Archive Monthly Archives: April 2012

Restaurant Property Loan

“Restaurant Property Loan Or Mortgage Financing Solutions”

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When we’re talking about a restaurant property loan, we are referring to a commercial building that is being used as a restaurant by the owner or the building has a tenant that is utilizing it to house a restaurant operation.

In either case, the main lending criteria are going to focus on the brand of the restaurant and the location. Most “A” and “B” lenders will only finance commercial restaurant properties that are branded under a national franchise or a well known restaurant chain.

This is not to say that standalone restaurant operations cannot secure commercial mortgage financing for their operations, but a commercial mortgage is likely going to be harder to come by unless a lender believes there are strong alternative uses for the building in the location where it is situated.

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For business owners and property owners looking to secure a restaurant property loan or mortgage, we work with a cross section of commercial lenders that can collectively fund a variety of different restaurant mortgage applications.

All the lenders we deal with can be placed into one of the three following categories.

The first and lowest cost category would include banks and other institutional lenders such as trust companies and credit unions. Lower cost from this group also means lower risk, so the lending and funding requirements will also be the tightest.

The second group or category of business lenders for restaurant real estate properties would include investment funds, hedge funds, and other quasi institutional lenders whose focus is on deals that do not quite qualify with group #1 above. These “B” lenders will still be focused the restaurant brand and cash flow, but will also provide greater consideration for the equity in the property and other risk mitigation factors to get the deal done. Their rates will also be higher, but that will be offset by providing terms and conditions that are more flexible than what you would be able to secure from an “A” type commercial mortgage lender.

The last group is private mortgage lenders which can be an excellent source of short term financing. Once again, the rates are going to be higher, but the application and funding process tends to be shorter in comparison to the other two groups, which can make a private commercial mortgage a preferred option in situations where you have a very tight timeline to work with to close a deal, generate incremental capital, or refinance an existing mortgage.

Application Process For A Restaurant Building Mortgage

To apply for a restaurant property loan, you’re going to need to complete a commercial mortgage application form detailing out the property and potential borrowers for the mortgage.

At least three years of accountant prepared financial statements are also going to be required with more value attached to review engagement or audited statements.

All commercial mortgage lenders will require an AACI property appraisal as well as an environmental audit as well.

Resumes and backgrounds of the owners and operators of the restaurant will also be reviewed by prospective lenders as well as any other information pertinent to a particular application, restaurant brand, and location.

If you are in need of a restaurant property loan or mortgage financing facility, I suggest that you give me a call so we can go over your requirements together and discuss different options that may be available to you in the market place.

Click Here To Speak With Toronto Commercial Mortgage Broker Joe Walsh For A Free Assessment Of Your Restaurant Property Financing Options

Student Residence Financing

“Long Term Mortgage Financing For
Student Residence”

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If you require a mortgage for an existing student residence, or one that is in the process of being built or renovated, we welcome the opportunity to discuss your mortgage financing needs directly with you.

One of the key lending criteria for financing a student residence will be location. Lenders will want to know the distance from the residence to the school, historical vacancy rates, student housing capacity in the area, comparable student housing costs in the area and vacancy rates for similar facilities.

Basically, the local market supply and demand statistics are going to be important to any lender considering long term mortgage financing on a student housing facility.

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Mortgage Application Process For a Student Residence

When applying for a commercial mortgage, lender’s will want to first have a full application completed that outlines the ownership structure for the property as well as all the related property information.

For instance, there will be a great interest in the rent roll for the residence as well as any other management information reports that are available to provide data on rents paid, vacancies, seasonality in the occupancy and so on.

From a debt servicing point of view, the application will need to provide accountant prepared financial statements for the last three years if possible as well as well supported set of projections that include a detailed listing of assumptions used to create the forecast and the source documents and logic that support the source documents utilized.

In terms of the physical property, an appraisal is going to be required along with an environmental audit from a lender approved environmental engineer.

Timelines To Completion For A Commercial Mortgage To Finance A Student Residence

From the time of application to funding, most applications for this type of financing can be completed in a 30 day to 60 day period of time.

That being said, the timelines can get extended if additional time is required to complete outside or third party work such as the completion of financial statements, property appraisals, environmental audits, market studies, and so on.

