CLOSE first, THEN optimize the financing
There is a long list of possible reasons to obtain a bridge loan ranging from the need to close ASAP because a bank is simply taking too long and your time-of-the-essence closing date cannot be moved even by one day, the need or desire to buy out a partner, the desire to recapture equity (often “trapped” by the prepayment penalties on long term fixed rate mortgages on assets like shopping centers, multifamily and office buildings) for a compelling business or buying opportunity, the need to settle up with the IRS, or the need to fund emergency repairs…the list goes on and on.
Special mezzanine loan program for new construction:
In life in general, the question often is: “what tool do I need right now to accomplish the job at hand?” Within the specialized world of high-yield, short-term real estate lenders, W Financial sets itself apart by offering multiple tools, and in many cases, a complete capital solution. More often these days, it’s not an either/or proposition (i.e., private money OR bank money). We routinely arrange smoothly integrated mezzanine or subordinate debt packaged with low-rate first mortgage debt. The ideal financing solution can sometimes be a combination of the two.
For example, we have a special construction loan program where a first mortgage construction lender will provide from 75% to 80% of the development cost, and our Fund will provide another 10% - 15% as a mezzanine loan, requiring that the Developer contribute at least 10% of the equity. There is an intercreditor agreement already in place between W Financial and various construction lenders, allowing the process to proceed seamlessly and to provide higher leverage than would ordinarily be possible.
To conclude, Private Money is one more tool in your toolbox. It may be of strategic benefit to you and your team to learn about the current “state of the art” of how deploying Bridge or Mezz money at the right moment can help your money-making strategy. © 2008. Gregg Winter. All Rights Reserved.
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By Gregg Winter, Managing Member
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