Loans

Commercial Construction Loans

Procuring large commercial construction loans is extremely difficult, time-consuming, complex, tedious, and requires a high-level of expertise and experience. But we absolutely love them!  Climax Capital Group^® is one of very few commercial lenders that has the knowledge and background to arrange substantial commercial construction loans and construction financing.  Our loans start at $5 million with virtually no upper limit.

Commercial Construction Lenders

One of the distinguishing characteristics of commercial building construction is that the physical building has not yet been constructed. In other words, the full and final collateral does not exist yet.  Therefore, the lender makes only partial construction loan disbursements. Of course, the lender monitors these disbursements very carefully.

Prior to the release of subsequent construction disbursements, the construction lender verifies that the borrower properly used the last disbursement for the intended construction expenses. The lender also checks that the borrower submitted all lien waivers.  Our construction funding sources consider many factors when underwriting a commercial construction loan, including the developer’s track record, the proposed development’s proforma, and so forth.

It takes a high-end brokerage with over a decade of experience, like CCG^®, to handle the extremely detailed and complex documentation. Importantly, this is essential for the approval and funding of high-end commercial construction loans.

Purposes and Types of Commercial Construction Loans

Different types of commercial construction loans are available for a variety of purposes.

Purposes

Commercial construction loans enable borrowers to build new commercial properties. They can also reconstruct, rehabilitate or upgrade existing commercial properties.  If you want to know more about commercial properties please contact us directly on +6620777014 for applications for commercial construction loans.

Do you need commercial property loans in excess of $5 million with excellent construction loan interest rates? CCG^® has the professional expertise and network of funding sources to arrange the financing you require.

Types of Commercial Construction Loans

Commercial construction loans can be categorized by type, as follows:

• Land Development Loans:  These are risky loans in that raw land will only collateralize a small percentage of the value of developed land. Therefore, borrowers often need to provide additional assets as collateral.  Lenders look for developers with solid track records before granting this type of loan.  You can use loan proceeds to clear land, install infrastructure (i.e., water, sewer, power), subdivide the land, and so forth.
• Acquisition & Development Loans:  These loans cover the purchase cost and subsequent development of raw or partially developed land.  Proceeds apply to any necessary improvements before new construction begins.
• New Construction Loans: These are short-term loans, usually interest-only.  The term is commonly up to 18 months, but the lender might grant extensions to cover additional fees.  Construction loans can be set up as revolving credit lines to fund separate construction loan stages or separate properties in a multi-phased construction project.
• Bridge Loans:  In some situations, a developer needs construction funding while they still owe money on a previous project that has not yet sold. A bridge loan is for this circumstance. The loan may require a lien on the for-sale property to act as collateral for the loan.  When the construction is rehabilitation rather than new construction, the existing property can also serve as collateral. Bridge loans are also temporary. Terms are usually for a year or less, though longer terms can be negotiable.

• Mini-Perm Loans:  Mini-perm loans are also temporary loans. They typically follow the completion of a construction project and the issuance of a Certificate of Occupancy for the new building.  A mini-perm loan settles any remaining balance on a construction loan.  It remains in place as the property stabilizes and generates income, usually for a period of two to three years beyond the initial construction loan.
• Takeout Loans: A takeout loan is a permanent mortgage on a commercial construction project that replaces the relatively short-term financing, such as a mini-perm loan. CCG^® can provide a flow of financing from commercial construction loan through mini-perm loan to takeout loan in a seamless and uninterrupted sequence.
• Mezzanine Loans:  Mezzanine loans are a mechanism to add financing to an existing construction project.  It adds debt to the capital stack through subordinated debt that increases the borrower’s leverage. For example, a mezzanine loan might increase the borrowers leverage from a 70% loan-to-cost (“LTC”) to an 85% LTC.  Mezzanine loans typically charge higher interest rates and may have additional restrictive terms.

How Do Commercial Construction Loans Work?

CCG^® fully understands the unique characteristics of short-term commercial construction loans, along with their many moving parts and complex deal structures.  Our firm understands the needs of both our borrowers and our funding sources. This helps us to negotiate the best overall loan terms for our clients.  Terms include the maximum leverage the borrower can obtain, interest rate, repayment terms, and many other factors.

By loan closing, CCG^® will have negotiated critical understandings. Examples include property insurance and the construction contract between the developer and lender.  The contract specifies how the developer can draw loan funds, subject to the architect’s sign-offs and lien waivers. The contract commits both sides to complete the project, under the terms of the contract.  The end goal is the receipt of the Certificate of Occupancy (CoO), which satisfies the borrower’s requirement for the last loan installment and the lender’s requirement for sufficient collateral to protect its investment. It’s only after the CoO is issued and the property is leased to stabilization (typically 95% leased) that the property reaches its full liquidation value for purposes of collateral.

What are the Requirements for a Construction Loan?

Banks are typically the primary source of commercial construction loans. They underwrite these loans by examining a large number of data points, including project metrics and the documentation. Usually, the representative brokerage firm prepares the borrower’s documentation. The lender must weigh a host of factors. For example, these include:

• The project’s most current proforma just prior to loan submission
• Local market conditions
• The construction budgets
• The history of the development team
• The financial capacity of the loan guarantors

Of course, any special project-specific risks undergo careful review and consideration.

Metrics for Commercial Construction Loan Underwriting

Lenders underwrite commercial construction loans using a variety of information. For example, important metrics include:

• Loan-to-Cost Ratio:  The LTC ratio equals the commercial construction loan amount divided by estimated total project cost.  Typically, commercial construction loans have an LTC between 70% and 90%.  The remainder of the funding comes from the borrower’s equity.
• Loan-to-Value Ratio:  The LTV ratio equals the fully disbursed construction loan amount divided by the estimated value of the property when complete. This value is usually close to 70% but can be higher for SBA-guaranteed loans.
• Debt Service Coverage Ratio:  DSCR equals the proforma net operating income of a proposed property divided by the estimated annual interest and principal payments on the permanent takeout loan (not the commercial construction loan, which is an interest-only loan). Typical DSCR values for commercial construction loans can exceed 1.25.
• Profit Ratio: The projected profit ratio equals the completed property’s estimated profit divided by the estimated total cost.  Lenders typically desire a projected profit ratio of 20% or greater.  Lenders requires a decent profit ratio to have confidence that the borrower has sufficient motivation to complete the project.
• Net Worth to Loan-Size Ratio:  This ratio is the developer’s net worth divided by the commercial construction loan amount.  Look for a value greater equal to or greater than 1.00, since a lower value would mean the developer had insufficient resources to cover the loan in the event of default.

Documentation

Putting together a loan application for commercial construction financing requires far more than just filling out a form.  The borrower, working with its professional representative, also needs to assemble and present full documentation. For example, these include:

• Business plan
• Earnings projections
• Contractor’s estimates
• Financial documents, both personal and business

A business plan contains enormous amounts of technical and financial data. For example, these include:

• Site location
• Property type (retail, residential, mixed-use, etc.)
• Feasibility studies
• Building size
• Number of stories
• Unit sizes
• Mechanical plans (plumbing, electrical, ventilation, floor plans, finish standards, etc.)
• Amenities
• Parking
• Signage

Commercial Loan Agreements

If a borrower and lender agree on commercial construction financing terms, they sign a loan agreement, memorializing all of the terms. The agreement includes a disbursement schedule. Specifically, this schedule specifies how and when loan funds become available to the borrower. It also includes a discussion of how to handle change orders.

