Bridge Loans Rising,  Due to tougher regulations, bridge loans are in high demand as a stop-gap measure.

 

 

“You miss 100 percent of the shots you never take, and if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur “ . ARE YOU READY TO SELL OR PURCHASE YOUR LAND OR COMMERCIAL BUILDING IN PHOENIX, SCOTTSDALE, MARICOPA COUNTY AND PINAL COUNTY, ARIZONA,  CLICK HERE  AND PLEASE CALL ME.     520-975-5207 or email me walterunger@ccim.net

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By Geoffrey R. Maibohm and Robert J. Sullivan | November.December.17

During the Great Recession, cooling capital markets, greater regulatory scrutiny, and tighter underwriting for commercial mortgage-backed securities caused more challenges for financing transitional assets. Even as the economy has improved, CMBS markets have not adapted.

As a result, bridge lending has stepped in to fill the gaps. Since its comeback, commercial real estate professionals will have more opportunities to use capital from bridge loans to assist with closing deals. It is crucial to understand its nuances.

In recent years, major companies such as Teva Pharmaceutical Industries, Anthem, AbbVie, and Aetna have used bridge loans for initial financing of significant acquisitions. When Teva bought Allergan’s generic business in 2015, it lined up $27 billion of debt to finance the $40.5 billion deal. Likewise, health insurer Anthem borrowed $26.5 billion in bridge financing for its $54.2 billion purchase of Cigna Corp. While biopharmaceutical company AbbVie secured an $18 billion bridge loan to finance its $21 billion acquisition of Pharmacyclics, Aetna lined up a $16.2 billion bridge loan to fund its $47 billion purchase of smaller rival Humana.

Total U.S. loan volume reached $2 trillion in 2016, and many of those loans started with bridge financing

Intended as an interim step before securing permanent financing, bridge loans typically range from two weeks to three years. From the commercial real estate perspective, compared to other financial products, bridge loans are monitored at higher levels. In contrast, traditional CMBS loans are static at inception and constrained by limitations from the Internal Revenue Code.

Funding Obligations

For bridge loans, lenders impose hard cash management at origination. These cash management provisions feature cash traps with complex debt-coverage ratio or debt yield tests that commercial real estate professionals have to calculate.

To date, no consensus exists about how to perform these calculations. To the extent that bridge loans feature future funding, commercial real estate professionals should understand that a cash trap’s debt yield test may differ from the test related to a future advance.

Reckoning on Libor

Bridge loans are offered at a floating rate. They almost always use the London Interbank Offered Rate to calculate the interest due. Unlike fixed-rate loans, the interest rate will change periodically.

U.K. regulators have proposed phasing out Libor by the end of 2021. Bridge lenders should examine their existing loans and see which deals will be affected by its elimination. Any changes to a borrower’s interest rate index will be closely scrutinized.

Understanding Prepayments

Next, bridge loans often feature prepayment very early – in some cases within the first year – and are often interest-only. As a result, commercial real estate professionals should consider pricing carefully.

These loans may not produce the income that longer-term loans may provide. Without assumption fees, asset management fees, defeasance fees, and other assorted lender fees, the mortgage servicers’ income may be simply a servicing fee and interest income on deposits similar to a float.

Reserves and Disbursements

Bridge loans often provide options for reserves and disbursements. Their proper administration may be more critical than long-term loans because of their transitional nature.

Mortgage servicers are required to process disbursements, while understanding the requirements for disbursement and what, if any, performance hurdles are required to disburse. Given the need for capital infusions for bridge loan properties, the speed and accuracy of the process determines its success.

Extension Options

Many bridge loans contain extension options. As a result, commercial real estate professionals must ensure that the collateral and the obligors are meeting the performance criteria under the related loan documents. Inevitably, this will involve debt-service coverage ratio maintenance and also may require certain principal curtailments. Commercial real estate professionals should review extension provisions and know these provisions requirements.

