you can't get the accounts waived entirely, you could probably get them to settle on a certain amount being deposited into a CD or money market account in lieu of all of your banking business. @Michael Lucero made some good points as to the bank's thinking for requesting accounts. The common theme I am being told when negotiating with a bank's senior management is that this request stems from bank regulators and audits. 

Good luck.

It's pretty standard language in the commercial loan documents. Lenders are underwriting your property to certain metrics like LTV and DCR and a second mortgage will impact these numbers. There are also foreclosure issues in the event of a default of the second mortgage.

You should ask your current lender about obtaining a second mortgage or line of credit. They are more likely to allow that than a second mortgage from another lender. 

But to answer your question, it is definitely enforceable if that language is included in the loan documents. Back when I was doing a lot loan workouts and modifications when the real estate bubble burst, we accelerated a handful of loans that had unauthorized second mortgages. All of which was completely enforceable and were on properties in New York. Also, keep in mind I am not a lawyer so it may also be prudent to let your lawyer review the loan documents and language regarding 2nd mortgages.

@Matthew Rembish We spoke before. Based on the area of NJ you are focused on investing I would say 7% is about what a bank would use. So 10% if you want to be conservative and 5% if you want to be aggressive.

@Joseph Duff STR reports are specific to the hotel industry. They will help you analyze a particular hotel against its comp set by several factors including occupancy, RevPar, and ADR. When a client asks me to review a hotel acquisition or refinance, one of my first questions to them is if they have a STR report. There isn't really a "go to" report that I would ask a client for on other assets like apartment buildings. We just review in-place & pro forma income, market comps, etc.

@Account Closed Yes, I agree with you about the issues with the valuation process. I was just answering your original question asking if investors/developers use the "Coke Can Multiplier" to value/analyze a hotel deal. I've never had a client use it and I haven't included it in a lender presentation. I do remember it from a college course but have not applied it in real world scenarios.

Freddie SBL will offer much better terms than the local bank terms you just described. They designed for smaller loans in the $1MM to $6MM and as high as $7.5MM depending on the market. PM if you'd like to discuss your deal in more detail. 

I'd be happy to discuss underwriting/lending individual deals and options regarding your experience. Feel free to PM me.