Lenders often require loan-in-balance (LiB) provisions requiring that the unfunded loan is sufficient to cover the costs to complete the project. In other words, the provisions help ensure that the loan remains in balance. A loan agreement’s LiB provisions discuss the hard and soft costs of the project, plus the project’s allocated equity and secondary loan resources. Often, the commercial construction budget includes a contingency account for when costs change in order to maintain the loan’s balance. Change orders are a common contingency that often arise during a commercial construction project. If the commercial construction loan becomes significantly unbalanced, an LiB provision might allow the lender to place the loan into default status.

Sources of Commercial Construction Loans

Banks and credit unions are the primary sources of commercial construction loans.

They typically offer the best interest rates, but they also have some of the most stringent underwriting standards. Other sources include private lenders, the commercial mortgage-backed securities market, and life insurance companies.

The Small Business Administration’s CDC/SBA loan program is available for the construction of owner-occupied commercial real estate.  For example, the loan amounts can reach $14 million, with interest rates around 5% and terms from 10 to 20 years.

 

CCG^® Provides Commercial Construction Loans

Count on CCG^® for all your commercial financing, including commercial construction, bridge loans, mini-perm loans and takeout loans.  For the highest level of continuity, we can arrange the sequence from commercial construction loan to mini-perm loan to takeout loan.

Finally, CCG^® is one of the most professional and diligent construction loan lenders in the marketplace. You will also find that we have the specialized knowledge and technical skills required to assemble your detailed commercial property loan documentation. Of course, the same is true for funding and securing exceptional commercial real estate loans.

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In conclusion, if you are interested in multifamily development, mixed-use development, hospital building, industrial construction, hotel construction, or any other commercial building loan, we are one of the finest choices you could possibly make for successfully closing your construction loan.  To arrange for your commercial construction loan starting at $5 million, contact us today at (66) 20777014!

Energy Project Finance

The pursuit and delivery of energy is of paramount importance to the survival of our civilization, and Climax Capital Group^® is proud to play its part by arranging energy finance for the full range of technologies and fuels, including solar finance and other energy finance solutions.

The energy industry is a foundational part of the global economy, facilitating everything from the finance of Wall Street to transportation and logistics.  With supply chains stretching across the globe and incorporating exploration and production, manufacture and supply as well as companies ranging from large-cap public entities to smaller, private equity-backed start-ups, the energy sector is complex.  It is also in a period of significant transformation. Technological innovation, cost pressures and concerns about efficiency and the environment have collided with increased government regulations and incentives to create dramatic changes across the energy industry.

Through all this change, however, one thing has remained constant, the need for businesses to secure energy project financing with substantially beneficial transactional terms and pricing.

The problem energy projects face when securing energy finance is that the loan products and underwriting guidelines used by many funding sources are not suited to the energy project’s unique and specific requirements.  Lenders often demand the creation of a relationship whereby the energy lender seeks only to maximize their own profits and place the lion’s share of the risk onto the borrower’s shoulders.

CCG^® does not believe in making energy developers and businesses clamber through administrative obstacle courses to obtain the funding they need to succeed. CCG^® does the legwork, from soup to nuts, to facilitate the most efficient and highly tailored flow of capital from lenders to innovators, to producers to network operators.  At CCG^®, we combine energy market knowledge and insight with our expertise in how to secure the best possible financing solution for energy projects across the world.  By understanding the specific requirements of your business, we can match you to exactly the right energy funding source to provide incredibly meticulous and detailed, energy transactional processing.

Whatever the scale and scope of your project, CCG^® can secure financing from an extremely broad and diverse range of potential capital sources.

Understanding your Energy Project

By understanding both the specific requirements and, more importantly, the “spirit” of your energy finance request, CCG^® matches you and your energy deal to the optimal energy funding source while providing incredibly detailed and meticulous, transaction evaluation, loan origination, deal structuring, processing, electronic document management, incredibly beautiful and organized energy finance package preparation and submission, term sheet negotiation, third party report coordination, loan commitment negotiation, loan document review, and coordination of loan document signing, funding, recording and closing such that CCG^® ensures that every part of the energy finance transaction is guided with the utmost of care, experience and professionalism to handle and fund the energy project from beginning to end.

Phases of Energy Projects

Energy finance is needed to fund projects that typically involve several phases:

• Exploration: Exploration involves the search for deposits of fossil fuels, such as oil, gas and coal, that are trapped below ground. Exploration can also apply to finding the most suitable sites for solar, wind, geothermal or another types of renewal energy projects.
• Production: Energy production refers to the steps necessary to turn energy sources into energy products for industrial and commercial use. This includes recovering and refining raw fossil fuels from their deposits and generating electricity from renewable resources. Pipelines, refining plants and/or generation plants are typically included in the production phase.
• Transmission:  Electrical transmission requires high-voltage lines that rapidly move electricity over long distances. The network of transmission lines is known as the power grid or electrical grid. Electrical cables can be found overhead, underground, and under the seas. 
• Storage: Some electricity can be stored in batteries, but most is generated on demand.  Fossil fuels can be stored in huge storage facilities and tapped when needed.

Types of Energy Finance Projects

Energy projects can be categorized by the source or fuel that creates energy for industry and commerce. Renewable energy projects are usually viewed more environmentally friendly than fossil fuel projects. However, fossil fuel projects are necessary to provide the huge amounts of energy required by the world’s population. Both require substantial energy finance.

Traditional Energy Financing Projects

Despite the rapid rise of renewable energy, traditional gas and oil industries still reign supreme over the massive energy sector. Even these long-established industries are a hub of innovation and evolution as companies seek to improve sustainability and optimize delivery. And, while it is extremely important that an energy project minimizes negative environmental effects and reduces waste, the energy project must, of course, be a financially sound and profitable business proposition. This is even more crucial in a crowded supply chain adapting to the digital age and under pressure to increase efficiency gains and improve both its top and bottom lines.

Energy projects are often large-scale, long-term endeavors that involve a range of parties and investors from start-ups to government bodies and carry specific risks not usually found in the context of project finance. Having an in-depth understanding of a project’s objectives as well as the complex logistical, environmental and regulatory context in which it will take place, is essential for the energy project to be matched to the proper energy funding source.

In comparison to our competition, CCG^® can provide you with a commercial, transactional experience that you simply won’t find anywhere else in the commercial, energy sector and capital funding markets. We focus on your business objectives and use our market knowledge and insight to create a secure, productive relationship between you and the private energy or institutional energy capital source that best fulfills our clients’ requirements. Our approach puts our clients at the center, prioritizing attention to detail to ensure deal making is properly formulated at all levels and optimized for each energy finance transaction. We save our clients time and money while simultaneously reducing transactional risk.