Bridge lending’s rise will present new challenges for commercial real estate professionals. With diligence and preparation, they can use bridge loans effectively and take advantage of these opportunities. SEE IT ALL: https://www.ccim.com/cire-magazine/articles/2017/11/bridge-loans-rising/?gmSsoPc=1

 

ARE YOU READY TO SELL OR PURCHASE YOUR LAND OR COMMERCIAL BUILDING IN PHOENIX, SCOTTSDALE, MARICOPA COUNTY AND PINAL COUNTY, ARIZONA,  CLICK HERE  AND PLEASE CALL ME.     520-975-5207 or email me walterunger@ccim.net

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FROM ME:

Phoenix Commercial Real Estate and Investment Real Estate: Investors and Owner / Users need to really know the market today before making a move in owner user Commercial Properties, Investment Properties and land in Phoenix / Maricopa County, Pinal County / Arizona, as the market has a lot of moving parts today. What is going on socio-economically, what is going on demographically, what is going on with location, with competing businesses, with public policy in general — all of these things affect the quality of selling or purchasing your Commercial Properties, Commercial Investment Properties and Commercial and large tracts of Residential Land  Therefore, you need a broker, a CCIM (Certified Commercial Investment Member) who is a recognized expert in the commercial and investment real estate industry and who understands Commercial Properties and Investment Properties. I am marketing my listings on Costar, Loop-net CCIM, Kasten Long Commercial Group.  I also sold  hundreds millions of dollars’ worth of  Investment Properties / Owner User Properties in Retail, Office Industrial, Multi-family and Land in Arizona and therefore I am working with  brokers, Investors and Developers. I am also a CCIM and through this origination ( www.ccim.com ) I have access to marketing not only in the United States, but also internationalClick here to find out what is a   CCIM:   https://en.wikipedia.org/wiki/CCIM 

PLEASE CALL ME 520-975-5207 OR E-MAIL ME walterunger@ccim.net

ARE YOU READY TO SELL OR PURCHASE YOUR LAND OR COMMERCIAL BUILDING IN PHOENIX, SCOTTSDALE, MARICOPA COUNTY AND PINAL COUNTY, ARIZONA,  CLICK HERE  AND PLEASE CALL ME.     520-975-5207 or email me walterunger@ccim.net

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PHOENIX Industrial Market Statistics Q3 2017

PHOENIX Retail Market Statistics Q3 2017

PHOENIX Office Market Statistics Q3 2017

Timeline of Arizona from  900 BC – 2017                                              

WHY PHOENIX? AMAZING!!!  POPULATION IN 1950 – 350 K PEOPLE; “NOW 5 MIL”. – “5TH. BIGGEST CITY IN USA”

PHOENIX TOPS US IN POPULATION GROWTH (MORE THAN LA, NYC) AND WHY THAT’S GOOD FOR THE ECONOMY, BUSINESS

DOT – LOOP 202 / SOUTH MOUNTAIN FREEWAY / PHOENIX AZ – UNDER CONSTRUCTION

ARIZONA FACTS – YEAR 1848 TO 2013

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What is a CCIM.

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  • DEMOGRAPHIC FACTS ABOUT MARICOPA COUNTY:
  • The average age of the population is 34 years old.
  • The health cost index score in this area is 102.1. (100 = national average)
  • Here are some of the distributions of commute times for the area: <15 min (22.7%), 15-29 min (36.8%), 30-44 min (25.1%), 45-59 min (8.6%), >60 min (6.8%).

PHOENIX PROJECTED AS NUMBER ONE US HOUSING MARKET FOR 2017

LIST OF ECONOMIC DEVELOPMENT PROJECTS IN PINAL COUNTY, REVISED 2-14-17

Reasons to Consider me for Commercial Referrals – I have the Knowledge and Experience                                                                                                                         

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2016 Official Arizona Visitors Guide

Visit Arizona

Why Phoenix?  This is a very interesting article, you should read it, amazing, there were only 350 K people living in Phoenix in 1950

Timeline of Phoenix, Arizona history

Phoenix, Arizona

Facts of Arizona – year 1848 to 2013

Feel free to contact Walter regarding any of these stories, the current market, distressed commercial real estate opportunities and needs, your property or your Investment Needs for Comercial Properties in Phoenix, Tucson, Arizona.

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 Walter Unger CCIM, CCSS, CCLS

I am a successful Commercial / Investment Real Estate Broker in Arizona now for 20 years.  If you have any questions about Commercial / Investment Properties in Phoenix or Commercial /  Investment Properties in Arizona,  I will gladly sit down with you and share my expertise and my professional opinion with you. I am also in this to make money therefore it will be a win-win situation for all of us. 

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Walter Unger CCIM

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Kasten Long Commercial Group

5110 N 40th Street, Suite 110

Phoenix , AZ 85018

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