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| | Commercial Real
Estate Mezzanine Loans, Bridge Loans & Hard Money...
In recent months, the credit crunch has made the acquisition of
commercial
real estate mezzanine loans decidedly harder for commercial real estate
development financing programs. Before  you jump, it is important to
understand what most commercial real estate mezzanine loans (and lenders) will
entail. Today's mezzanine lender is not going to jump into the game
without having a comprehensive understanding of the due diligence issues
surrounding the project and the support the developer will be able to provide as
additional surety for retirement of the loan. These investors don't take
big changes; they take big chunks of your profit.
The typical mezzanine (or bridge) loan is a near-term financing vehicle
that is used to provide additional construction
phase project financing for a commercial real estate development
project. Most mezzanine lenders require personal recourse so you are
paying for the privilege of having the lender lend you your own money and you
pay for this service. The typical mezzanine/bridge loan terms in the
market are:
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Term: One (1) year. |
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Interest Rate: 12% to 18%. |
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Points: 4% to 6%. |
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Exit Fee: 4% to 10%. |
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Prepayment: Not Allowed - the interest on the loan is reserved out of
the financing at closing. That's right, a full year's interest
payments are ripped right out of the funding by the lender. |
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Recourse: joint and several. |
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Collateral: 150% to 250% of Loan Origination Amount. |
As you can see, these are not inexpensive and there are plenty of
companies out there that are in the application fee business - meaning they will
charge you, "a nominal application fee" that you will pay and then
nothing will happen as these firms have no intention (and in some cases
resources) of completing the transaction. Recently, the states and the SEC
have been cracking down on the phony lenders and have sent some people to jail,
but forewarned is forearmed. You should be talking to Rainmaker
Marketing Corporation about
all of the alternatives and when the mezz loan makes the best sense.
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Do
You Know The Secret?
When it comes to commercial real
estate development finance, it doesn't matter whether you need to raise
$5 million or $50 million, the out-of-pocket costs, advance fees and
project due diligence costs will always require the same relative
investment dollars the promoters have to fund. Do you know what
that amount is? Do you know the Secret? |
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