Fossil Fuels: Coal, Petroleum, and Natural Gas

Fossil fuels are non-renewable and require expensive extraction from underground reserves.  CCG^® is a provider of oil and gas financing, as well as coal financing.  These fuels derive from the decomposition of flora and fauna.  Another fossil fuel, liquid petroleum gas, is a side product from the production of natural gas.

Coal can be burnt directly in a power plant to turn turbines that produce electricity. It can also be converted into a liquid or gas fuel, but these materials are usually too expensive for generating electricity.  A new, coal-fired power plant costs in excess of $2B, including financing costs.  The capital cost for a coal-fired powerplant ranged from $4,560 to $6,112 per kilowatt, as of 2017.¹ 

Petroleum and natural gas are extracted from underground reserves. Fracking has allowed oil and gas fields to provide larger yields. Petroleum, commonly called “raw crude,” needs to be refined in chemical plants to constituent materials that can be used for gasoline, diesel fuel, and many other compounds that are used for energy production, chemical processes, drugs, plastics, and many other uses. The capital cost in 2017 for a petroleum/gas-fired powerplant ranged from $899 to $1,687 per kilowatt in 2017.

Renewable Energy Finance Projects

Renewable energy such as wind, solar and hydro power now accounts for approximately one fifth of the total electricity generation in the United States. In fact, in the next decade, it is likely that renewable power generation will overtake nuclear energy as the second largest contributor of power. A large part of this success has been due to beyond amazing innovation, but it has also required the effective utilization and adaption of energy finance structures that have worked so well for conventional power generation.

The kind of energy funding needed for these renewable energy projects can range from project-level finance and technological energy development all the way up to the municipal, state and national levels. Matching a business to the perfect source of energy capital requires up-to-date knowledge of federal tax credits and state-level incentives, as well as attribute markets and site-specific factors like energy technology operation costs. When adding in financing structures that differ massively depending on whether you are investor-owned, a municipal utility or a commercial entity and whether you are working on distributed, mid-size or utility-scale systems, it can be challenging to identify the correct capital source.

Wind Power: Wind Turbines and Wind Farms

Onshore and offshore wind farms harness the power of the wind to turn magnetic turbines that generate electricity.  Many of the largest wind farms are located in the U.S., including the Alta Wind Energy Center, Roscoe Wind Farm and Horse Hollow Wind Energy Center.  Wind power is renewable and clean, creating essentially no pollution.  As of 2014, about 4% of the world’s power came from harvesting wind.  In terms of green energy financing, the capital cost for an onshore windfarm in 2017 was about $1,573 to $2,725 per kilowatt, while offshore windfarm construction cost about $5,893 to $8,268 per kilowatt.  The largest onshore windfarm has a capacity of 1,320 million kilowatts.  Assets America^® loves renewable energy project finance and can provide you with energy finance solutions appropriate to your needs; the larger the project, the better!

Biofuel: Biomass

Biofuel is generated from living organisms that are cultivated in biomasses. Biomasses are converted into energy-rich substances through chemical, thermal and biochemical conversion. Principal types of biofuel include bioethanol (derived from plants containing sugar, starch or cellulose), and biodiesel made from animal fats and vegetable oils. 

When you consider the capital costs for alternative energy financing, biofuel power plants cost from $3,538 to $4,708 per kilowatt to construct.  Energy finance for biofuel energy generation projects are one of the many types renewable energy financing we can provide.

Solar Power: Photovoltaics, Concentrated and Space-Based

CCG^® is a source for financing energy efficiency projects like solar that require solar financing.  Solar energy comes from the sun’s heat and light.  It can be harnessed through technologies such as:

• Solar photovoltaics: Semiconductor materials (principally silicon) within solar panels convert light into electricity.  Solar panel farms are large, ground-mounted arrays with either fixed positions or panels that track the sun’s path for maximum yield.  At the start of 2017, global photovoltaic output exceeded 300 gigawatts, or 2% of worldwide electrical demand.  Power-purchase agreements price the output of solar farms under 5 cents/kWh.  The cost to construct a tracking-panel solar farm ranges from $1,423 to $3,282 per kilowatt, depending on location.  As of 2017, the world’s largest solar farm was Tengger Desert Solar Park located in China, generating 1,500MW (megawatts).

• Solar heating: A solar thermal collector harvests the sun’s heat through hot water panels, solar parabolic dishes or solar towers.  Solar power plants typically feature complex trough-shaped reflectors to heat a fluid, drive a turbine and generate electricity.  A power tower is a tall structure with tracking mirrors that reflect sunlight to a receiver at the apex of the tower.

• Artificial photosynthesis: This is a promising set of technologies that simulate natural photosynthesis.  As of this time, it is in the research stage and has not yet reached commercial deployment.
• Solar architecture: This is an architectural approach that incorporates active and passive solar features into homes, buildings and other structures. It includes building orientation, built-in photovoltaics, thermal mass and other strategies.

CCG^® is keenly interested in providing solar projects financing and other types of new energy finance. The decreasing cost structure of solar panels and equipment make solar energy finance a good investment prospect among all projects requiring energy finance, and we are happy to provide solar financing into the billions of dollars with no upper limit.

Marine Energy

The Earth’s oceans are a huge, and mostly unexploited, source of renewable energy tied to fluid flow, thermal energy, salinity gradients and surface wages. The following sources of renewable marine energy can be tapped with suitable devices and techniques:

• Current power: The sun’s energy helps drive strong currents in the world’s oceans, along with wind, temperature, the Earth’s rotation, topography and salinity.  Energy extraction devices such as turbines are currently undergoing research.
• Osmotic power: This power derives from the salinity gradient where salt water meets fresh water. Devices that utilize pressure-retarded reverse osmosis or freshwater upwelling can tap osmotic energy. Energy finance is needed to convert research projects into commercial operations.
• Thermal Energy:  Energy differences between surface and deep waters, especially in tropical waters, can be used to drive turbines that generate electricity. As this technology develops, it might become a consumer of energy finance.
• Wave Power: Wind, which itself derives from solar-derived temperature differences, interacts with ocean surfaces to create waves. Devices used to harvest power include overtopping devices, oscillating water columns, surface attenuators and point absorber buoys. Demonstration projects are providing positive results that will soon require energy finance for commercial development.
• Tidal Power: The interaction of the moon with the oceans creates tides, a form of hydroelectric power. Tidal power takes three major forms: dynamic tidal power, tidal barrage power and tidal stream power. This source of power looks very promising and may soon require significant energy finance capital.

Hydrogen

Hydrogen is already used in fuel cell vehicles.  It does not create hydrocarbon pollution and combines with atmospheric oxygen to form water vapor as the sole emission.  A fuel-cell-powered electric motor is two to three times more efficient than a gasoline motor.  A national infrastructure for hydrogen delivery will require vast amounts of energy finance.

Geothermal Power

This is power sourced from temperature differences at and just below the Earth’s surface.  The temperature gradient is used to generate electricity and geothermal heating.  Geothermal power is already in commercial use around the world and offers great promise as research finds ways to further lower costs. The requirements for energy finance in this area are significant.

Hydroelectricity

This is electricity generated by water pressure at dams and waterfalls harnessed to turn turbines. Dam construction is a huge consumer of energy finance.

