One of his goals for his term, which starts
in May, is to help members locate additional financing options for tenants. Too
many, he says, try to get financing for a portion of the upfit work and find they can’t
get qualified through their lenders. That is
a key reason why deals are taking longer to
go through, he says.
The burden is falling disproportionately
on smaller retail tenants, which don’t have
the heft or cache to inspire the retailers to
be more forthcoming in financing the deal
and can’t get a loan from a local bank.
In a way, though, Maheras can’t blame
the retailers, which are struggling with their
own cost and financing issues. “We are see-
ing lenders become more restrictive on
underwriting issues for acquisitions. In
2007, a retailer could put down 5% to 10%
for an acquisition but in today’s market it
must be 25%.” Yes, he concludes, lenders
are more flexible now, but they are still
closely scrutinizing credit profiles.
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Administration to Bank of America.
“There is still a very wide trough between
class A and class C properties—that is,
between stabilized, well-leased buildings
and value-add properties,” he says.
And as for troubled assets, lending is
downright scarce, Bryant says. “Mostly those
transactions are trading through all cash or
possibly a small loan.”
He also gives a familiar refrain about the
lending market: “once you get the asset sta-
bilized, the lenders will come calling.”
Unfortunately in the Atlanta market
there is little shortage of industrial and
office buildings that are vacant or under
utilized. For these properties Bryant has
seen an uptick in SBA financing. “We have
done five or six of those this year alone.”
He is also seeing a resurgence of lending
from small community banks, especially
compared to the large money center banks.
“It is just how the market is now—the
smaller community banks are more likely to
make loans than the larger banks.” Bryant
reports he recently represented a borrower
that approached eight community banks
and four national ones. None of the
national banks were interested in the deal.
The borrower eventually secured a loan at
80% LTV at a rate between 5.5% and 6%.
CMBS is also active in the Atlanta market
and in rare cases some of these institutions
are willing to go as low as $2 million in their
loans, Bryant reports. “But they are primar-
ily interested in multifamily and grocery-
anchored shopping centers.”
Several hundred miles south Bryant’s
colleague is finding the lending even more
inhospitable. “Lending is very tight here; of
all the deals I have done in the last 18
months, I would say 90% have been all
cash,” says Jerry Messonnier, principal at
Lee & Associates in Naples, FL.
The reason is simple—lenders are only
lending based on cash flow right now.
“Every building in our market has some
kind of a vacancy issue,” he says. “Our mar-
ket took some significant hits in rental
rates, 40% to 80% drops and commensu-
rate drops in valuations.”
The banks don’t necessarily care about
the appraisals—or just the appraisals—but
they are manic about cash flow. “For us, it is
not about equity at all anymore; cash flow is
all that banks care about.”
It’s frustrating to borrowers that have a
significant chunk of equity in a building and
know that the property will increase in value,
but are having short-term cash or vacancy
issues, he says. “But banks are turning their
backs on any deals with those qualities.” ◆
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