The goal is always to try and cover off all requirements as quickly as possible, regardless of the source for any one particular lender requirement.

The reality at times, however, is that the coordination necessary to meet all lender requirements to first get an approval and then get the deal funded can take longer than anticipated, due mostly to the number of people that can be involved in the application process.

So while 30 to 60 days is a good guide to work from, the sooner you can start the process the better to allow for potential timing issues down the road.

If you require student residence financing right now for a property you own or are trying to acquire, I suggest that you give me a call so we can go through your requirements together and discuss different commercial mortgage funding options that can meet your business needs.

Click Here To Speak Directly To Commercial Mortgage Broker Joe Walsh For A Free Assessment Of Your Student Residence Mortgage Financing Options

Retail Property Financing

“Retail Property Financing Available From Our Commercial Mortgage Lenders”

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Today we’re going to talk about retail property financing for structures such as strip malls, plazas, big box stores, and so on.

When institutional lenders are considering a retail building mortgage application they immediately are going to focus in on things such as the location, the strength of the retail rent and lease market in that area, the strength of your tenant rent roll if you are renting, or your business financials if you are self occupied.

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Commercial mortgage lenders that will look at providing financing for a retail building will typically fall into one of three different categories.

The first category would banks and other institutional lenders. While the cost of financing is going to be the lowest from this group of commercial lenders, the lender requirements are also going to be the highest to assure that rate and risk are in proportion.

The second category of commercial mortgage lenders for retail building financing would be sub prime or quasi institutional lenders such as investment banks, hedge funds, and other forms of organized investor capital interested in commercial real estate financing. This form of financing is ideally suited for those applicants that are just below the requirements of bank financing, or for applicants that are not going to have sufficient time to complete or meet the lending and funding requirements of a bank or institutional lender in the time that the applicant has to work with.

The rates for a sub prime retail building mortgage are going to be slightly higher, but the requirements are also going to be less stringent as compared to an institutional lender.

The third category of lender for retail property loans is from private mortgage lenders, which are effectively short term bridge loans to deal with some combination of tight timelines and funding constraints that can’t be satisfied by the first two categories of lenders.

Application Process And Timelines
For Completion And Funding

The application process is going to include a general disclosure of business owner information, financial statements, appraisal reports, environmental reports, rent rolls, tenant profiles, and anything else that is relevant to a particular situation.

Even though an “A” lender may require more information, fundamentally all lenders will require the primary information listed above. Sub prime lenders and private lenders may be more flexible in working with the information provided which can result in funding approvals that may otherwise not be possible with a bank or institutional lender.

The timelines to completion from application to funding will typically fall in the 30 to 60 day range. This can also go beyond 60 days if additional time is required to get third party reports in from accountants, appraisers, consultants, etc., as each of these service providers will be working within their own work schedules which may not always correspond with your own planning timeline.

Keys To Retail Property Financing Success

The two main keys to retail building mortgage financing is to 1) make sure you have sufficient time to work through the process, and 2) work with an experienced commercial mortgage broker who can get you working with the most relevant lenders as quickly as possible so that you are able to meet your funding requirement in the time you have to work with.

If you require retail property financing, I suggest that you give me a call so we can go through your requirements together and discuss different commercial mortgage options that are available to you.

Click Here To Speak Directly To Commercial Mortgage Broker Joe Walsh

Office Building Financing

“Office Building And Professional Building Mortgage Financing”

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Office Building mortgage financing or Professional Building Mortgage financing can be placed through a wide variety of lenders, depending on the specifics of any particular application.

Each lender is going to have their own lending criteria, but for the most part, all commercial mortgage lenders that fund office buildings are going to pay close attention to the age of the building, location of the building, and the rent roll or tenant lease contracts in place or expected to be in place in the near future.

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For the lower interest rate business real estate loans, lenders are looking to see that the tenant lease terms match up to the interest term being sought. The quality of the tenant can also be very important in terms of their credit and financial stability that will increase the probability that they will be able to pay their rent on time through out the lease term.

Vacancy rate is also a key consideration as well as the marketing plan in place or to be put into place to reduce existing vacancy.