Nuclear Energy

Nuclear reactors provide energy by providing heat to boil water that turns steam turbines. A nuclear power plant can cost north of $10B, and CCG^® is happy to provide energy financing for this market.

Characteristics of Energy Finance

Energy projects are funded by one or more of the following sources: banks, private investments including venture capital, municipalities and government agencies.  Energy finance is characterized by its risks and its financing mechanisms.

Risks

The following risks must be considered when providing energy finance to specific projects:

• Financial: Energy finance from private sources rests upon the availability of risk-adjusted capital at an affordable price relative to projected revenues. Costs are heavily front-loaded while payback is relatively slow. Financial risks include geopolitical, currency, liquidity, regulatory and counterparty risk.
• Tech Disrupters:  Expensive investments might be undercut by technological breakthroughs that render older technologies obsolete.
• Operations:  The operation of a power plant can be disrupted by delays in the availability of grid interconnection and/or transmission line interfaces, among many reasons.

Financing Mechanisms

Energy finance risks can be somewhat mitigated by the appropriate financing mechanisms, including:

• Public Funding: Public finance institutions account for about 15% of total renewables investments.^2 Public capital from various levels of government finance public and private energy projects.  Property Assessed Clean Energy (PACE) financing, from the U.S. Department of Energy, is an example of public funding.
• On-lending Structures:  This is lending via a development finance institution (DFI) with high credit quality and access to credit. DFIs borrow debt at low rates and on-lend them to governments and other institutions via credit lines.
• Loan Syndication: This is lending arranged with a group of lenders who participate in a project together.  DFI’s often co-lend with commercial banks to distribute the risks among a larger group of lenders.
• Subordinated Debt: This is lower-quality, higher-interest debt that helps insulate senior debt from risk. It is a form of mezzanine financing that can unlock additional energy finance, the aggregate of which increases the overall loan-to-cost (LTC) on a project.
• Convertible Grants:  Public finance institutions can offer grants that transition to loans.  They facilitate the high-risk early stages of projects requiring energy finance.
• Convertible Loans:  These start out as loan that can be converted into high-risk, high-return equity following the riskiest early stages of an energy finance project.
• Standardized Contracts:  These reduce the complexity of conventional contracts, thereby lowering due diligence costs, for servicer requirements, ownership structures, power purchase agreements (PPAs) and so forth. A PPA is a contract between energy consumers and producers that defines all commercial terms, including schedules, payments, penalties and termination terms.
• Aggregation: To justify their due diligence and transaction costs, smaller energy projects are often aggregated to the size of large utilities.  This allows institutional investors to participate in projects that would otherwise fail to satisfy their minimum investment benchmarks.
• Securitization: Through securitization, project sponsors can issue securities with a wide range of risk/return profiles to fund an energy project.  The securities are backed by assets that are assigned to a separate special purpose vehicle (SPV), thereby protecting large companies from individual project risks associated with energy finance. These acts, almost like an insurance policy by spreading the risk.
• Credit Ratings: Different energy projects require different types of due diligence.  Credit ratings act as proxies for due diligence by providing expert assessments of creditworthiness to support energy finance.
• Green Bonds: These are fixed-income securities that finance environmental or climate-related investments, and are increasingly used for renewable energy finance.  They are similar to securitization in that they are backed SPVs. 
• Yieldco Structure: These are equity-based securities used by utilities and other owners of renewable energy assets to partially spin off operating assets.  The money raised by the spin-off is used to fund new projects.  The structure facilitates tax-efficient distribution of free cash flow to shareholders.

Climax Capital Group^® Provides Energy Finance

Whether you need project financing for a very small, $5 million commercial wind farm or large $1 billion nuclear powerplant, CCG^® can provide you with the appropriate energy finance solutions to meet your needs. The CCG^® difference is focused, dedicated, cohesive and seamless with terms that frequently beat those attained by more conventional methods. When it comes to energy project financing, CCG^® is the name you can trust.

CCG® works for its clients to analyze their projects, pairing our energy client and the subject energy project with the energy finance structures that will provide the most value. By not being beholden to any particular capital source, we are adept at providing accurate, objective financial representation typically allowing our clients access to various energy finance options.

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CCG^® difference is focused, dedicated, cohesive and seamless with terms that frequently beat those attained by more conventional methods.  For more information about how we can help you obtain the ideal energy finance terms for your large energy project, call us today at (+66) 20777014!

Hotel Construction Loans

Of course, the construction of a new hotel project is the most complex form of hotel financing. Securing an optimum hotel construction loan is a similar process to financing a new business. The main similarity is the lack of any demonstrable performance history.  There is a key difference, however, between a hotel construction loan and hotel refinancing.  As you construct your hotel, you are building your hospitality project collateral.

Hotel construction loans require significant capital. Your hotel financing project needs to account for large-scale construction down payments and the potentially long time period of construction. Financing must also last through the period required to gain a certificate of occupancy, open the hotel, and begin producing a revenue stream. Accordingly, the loan must be large enough to service the hotel debt and meet the operating costs and expenses.

Hotel construction financing and bridge loans are available through CCG® from banks and other sources.  For example, the SBA and the USDA offer loan financing guarantees for hotel construction as well as FF&E expenditures.  Alternatively, hoteliers can arrange to finance FF&E through leasing.  Our private lenders also compete to offer hotel construction financing.  Hotel construction loans are usually interest-only with terms of 18+ months. In some cases, you can refinance or extended the loans as necessary.

Hotel Conversion – Hotel Renovation Financing

Hotel renovation financing pays for improvements that increase the value and life of the hotel.  It’s possible to self-fund renovations through operational cash flows segregated in renovation reserve accounts. However, many, if not most, hotels prefer to finance hotel construction renovations externally.  PIP obligations require franchisees to maintain hotels to brand standards, which can require a significant amount of renovation financing.  Renovation hotel funding is available through CCG® from our sources of banks as conventional loans and/or business lines of credit.

Hotel Renovation Financing Options

Commercial mortgage bridge loans are also used for hotel construction and renovation projects, usually as interest-only loans of up to 3 years, with an LTC up to 85%, and a lender loan fee of 1% to 2%, on a recourse or non-recourse basis.

Another source of renovation financing is a mezzanine loan of subordinated debt.  This debt resides below senior debt and above equity on the capital stack. Of course, mezzanine loans increased leverage and are priced higher to account for greater risk.  While acquiring mezzanine financing can be tricky, we can procure this type of financing for your hotel financing projects.

Hotel conversions are a type of hotel renovation in which a hotel converts to a different flag, or a non-flagged property becomes a flagged property.  The parent corporation typically refinances managed hotel conversions, while the franchisor typically refinances franchise conversions.  However, in some cases, a hotel conversion may require external funds, as when a flagged hotel becomes a non-flagged one.  Of course, Assets America^® is happy to provide this type of hotel financing.

Hotel Acquisition Financing

A hotel is a good candidate for acquisition if it is underperforming due to poor management. Other good candidates include hotels with deferred renovations or deferred maintenance, demographic changes, or some other reason. Moreover, high-performing hotels are also candidates for acquisition if they fit into a hotel brand’s long-term strategy. However, these hotels often carry a premium price tag. Typically, CCG® finances hotel acquisitions with conventional banks as well as SBA-guaranteed loans.

