If a CRE borrower can’t find an institutional lender to pay off their upcoming balloon payment – what choices will they have?  The most probable source of creative refinance in today’s market is a “Bridge Loan” lender.  These lenders run that gauntlet from hedge funds and investment banks in New York to other “private capital” lenders (both national and local).  Rates may vary tremendously between the bridge lenders.  The owner of the CRE property must allow time to research and find the right lender for them.  On the bright side of things – finding a bridge lender can lead to a profitable outcome for the borrower.

Commercial Real Estate Portfolio Trap

Both CMBS pools and commercial banks are typically not happy to own property or to hold non-performing loans in their portfolio.  This often motivates them to be willing to consider taking a discounted pay off on their loans. However the CRE borrower faces a difficult Catch 22 scenario.  Before  CMBS and commercial bank lenders are willing to discuss discounting their notes they want to know that their borrower has a new lender who can close a payoff in a relatively short time frame.  The CRE borrower has to find a new lender without knowing (for sure) if they can actually get a discount but can’t get a discount without a new lender.

Bridge Lenders  – Start Looking for Options Now

The best solution to this dilemma is for a borrower to work with a group that is experienced in dealing with these types of discounted note pay-off loans.  Hedge Funds and Investment Banks can be good choices but they typically will not look at loans under $5,000,000 (or in many cases even larger amounts).  National private capital lenders have experience in these types of loans but the borrower, for obvious reasons, must use extreme caution in dealing with out of state lenders.

Colorado Bridge Lenders

If a CRE borrower can find a local private capital lender with experience in working on discounted note pay off loans then this may offer the best choice in today’s lending climate to get the job done.  The borrower needs to exercise due diligence in working with the local lender, but by using their own attorneys and other professional resources, this due diligence can establish a lasting relationship with a Colorado hard money lender.

This blog was written by [google_authorship] Amter, President of Montegra Capital Resources, LTD., a Colorado hard money lender.  Bob has been in the private capital lending business for 41 consecutive years.