Lender’s will also look at the average market rent for similar buildings and prefer funding deals where the professional building in question is at or very near market rents as well. When landlords provide leases below market rent, there is a risk that if the tenant were to leave that it may be difficult to replace that tenant at market level or even at the discounted level the previous tenant was at, depending on the vacancy level in the building and the space availability in the area.

That all being said, different scenarios will qualify with different lenders and different lender categories.

There Are A Number Of Different Office Building Mortgage Financing Options Available

If a particular application package cannot qualify with a bank or institutional lender, then there are sub prime options that will be slightly more expensive for the most part, but also somewhat easier to qualify for.

And if short term financing is required to complete a purchase or meet a deadline that would not allow the financing process to be completed with an institutional lender even if the borrower would qualify, private mortgage financing can be a good option to get funds into place quickly, providing you with time to arrange your preferred longer term mortgage funding option.

The office mortgage loan financing options you consider will also be a function of the time you have to work with.

For instance any bank or institutional lending deal will require 30 to 60 days to close and its not unusual for the time period from application to funding to exceed 60 days.  This is largely due to the amount of third party information the lender will require from the likes of accountants, commercial property appraisers, environmental consultants, and so on.  Each of these third party providers will have their own work schedules to manage which can cause delays in getting your requests completed in the time you have to work with.

When the available time is 30 days or less, then private commercial mortgage financing is likely going to be the best option.  This is short term financing which typically only covers a term of one year, but can be a key commercial mortgage financing component to acquiring a property, refinancing an existing mortgage, consolidating debt, or funding construction and/or renovation work.

The key to getting an office building mortgage or professional building mortgage in place is focusing in on the right commercial mortgage lenders with a solid information package.

Its easy to waste considerable amounts of valuable time focusing in on lending sources that have a low probability of being able to fund your deal.

In order to increase your probability of success with office building financing, you should consider utilizing the services of a commercial mortgage broker who can help guide you through the market in terms of who can fund your deal at the point of time you require financing as well as putting together an application package that will proactively answer the questions of interested lenders.

If you have an office building or professional building that requires financing either for purchase, refinance, or construction, I suggest that you give me a call so we can go through your situation together and discuss different commercial mortgage financing options potentially available to you.

Click Here To Speak With Commercial Mortgage Broker Joe Walsh

Hotel Property Financing

“Hotel Property Financing Available From Different Categories Of
Commercial Mortgage Lender”

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For hotel property financing from a commercial lender, the key criteria for lending is going to start with cash flow, followed closely by vacancy rates and the seasonal use patterns that impact the cash flow of the hotel operation.

Other key lender requirements can revolve around the type of hotel and category. For instance is the hotel property under the flag of a national or international hotel chain? Is the hotel classified as a three, four, or five star hotel? Is it linked into a national reservation system and so on.

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Each type of lender will have their own lending/funding criteria related to hotel financing, making it critical to be applying to a funder that is interested in your particular hotel profile.

Lender Categories For Hotel Commercial Mortgage Financing

When it comes to hotel property financing, there are basically three lender categories that can be looked at.

The first category, or lowest rate category would be a bank, credit union, or other form of institutional lender which could include life insurance companies, trust companies, pension plans, and so on.

While category #1 will provide the best rates on the market, their financing requirements will also be stringent and difficult to qualify for at times.

The second lender category for hotel financing is would be more of a “B” lending category where the financing target of the lenders are hotels that cannot quite qualify with a bank or institutional lender.

This group would include quasi institutional lenders such as investment bankers, hedge funds, and other forms of investment funds.

The rates will be slightly higher, but lending requirements also not as rigid as you will find in the lower rate lender category.

The third category would primarily include private mortgage lenders which could range from an individual investor to a mortgage syndicate to a mortgage investment corporation.

Once again, the rate is going to be higher than what you would get from a bank or institutional lender, but the qualifying criteria will also be easier to achieve.

Private commercial mortgage financing can be an excellent source of short term funding for a hotel property.

Hotel Financing Application Process

The application process for securing a commercial mortgage on a hotel property is going to start with a completion of a standard application that clearly outlines the ownership of the hotel as well as the guarantors for the proposed mortgage.