Hotel Refinancing

Hotels are candidates for refinancing under several circumstances.  Typically, you can refinance a newly constructed property after it stabilizes at 90% to 100% of the RevPAR index.  Lenders also look at these metrics:

• occupancy levels
• daily rates
• expenses vs benchmarks
• limited deferred maintenance
• appropriate levels of reserves
• maximized cash flow

In some cases, you can refinance hotel construction loans and commercial bridge loans with a mini-perm loan and then a takeout loan.  Alternatively, we can renegotiate an existing mortgage for better terms or to cash out equity.  CCG® does all of these types of hotel loan refinances.

Climax Capital Group^® is Your Trusted Source for Hotel Financing

Without professional help, hotel financing and hotel construction loans can be a complex and daunting task.  CCG^® serves as a powerful ally to its clients. We draw from over 15 years of experience in commercial finance.  We start by using our marketplace knowledge and vast expertise to understand the details and specifics of your hotel project.  With those details in mind, we match your project and its financials to the ideal hotel financing capital sources.

A Note About Our Hotel Lenders

For hotel construction loans and renovation projects, raising capital is of central importance. Tier-1 banks often display caution and favor low-risk projects and loan-to-value ratios.  However, in recent years, there has been an explosion of lenders willing to provide hotel construction loans and other hotel financing options. These lenders include private lenders, lower-tier commercial banks, investment banks and mortgage bankers.  While these hotel financing sources will accept higher risk, they also expect higher growth.  That said, they tend to turn down fewer opportunities if the borrower has done their due diligence. One common pitfall is under-estimating the total cost of capital.  This miscalculation often leads potential lenders to deny a loan request. 

With so many potential sources of capital available, it can be extremely time and resource-intensive to select the right hotel financing option. This is where CCG^® comes into play. 

Contact Us

In conclusion, hotel financing is a complex topic that requires expertise and experience. CCG^® supplies both in spades and should be your source for all of your large-scale, hotel financing.  We pledge to get you the hotel financing you need at the best possible price!  See for yourself how over a decade of experience and commercial financial and sales services can help you realize your hotel financing goals.  Call us today at +66020777014 for a free consultation!

Hospital Building Loans

While no one looks forward to a hospital stay, we are nonetheless very grateful when we have quick access to one when we need it.  Climax Capital Group^® does its part by helping to fund hospital acquisition, hospital construction, hospital rehabilitation and hospital refinancing.  We can finance medical building construction starting at $5 million, with no upper limit.  We pursue the best financing for each unique hospital building project and we look forward to providing loans for hospital construction, no matter what type of hospital building you are planning.

Types of Hospitals

Hospital buildings are health care institutions with specialized medical staffs and equipment. They may be publicly or privately owned, and some are affiliated with religious organizations, charities or health insurance companies. These are the predominant types of hospitals:

• General/Acute-Care: These hospitals treat a wide range of illnesses and injuries. They usually have an emergency room, intensive care unit, and wards with beds. They typically provide surgical services and can handle victims of emergencies like fires and collisions. They may also have pharmacies and departments for outpatients, radiology, pathology, and chronic treatment.

• District: A district hospital handles patients from the region. They are similar to general hospitals; except they might not be major trauma centers. They often have a large number of beds for both emergency and long-term patients.
• Critical Access Hospital: This is a rural hospital, located at least 35 miles from another hospital, that provides 24/7 emergency care. It must have a limited number of acute care inpatient beds and maintain a maximum average length of stay for acute patients of 96 hours (3-days).
• Medical Office Building:  A building housing one or more medical practices. Some are situated adjacent to a hospital on a medical campus, while others are stand-alone (free-standing) buildings. Usually, physicians own medical office buildings, but they may also be owned by a corporation that leases space to medical practices and individual doctors.
• Specialized:  These hospitals have one or more treatment specialties, including traumas, psychiatric conditions, specific disease categories, rehabilitation patients, children and seniors. Specialization can reduce medical costs relative to general hospitals.

• Teaching: Teaching hospitals are usually associated with universities and medical schools. They provide medical treatment for patients and they train nurses and medical students.
• Clinics:  These are smaller medical facilities that usually deliver only outpatient services. Typically, they are run by a government agency or a private physician practice. Sometimes, hospitals are called clinics, such as the Cleveland Clinic and the Mayo Clinic, but these are the exceptions.

 

Hospital Construction: How Are Hospitals Funded?

A hospital building is highly specialized, which makes construction complex and more importantly, expensive. A hospital building must support the needs of the medical staff, patients and visitors, and a significant portion of the budget must be allocated to procurement and installation of medical equipment in the hospital building. There are several sources of hospital construction financing, and CCG^® can provide some of the best funding terms available for the construction of a hospital building.

Bank Loans

Banks can fund hospital building construction through direct loans. They are usually collateralized by specific assets of the hospital but may also be secured by revenue from hospital operations. Collateral may also include government and insurance payments. Loans may be recourse or non-recourse, and multi-building hospital construction loans may be set up as revolving credit lines. These bank loans are typically structured in coordination with CCG^®. Our firm negotiates with the funding source on behalf of the hospital with underwriting that includes the borrower’s creditworthiness, collateral offered, projected operations, size of the financing facility, and previous relationships between the parties. Bank loans are available to all hospitals, offer flexible structuring, and have lower issuance costs. On the other hand, they do not have the lowest debt service requirements or interest rates and may require better financial ratios than other sources (such as fixed-rate municipal bonds).

Bank Qualified Bonds

Banks can issue tax-exempt bank qualified bonds that are not private activity bonds (that is, bonds issued to benefit a private, non-governmental entity) if they issue no more than $10 million of tax-exempt bonds during the calendar year. The bank can deduct 80% of the carrying costs (the interest expense incurred to purchase or hold securities) of these bonds. These bonds are often used to finance the construction of a hospital building when the hospital is owned by a 501(c)(3) not-for-profit organization. Bank qualified bonds must have a maturity that does not exceed 120% of the economic life of the asset (in this case, the hospital building). No more than 25% of the bond proceeds may be used to purchase the land on which the hospital building will be built.

FHA Section 242 Mortgage Insurance

The Department of Housing and Urban Development, through the Federal Housing Authority (FHA), issues mortgage insurance for hospital construction loans under Section 242 of the National Housing Act. The effect is to increase the hospital’s access to low-interest-rate loans. The borrower must be an acute care or critical access hospital and can be for-profit or not-for-profit. The insurance can only be issued before the start of construction of the hospital building. The loan terms include a 90% loan-to-value ratio (meaning the hospital must put up 10% equity), have an aggregate operating margin greater than zero, and have a maximum debt service coverage ratio of 1.25. The loan is fixed-interest, non-recourse, with a maximum term of 25 years. A first lien on the entire hospital building collateralizes the loan.

