become more aggressive but they tend to
take a longer view on lending and they also
tend to work mainly with institutional clients. In this environment, their floor
appears to be the 75 to 80% LTV range.
But how many of these choices are actually available to a borrower depends entirely
on the market. This has always been true, of
course—but it is easy to overlook when stories of aggressive and hungry banks start
making the rounds.
Andy Farbman, CEO of Farbman Group,
which is based in Detroit, has his own share
of “I can’t believe how good it’s gotten” war
stories about commercial real estate lend-
ers: He tells of one property he’s refinanc-
ing now that he first took to the markets a
year ago. Then it was a distressed property
and Farbman assumed he would have to
borrow in the short-term markets. Instead,
“we were surprised that the life companies
were as aggressive as they were. We wound
up with a loan of 80% LTV, which we never
thought we would get. In fact we figured
that is what the next borrower’s capital
would look like—but not ours.
originally thought we would have to because
the asset’s value is so much higher,” he continues. The firm recently decided it would
be worthwhile to refinance even though the
loan has been in place for only a year.
“Financing is definitely back—in a big way.”
In short, Pielet and Farbman are able to
speak for what is happening in their markets and only their markets. They are,
admittedly, among the lucky ones for this
A look further afield will find varying—
sometimes significantly—experiences with
the lending community. For these companies, the question “what do borrowers want”
becomes a matter of just the basics. “I want
my lender to give serious consideration to
my property even though we have lost tenants.” “I want my lender to offer non-recourse financing.” “I want my lender to
pick up the phone, darn it!” will be among
the rhetorical answers.
Lenders still know how to say no to deals
they deem to be too risky, as Stephen
Hagenbuckle can well attest.
Hagenbuckle is founder of Fort Myers,
FL-based real estate private equity firm
TerraCap Partners, which invests primarily
in distressed real estate in the South. The
properties he buys are usually 30% to 60%
occupied—a level that even the hungriest of
lenders are unwilling to touch. “Yes, lenders
still have their underwriting standards, I see
it all the time,” Hagenbuckle says.
TerraCap buys these properties in cash,
stabilizes them to north of 70%. It’s at that
point the lenders enter the picture, sometimes, depending on the asset, very aggressively. “When the property is stable, they’ll
pursue it vigorously,” Hagenbuckle says.
The reason, in his view, is that lenders
haven’t relaxed their underwriting per se,
but more lenders are coming back on line
and pursuing fewer deals. “Prior to that,
they are reluctant to even talk to you.
Underwriting is still strict; don’t let anyone
tell you otherwise.”
One can see that in shaky properties com-
ing up for renewal. If the occupancy or rent
roll has dipped below stabilized levels, lend-
ers will typically ask for a principal paydown
to provide cross collateralization, he says.
That all said, borrowers are gaining lever-
age—and not in the strict real estate defini-
tion—on borrowers, Hagenbuckle con-
cludes. “The second we get a property up to
70% occupancy, the lenders are all over us.
That definitely wasn’t the case a year ago.”
Another moderate view of the lending
environment comes from John Maheras, a
partner in a law firm and state director of the
International Council of Shopping Centers
for North Carolina and South Carolina.