Most commercial mortgage lenders are going to want to see at least three years of accountant prepared financial statements as well as three years of operational data to clearly understand the room and service pricing, vacancy rates, and so on. The property will require an AACI appraisal as well as an environmental audit. Financial projections will be required for the next three to five year period with all assumptions clearly outlined.

If the hotel has a marketing plan, this would also be useful for assessing the business viability of a funding application.

The resumes of the owners and managers will be required to better understand the experience that is available to the business.

There can be several other lender requirements in a hotel financing application, but the above items represent what would be required in any application.

Timelines For Completion Of A Hotel Property Financing Application

The average time of completion from the point of application to funding typically ranges in the 30 to 60 day range. The process timeline can extend even further depending on the amount of time it takes to receive all the third party requested documentation such as financial statements and appraisals.

Depending on the area and time of year, third party experts such as accountants, appraisers, and consultants may have a back log of work which can take them longer to complete your requirements.

This is another reason why the process for hotel financing should be started as soon as possible so there is plenty of time to fully explore all the relevant commercial mortgage financing options available to you.

Best Approach For Securing Hotel Property Financing

Compared to other forms of commercial property financing, a hotel finance solution is one of the more complete to arrange due to the fact that the lender or funder needs to assess both the hotel property and the business operating within it.

Commercial mortgages for tenanted properties can be much more straight forward to assess in terms of the cash flow and debt servicing requirements now and in the future.

From a lender point of view, it can also be hard at times to identify which lenders are funding hotel applications and what their lending/funding requirements are.

Commercial mortgage lenders typically are in and out of this market, depending on the strength of the economy and the strength or weighting of their portfolio.

As a result, its easy to waste valuable time working through an application with a lender that has a very low probability of actually funding your deal at the point in time you require funding.

So from both a application complexity and positioning point of view, and lender market understanding, it can make a great deal of sense to work with a commercial mortgage broker who has a good understanding of the market place an is experienced in putting an effective application package together for any targeted commercial lenders.

If you have a hotel property financing requirement for acquisition, construction, or commercial mortgage refinancing, I suggest that you give me a call so we can go over your situation in detail and review commercial mortgage financing options that available to you.

Click Here To Speak With Commercial Mortgage Broker Joe Walsh

Hotel Property Mortgages


Both Sides Of A Collateral Mortgage

“A Collateral Mortgage Charge
Pros And Cons”

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Collateral mortgages are getting more air play as some of the main line mortgage lenders are slowly or quickly moving to them.

Unlike a standard mortgage that results in a charge being placed on the property title, a collateral mortgage is actually a promissory note with a lien registered against the property.

In the past, collateral mortgages in the mortgage financing world were mostly used with secured lines of credit, but now there is a greater interest in using them with conventional mortgage lending.

The reason for this is two fold. First, because normal regulatory limitations on loan to value do not apply, a mortgage lender can register a lien for an amount greater than the property value, at a rate higher than current market rates. This allows the lender to be able to provide additional advances as well as increases to rate during the life of the mortgage without having to pay out the existing mortgage or re-register mortgage security.

So on the one hand, the collateral mortgage provides borrowers with potentially easier access to future borrowings at lower mortgage placement costs. On the other hand, the collateral mortgage also serves as a barrier to the lender to get a second mortgage from a different lender as the collateral charge will not provide any security value to another lender, regardless of the amount of money owing on the original mortgage.

As a mortgage tool, the collateral mortgage and be a great fit for a borrower, provided they understand how it works and the benefits it does offer are things that the borrower thinks they may be able to take advantage of in the future.

That being said, a lack of full understanding of how the collateral mortgage will function can cause problems down the road, especially if the borrower is not able to qualify with their existing lender for incremental borrowing at a time when funds are required.

But even if incremental funds cannot be secured, the borrower can still take advantage of the prepayment options provided in their collateral mortgage, refinance with another mortgage lender and discharge the collateral mortgage in the process. This will incur incremental legal costs and in most cases a collateral mortgage cannot be relocated to another lender so a new mortgage will need to be underwritten and charged on title.

The best course of action to find out more about a collateral mortgage or a specific mortgage program that may or may not have a collateral mortgage charge associated with it is to work with an experienced mortgage broker who can serve as an independent adviser to you for no cost in most cases.

Click Here To Speak Directly To Toronto Mortgage Broker Joe Walsh