Municipal Bonds

Municipal bonds are often used to fund hospital building construction. The various types include:

• Unlimited Tax General Obligation Bonds: These fixed-rate bonds can be used for public hospitals and smaller rural hospitals (less than 100 beds). Voters must approve the issuance of these bonds. The bonds are secured by a special tax levy rather than collateral or loan covenants. Investors receive tax-exempt interest.
• Limited Tax General Obligation Bonds: These are similar to their unlimited cousins, except the bond income is usually taxable. These bonds are secured from regular taxing authorities and are not available for not-for-profit private hospitals.
• Qualified Hospital Bonds: This is a private-activity bond issued by a governmental entity that loans the proceeds to the hospital. Limited to 501(c)(3) not-for-profit organizations, at least 95% of the net proceeds must be used to finance a hospital. The hospital is responsible for all debt service. These bonds qualify for tax-exempt status but are subject to many federal and state regulations. For example, the hospital must be accredited by an acknowledged organization, must provide around-the-clock nursing services, and must require all patients be supervised by a physician.
• Tax Exempt Revenue Bonds: These bonds fund public district hospitals, small rural hospitals and non-profit hospitals. The interest rate is tied to borrower’s credit factors. Loans mature in 1 to 30 years, and restrictive loan covenants may be present. Not-for-profit hospitals must secure these bonds with a mortgage on real property, that is, the hospital building.

Private Placements

Hospitals may also choose to receive funding through a privately placed hospital bond offering. The bonds are issued by a municipality to one or a few select institutional buyers (usually, a bank) via a bond purchase agreement. The hospital (which is called a conduit borrower) signs a loan agreement with the issuer, receives the bond proceeds from the bank and pays debt service to the bank. Relative to public issuances, private placements are less complicated, involve fewer parties and implicate fewer security laws.

USDA Rural Development Community Facilities Program

This program makes and guarantees loans to acquire, build or improve essential community facilities such as a hospital in rural area having less than 20,000 residents. The hospital must be owned publicly or by a non-profit corporation, must be unable to otherwise finance the project at reasonable rates, must serve its rural community, must have the support of the community, and must pass environmental review.

The program offers support several ways:

• Low-Interest Direct Loans:  The maximum loan term is 40 years with a fixed interest rate based on the median household income of community residents. The loan has no prepayment penalties.
• Grants:  Hospitals can receive grants based on community size and the median household income of community residents. The grant amount ranges from 15% to 75% of total hospital building construction costs depending on community population and income.
• Loan Guarantees: These guarantees are similar to those available from the FHA Section 242 program.

New Market Tax Credit (NMTC) Loan Program

This is a 39% tax credit available to private capital investors who invest in Community Development Entities (CDE) that serve low-income U.S. communities. For a hospital to benefit from these investments, it must work directly with a CDE to apply for a below-market interest rate loan from the program. The hospital must be active in the low-income community in terms of gross income and services performed.

Refinancing

Short-term hospital construction loans or commercial mortgage bridge loans for a hospital building can be refinanced with long-term mortgages under FHA Section 223(f) through CCG^®, even if the original debt was not insured by the FHA. Refinancing cannot exceed the lesser of:

1. a) 120% of the existing loan balance plus additional hospital building construction and financial costs, and
2. b) 90% of the replacement cost for the hospital building and its equipment

The hospital must meet a number of requirements to qualify for Section 223(f), including:

• A three-year historical average debt service coverage ratio of 1.4
• The hospital must demonstrate it needs to refinance to remain financially healthy and there are few affordable alternatives
• The hospital provides essential services to its community
• The hospital benefits from the refinancing by meeting three of seven criteria that include (i) reduction of operating expenses, (ii) reduction of interest rate, (iii) avoiding an increase in existing interest rate, (iv) total debt reserve will exceed a percentage of operating expenses, (v) any credit enhancement vehicle is being cancelled or downgraded, (vi) the existing loan has highly restrictive covenants, or (vii) other situations that threaten the hospital’s viability Of course, you can receive conventional mini-perm and takeout refinancing for your hospital building construction loan or commercial bridge loan from CCG^® without jumping through as many hoops as is required by Section 223(f).

Climax Capital Group^® Funds Hospital Building Projects

Construction of a hospital building is an enormous project that demands the highest quality professional hospital construction loans.  When you need funding for medical building construction, turn to CCG^® for the very best in service, professionalism and surety of execution.  Call us today at (+66) 20777014 for hospital building financing.

We look forward to hearing from you!

Shopping Center Loans

Climax Capital Group^® offers a variety of retail shopping center loans for most types of retail center venues, including shopping center financing and commercial strip mall loans.  We arrange loans for shopping center acquisition, development and refinancing. These loans take the form of retail shopping center construction loans, commercial bridge loans, commercial mini-perm loans and permanent take-out loans.  Over a decade of experience allows us to formulate retail shopping center loan programs that are ideal for each unique lending requirement. We provide financing for anchored and non-anchored shopping centers.

Types of Retail Shopping Center Loans & Properties

Our retail shopping center loan programs encompass the full range of shopping center loan configurations.  CCG^® retail loan programs begin at $5 million. They involve complex commercial real estate properties composed of merchandisers and food providers (with supporting structures and amenities). However, we do not provide financing for stand-alone retail stores.  We offer:

• Super-Regional Shopping Center Loans:  These loans are for dominant structures featuring a minimum of 800,000 square feet of gross leasable area (GLA) and at least three anchors. Super-regionals attract a high volume of shoppers from at least a 25-mile radius. They employ a concentration of mass merchants, merchandisers, boutiques, fast-food and family dining venues, along with ample parking.  Attractions might include movie theaters, child play areas, shuttle buses and even amusement parks.

• Regional and Conventional Retail Shopping Center Loans:  Regional shopping malls offer 400,000 to 800,000 square feet of GLA with two or more anchors and a variety of retailers, from high-end to discount. Conventional shopping malls are smaller with typically one or more anchor stores.

• Community and Neighborhood Strip Mall Loans:  These loans cover open-air strip malls, which are linear arrangements of stores fronted by a sidewalk and parking lots.  Some malls adopt U-shaped or L-shaped configurations, with GLAs ranging from 5,000 to 400,000 square feet.  Strip malls may be anchored or unanchored, with anchoring properties typically being discount department stores, pharmacies or supermarkets.

Financing Considerations

Each retail venue has its own unique features, which is why shopping center financing necessitates careful attention to packaging and presentation.  Shopping mall financing requires evaluation of current market conditions, property tenants and leases, and loan repayment considerations.

Market Conditions

Shopping center lenders evaluate market conditions by analyzing the competitive posture of the property under consideration. The analysis compares the retail property’s actual or projected vacancy/rental rates against those shopping centers and malls that directly complete for similar tenants.  Data sources used for underwriting shopping mall loans include government demographic reports and private market reports from the national real estate brokerage firms. For example, CoStar is a leading provider of real estate information that is widely used as a source of rent, vacancy, and sales comp data, as well as supply and demand utilizing 5-year forecasts.  Our retail shopping center loans funding sources rely on third-party appraisals to verify their underwriting assumptions.  Many data elements go into the market analysis of retail financing, including the population demographics in the target customer area, the traffic patterns adjacent to the property, visibility and signage, and the parking resources available or planned.

