Red Fox Lender Recapitalization Program

View this email in your browser

Maturing Loans Making You Nervous?

A lot of short term (bridge and construction) CRE loans that were originated in the last 1-3 years are going to be underwater when they mature. Many of these loans were underwritten to reasonable metrics at funding. Unfortunately, Jerome Powell has decided he’s Paul Volcker reincarnated and has increased interest rates 400 bps in less than a year and will likely do another 0.25 - 0.50 bps this week. Since cap rates tend to go up with interest rates, values also come down.

So, a bridge loan maturing this year could possibly be underwater - meaning the LTV is greater than the value of the property. This is a bad scenario for both the borrower and the lender. The borrower can’t refi the loan and can’t even sell the property for an amount high enough to pay off the loan. Hopefully, they didn’t sign a personal guarantee!

The lender doesn’t want to go through the cost, time and brain damage of a fore-closer because there’s no equity in the real estate to pursue.

The situation s-cks for both parties.

Even worse for a construction loan. A sponsor could be halfway through building an apartment complex and realize the agency or conduit term loan they were expecting to easily procure upon lease-up won’t be large enough to payoff the construction lender. The lender may realize this as well and decide to stop funding construction. This happened a lot in 2009.

No bueno.

Where do I expect this distress to occur? There’s lot’s of over-leveraged segments of the market but the area I’m really looking at is apartment development and value deals in secondary markets that were underwritten to primary market exit caps and financed with high loan-to-cost construction debt.

That’s where we come in. We have several capital sources ready to step in and help in these situations. Either by buying a note before it goes into maturity default and restructuring it or by refinancing a loan in situations where borrowers have additional assets or equity positions beyond the over-leveraged property.

So, if you’re a lender than is sweating some of the loans on your books, reach out and we’ll try to help.

If you’re a borrower worried about an upcoming loan maturity let’s start talking now.

Got a deal? Click the button below!

I Have A Deal

P.S. If you're brand new to the EN Capital newsletter; each week we promote a new capital source for a variety of commercial real estate properties. So if the above lender is not relative to you, the chances are high that we'll have the perfect capital source for you soon.P.P.S. EN Capital is a commercial real estate mortgage brokerage shop. We are not direct lenders. Seriously, every time we do a blast some guy responds and gets pissy when he realizes we're brokers. It's on the top of our website, LinkedIn, clear in all our marketing. We honestly don't know how to make it more obvious. Don't be that guy.P.P.P.S. If you have a commercial real estate deal, unrelated to the above, that needs capital right now reach out to us and let's chat!

Be sure to connect with EN Capital on Linkedin. and visit our website here.

Nathan WhighamPresidentCA DRE Broker License: 01793655EN Capital Contact Info:www.encapital.com[email protected]Direct Line: 310-465-9253

Copyright ©