Why would a commercial real estate investor choose to work with a mortgage banking firm, such as Venture Mortgage, versus going directly to a bank or life insurance company?
Obviously, there is a lot of complexity in commercial real estate financing, and our clients need to know that their financing will be structured in such a way as to meet their goals, maximize their returns, and allow for flexibility where needed.
Creating a Dialogue
When we begin the process of originating a commercial real estate loan for one of our clients, we have a dialogue about key considerations on the deal, including, but not limited to:
- What is your plan for the property in question? Is this a ‘buy and hold’ scenario, an attempt to lock in a rate for the long term on a property currently in your portfolio, or a deal where you will be looking to dispose of the asset in the next few years?
- What are your parameters for this financing? Of course, we will want to secure the most favorable rate possible in the market, but what about prepayment penalties? Is full or partial recourse acceptable? Are you willing to move the properties’ operating accounts to a new institution?
- What is the narrative for this deal? Do one or more of the sponsors have issues that need to be understood holistically, such as cash flow or net worth concerns? Does the property have historical operating issues? Is there room for growth; i.e., the lender needs to understand and appreciate the potential?
At Venture Mortgage, we are in debt markets every single day, monitoring them on behalf of our clients and keeping our fingers on the pulses of various lenders. We know where spreads are; we are aware of the most recent changes in lending programs from lender to lender; we know which lenders have the strongest appetite for each property type at any given time. All of these factors mean we can identify the best potential lenders quickly and secure the best available financing for each situation.
The Nuances of Negotiation
In addition, there is a lot of room for negotiation within the parameters of a loan, and a good mortgage banker can add value to the process of securing commercial real estate debt, particularly by creating a market for each loan and having prospective lenders compete on terms and pricing to win business.
If your lender knows that they are the only one quoting on a loan, leverage is lost and there is the potential to receive less-than-aggressive quotes because there is only a slim chance of losing the deal to an alternative. The mortgage banker helps lenders put their best foot forward, and to do what it takes to close the deal at terms most favorable for the client. Since we know that each lender has their own interests and preferences in terms of what types of loans they want to underwrite, Venture Mortgage knows how to present to several appropriate lenders exactly what they want to consume: in this way, we ensure that they are interested in the investment and they are motivated to win the deal.
Saving The Borrower Time
Ultimately, we save the borrower a lot of time on a deal, beginning with identifying potential lenders. When one realizes how many potential lenders are out there for a given deal – from banks (national, regional, and community), to the countless life insurance companies that exist, to the government-sponsored agencies, to the Wall Street/CMBS market, it’s easy to see how a borrower can get into the weeds trying to identify the best deal. Since we at Venture Mortgage are aware of the various markets on the ground level and have close relationships with many of these lending sources, we are able to simplify the process for marketing the loan and obtaining reliable quotes that lead to closing. Additionally, many life companies, with their competitive long-term financing and non-recourse structures, work exclusively through commercial mortgage banking firms like Venture Mortgage, and do not directly originate financing to borrowers. Post-closing, we work with you directly, locally, and proactively to address any on-going issues, advise of market trends, discuss future projects, and offer insight on your property portfolio as needed.
In summary, the experienced mortgage bankers at Venture Mortgage work to inform, simplify, and get results. It’s about informing the borrower and the lender of the specific details and background of each financing, and communicate effectively with both the lender and the borrower, doing the heavy lifting it takes to get the deal done favorably, and maintaining positive relationships long after the deal is closed.