Tenants and Leases

Obviously, the mom-and-pop store tenants found at small strip malls differ considerably from the tenants at large shopping centers. The small neighborhood stores present an underwriting challenge.  In some cases, these stores have no history, whereas others are long-term tenants that add strength to the retail center financing and the project as a whole.  Anchor tenants are key. They draw shoppers who will patronize the other stores in the shopping mall.  However, an anchor store that falls into financial difficulties can hamper efforts to accomplish shopping center refinancing or rehabilitation.  It can also have a depressing effect on occupancy rates and lease rates.  So too can the departure of a popular anchor, which might choose to relocate to a shiny new shopping center in the same neighborhood.  

Regional and super-regional shopping malls have multiple anchors and might withstand the loss of an anchor better than smaller, one-anchor properties.  Shopping mall lenders examine the rent rolls for monthly rental payments, length of lease, and the square footage under lease. Underwriters must be sensitive to trends that portend a change in the quality of tenants and thus, rental rates.

Retail Shopping Center Loans – Repayment

Most important to a provider of shopping center financing is the assurance of repayment, on time and in full. The primary source of repayment cash is rental income, while secondary sources include collateral and recourse.

Rental Cash Flow

The prime characteristic of a retail property is that it produces net operating income (NOI), which is the cash flow remaining after all operating expenses are paid. The ability to service debt stemming from shopping mall financing depends on the amount of rental income, the percentage of leased rentable of space, and collection issues for leased space. Before a lender can agree to finance a shopping center, it must underwrite the risks of an NOI shortfall.  To that end, a lender can employ sensitivity analysis to test the effects of downside scenarios.

Liquidation of Collateral

In some cases, rental cash flows fall so short that retail stores cannot make their lease payments on time. Providers of shopping center loans then look to collateral liquidation as a secondary source of repayment. This requires an accurate collateral property valuation. Shopping center lending underwriters determine this valuation through sales and income approaches. They use cap rates, comparable sales, and other metrics.

Recourse

Providers of delinquent shopping center loans may have recourse to recover funds if the loans so stipulate. Recourse debt allows creditors to seize debtor assets above and beyond the loan’s collateral.  Seizure requires a court process and can be an expensive, time-consuming option.  Debtors can declare bankruptcy to slow down the process even further.  Nonetheless, lenders prefer recourse procedures in a shopping center loan, while borrowers prefer non-recourse loans.

Retail Financing Options

Climax Capital Group ^® offers a variety of shopping center loans, strip mall loans, and other retail financing options for the following:

• Acquisition:  We can provide shopping center financing for the acquisition of existing retail properties.
• Refinance:  Owners of retail centers can refinance their loans to achieve better shopping center loan rates and terms. They can also refinance when their existing financing is about to mature.
• Construction:  CCG^® can finance retail development projects with construction loans and construction bridge loans.
• Mini-Perm:  Once a shopping center is built, owners can refinance their debt with mini-perm loans of one to three years.
• Take-Out Financing:  A final take-out is a mortgage with a typical term of seven or more years.  This take-out loan will pay off the construction or mini-perm loan.

Contact Us

If you are interested in a commercial real estate loan for a shopping center, turn to Climax Capital Group^® for phenomenal service built upon more than three decades of experience.  Call us today at (+66) 20777014!

What Is a Bridge Loan?

A bridge loan (BL) is a short-term loan for funding real estate transactions.  Borrowers typically use bridge loans for an “acquire and improve” strategy. Here a commercial developer uses the proceeds to purchase a distressed property (or a property owned by a distressed borrower). Once rehabilitated, the owner can sell the property or retain it for commercial rental income or owner occupancy. 

As an interim loan, a commercial mortgage bridge loan (CMBL) provides financing while the borrower waits for long-term arrangements. A bridge loan differs from conventional construction loans because bridge loans are asset-based. They also have higher interest rates, shorter terms, and easier access.

While banks typically source construction loans, a bridge loan usually comes from private money investment funds and private lenders. Climax Capital Group ^® arranges CMBLs starting at $5 million. Since BLs require less documentation than conventional commercial loans, they are a good choice for opportunistic purchases that require quick closings. 

Effective Use of a Bridge Loan

Using CMBLs effectively requires speed, precision, expertise and a properly formulated exit strategy.  CCG^® works with its clients, its borrowers, to save them time, money and reduce transactional risk.

Commercial property investment is a complex, multi-faceted process. Bridge loans (also called commercial mortgage bridge loans, bridge loans, bridge financing, and construction bridge loans) are often a necessary tool for quickly taking advantage of a new opportunity. If you want to maintain your place in a sale chain, purchase commercial real estate below market value or fund commercial property development, a CMBL allows the project to progress rapidly. Higher interest rates make a properly formulated exit strategy a critical factor in the successful use of CMBLs.

How A Commercial Loan Broker Can Help

To make the best use of short-term bridge financing, you’ll need a financial partner who is clued into your specific objectives. What you don’t need is a sales rep who’s trying to force your commercial financing project into a pre-defined underwriting box. Here at CCG^®, we represent our clients rather than one specific lender. In other words, we are free to formulate targeted commercial real estate loan transactions between you and our well-funded private and institutional capital sources. When speed and precision are vital, our second-to-none personal service and extremely high closure rate provide a monumental advantage.

CMBLs are applicable for most types of commercial real estate, including properties that are in default, have an inadequate lease rate, need substantial rehabilitation, or that are not likely to stay on the market for long.

Bridge Financing Characteristics

A bridge loan has certain well-defined characteristics. They are usually interest-only loans, and common practice is to refinance a BL with a take-out loan (i.e., a long-term, permanent mortgage).  Bridge loans are asset-based, meaning they are fully collateralized, either with the property that is the subject of the loan, and/or other in combination with additional assets as required by the funding source.  As detailed below, CMBLs require a larger percentage of borrower equity than commercial construction loans.  This helps protect lenders from the higher risk associated with commercial mortgage bridge loans.  Because bridge financing is asset-based, it requires less underwriting than other real estate loans. For this reason, it can receive approval and funding much more quickly than a typical commercial real estate loan.

You can use BL proceeds in various ways beyond construction. These include acquisition, rehabilitation, stabilization, additions, higher occupancy rates, repurposing or other purposes.  You can purchase raw land with BL funds as long as the land will be improved (i.e., infrastructure, subdivision, etc.).  Commercial mortgage bridge loans also apply to properties already owned by the borrower. Then the borrower can improve or refinance the property.

Other Considerations

Certain other considerations factor into the decision to apply for a BL.  For example, a CMBL is a good alternative if long-term financing is unavailable, due perhaps to the borrower’s poor credit rating or insufficient net worth.  The successful use and repayment of a bridge loan can serve to boost the borrower’s credit rating, making other types of loans more accessible.  You can also use bridge financing when the details of a project and/or the management team are not yet specified, but the developer wishes to acquire the property before someone else beats him to the punch.  Distressed properties that banks will not finance are a natural fit for bridge loans.  Upon rehabilitation, the commercial mortgage bridge loan is taken out with long-term financing.

