Victor’s Insider Scoop on The Perils of A Commercial Loan…
June 1st, 2008 | top of page

If, after reading this month’s edition of my newsletter, you are motivated by curiosity to search its text for the phrase Mortgages Ltd., you will find (by my count) 89 occurrences! Although this is only the second edition of my Scoop column, I have been compiling these real estate news articles since January 2006. To date I have not been motivated to make such a count as there has never been a single story line that seemed to dominate a month’s real estate news like the on–going saga of Mortgages Ltd.

Commercial real estate acquisition or development loans have become decidedly more difficult to obtain as lenders have tightened up their lending underwriting practices in the wake of the current economic slowdown. They are looking for developers to have more skin in the game or more pre–leasing done before lenders write the check. If you are a developer looking for financing to get your project off the drawing board and you find a lender who indicates they are willing to entertain making you a loan you may very well find yourself breathing a sigh of relief. This will be especially true if you have an acquisition loan with an immanent call coming due and refinancing is a consuming priority.

But, before you sign those loan docs my thought is: Caveat mutuitor!—Let the borrower beware! Check out that lender as carefully as they are checking you out. With $925 million in loans in their portfolio it appears that Mortgages Ltd. had too many developers in their nest. An unfundable loan or, perhaps worse, a partially funded loan could jeopardize your project and your reputation. Who wants the stress of scrambling for a new source of funds from already skittish lenders who are going to balk at possibly being in second position behind an existing loan? And, think what those new loan terms could do to your proforma. Need I also mention attorney fees?

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PS – If you are ready to begin to thrive again by getting off the sidelines and putting your money to work give me a call at 602-320-6200. I see lots of deals and may have just what you are looking for.

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