Terms for Bridge Loans

A BL typically matures in 12 to 18 months, although longer terms are available for additional fees.  Bridge financing is typically interest-only. Interest rates range between about 8.99% to 14% (fixed or variable), and the typical lender origination fees for commercial mortgage bridge loans are usually 2% to 4%.

Additional Terms

• Prepayment Penalties:  Some CBLs have no prepayment penalties, while other lenders insist upon some sort of prepay penalty.  Often, this can be a 6-12-month lockout. In other words, the borrower must pay 6 to 12 months of interest payments as a minimum, less the amount of interest already paid for prepaying early.  Alternatively, the prepayment penalty can be a straight 1% to 2% of the remaining mortgage balance if prepaid within certain defined intervals.
• Post-Rehab Valuations: Sometimes, the post-rehab value determines the size of a BL. Otherwise, the current value of the property determines the loan size.
• Recourse/Non-Recourse:  Some BLs are non-recourse with “bad-boy” carve-outs. In other words, borrowers with a turbulent credit history may have to submit to a recourse clause.  However, BLs are recourse in most cases.
• Reserves:  Potential lenders may require up-front reserves for operating expense shortfalls, tenant improvements, leasing commissions, and other reasons.  Ongoing reserves may become necessary for insurance, property taxes, and replacement of building components.
• Security:  A BL typically requires a first mortgage lien and assignment of rents.
• Markets:  CMBLs are available nationwide for primary and secondary Metropolitan Statistical Areas. Tertiary markets are evaluated on a case-by-case basis.

Commercial Bridge Loan Metrics

Lenders evaluate certain metrics when underwriting bridge loans, including:

• LTC:  The maximum loan-to-cost ratio is usually around 80%.
• LTV:  A loan-to-value maximum ranges from 60% to 75% of the property’s after-repair value
• Debt Yield Ratio:  Typically, there is no minimum debt yield ratio.
• DSCR:  Typically, no minimum debt service coverage ratio, but some lenders require a DSCR of at least 1.20.

Bridge Financing Risks

The goal of a CMBL is to provide interim financing as a stepping stone to permanent commercial financing.  When necessary, CCG^® funds construction bridge loans for large multifamily apartment projects, retail shopping centers, and a host of other commercial real estate market segments. Commercial real estate bridge loans tend to have relatively uniform features across the market. Specifically, this means 50% – 60% LTVs. However, we can go higher in many cases, depending on the assets and other collateral.

The key is that closing within 10-30 days of a term sheet is common. BLs provide companies seeking longer-term financing with a substantially greater degree of flexibility.  Of course, a bridge loan has higher rates, higher fees in the form of points, and shorter terms than standard commercial real estate loans. That said, we can do terms as long as 3 years depending upon the specific deal.

Generally, commercial mortgage bridge loans rely on take-out financing such as permanent debt or the eventual sale of the subject property, the availability of which may not always be assured.  However, we are experts at securing just the right bridge loan financing terms for the specific project and its specific needs, requirements and often its deadlines.

Borrower Qualifications for Commercial Mortgage Bridge Loans

Bridge Loan Rates

Since CMBLs are principally for large-scale projects. Accordingly, the most important qualifiers are the annual net operating income and the debt service coverage ratio (DSCR). This holds true for total gross income minus your tax and insurance obligations. However, it should also account for utilities, repairs, maintenance costs, and vacancy factors. Your net annual operating income will need to cover a minimum of your BL carrying costs.

Additional Qualifications

Another important consideration is that BLs usually cannot exceed the total net worth of the applicant. CMBL lenders look at financial statements on all principals and guarantors. With this information, they determine the collective net worth of all applicants. Lenders often require that you demonstrate appropriate cash reserves to cover key contingencies, such as replacement reserves on apartment complexes.

Alternatively, the lender may hold back a portion of the commercial bridge loan proceeds as an interest rate reserve. This will service monthly interest payments until the subject property generates cash flow. We do not believe in making our clients run unnecessarily complex administrative obstacle courses. Our goal is to facilitate the flow of capital from our funding sources to your project, not to maximize our lenders’ profits. We cannot understate the importance of finding the right BL.

Borrower Creditworthiness

CBL providers evaluate borrower creditworthiness, but only to a limited extent because the loans are asset-based. Some typical borrower qualifications for commercial bridge loans are:

• Minimum Credit Score:  While there is no definitive minimum credit score for a bridge loan, most $10+ million bridge loans require a relatively decent credit score, preferably above 720.
• Net Worth:  The lender will want to see a 1:1, or better, net-worth-to-loan-amount ratio.  For instance, if a borrower has a net worth of only $5 million, the change that he’s going to be able to close on a $40 million commercial loan is slim to none.  This ratio, however, can lessen as the loan size increases.
• Documentation:  Lenders require a fair amount of documentation, including:

• • Credit report
  • Tax return
  • Resume
  • Financial statements from the previous property owner
  • Rent rolls
  • Lease schedules
  • Budget
  • Detailed construction budget (if the bridge loan is a construction loan)
  • Schedule
  • Exit strategy

However, the scope of bridge loan documentation is less than that of bank loans. Accordingly, a bridge loan can close much more quickly.  We have closed BLs from application to closing in as little as 12 calendar days.

Exit Strategies for a Bridge Loan

Commercial bridge loans are short-term, so a viable loan exit strategy is essential. Typical exit strategies for commercial bridge loans include sale of the property, refinancing, or cash payoff. Whichever exit strategy you choose, you need to provide a clear, actionable roadmap in the loan application documentation. CCG has a reputation for providing clients with a tangible, strategic advantage when preparing loan exit strategies.

By nature, CBLs are a short-term solution. A viable BL exit strategy at the outset is a foundational part of the application process. The borrower may redeem the bridge loan via the sale of the property, refinancing, or cash redemption from another source. We have built our reputation on providing our clients with a tangible, strategic advantage compared to our competitors.

Sources of Commercial Mortgage Bridge Loans

Banks rarely engage in the commercial bridge loan market. Rather, private money funds dominate the market. They come from accredited investors and institutions that invest in real estate projects and commercial real property. Private money funds do not have to observe bank regulations. Examples include reserve requirements, due diligence and so on. Accordingly, they provide substantially more flexible lending to developers seeking a bridge loan.

 

Climax Capital Group^® Provides Bridge Loan Money

CCG^® has a proven track record of meeting our client’s transactional and financing needs. Our approach combines market and business knowledge with proven expertise in closing. We have a network of long-term, productive relationships with well-funded capital sources and private decision-makers. Whatever your commercial financing and business objectives, our attention to detail provides a substantial advantage in securing optimized and custom-tailored loans from large, private bridge funding to institutional investors to government-sponsored entities. 

In conclusion, if you are looking for bridge financing at highly competitive rates, turn to CCG^® for professional expertise. CCG^® is well versed in commercial mortgage bridge loan risk. Our goal is to provide our clients with a low transactional risk commercial financing structure alongside a seamless, focused experience. This is the CCG^® difference.

Contact Us

For more information about securing and funding a bridge loan for your large commercial real estate project, please contact us today at (+66) 20777014!

The SBA assists business owners by requiring lower down payments, which ultimately conserves capital. Climax Capital Group offers a complete array of SBA lending products, including the 7(a) and 504 programs.