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BUYING A BUSINESS - ADVICE FOR THE FIRST TIME BUYER/ INVESTOR
As a professional M&A intermediary I am amazed when I hear others in my profession at industry meetings proclaim, “I don’t work with individual buyers.” They put it out there almost like a badge of honor or an indication of reaching a higher level...
Develop a Successful Business Foundation Second to None
Looking to start a new business? Starting a new business can be
a complex, exciting time. There are many aspects to explore.
Consider this startling statistic approximately 97% of small
businesses fail or under perform. There are certain areas...
Famous Business Strategies
Either simply a looker-on or a player in the world of business, you see millions piling into the accounts of world's most famous businessmen and naturally the question pops "How?", wondering what is the alchemy they've discovered? Yet,...
Non-Profits Need New Strategies to Weather Budget Crisis
Non-profits everywhere are facing very difficult times as government funding is dwindling and public need for services is increasing. Sitting at my local county budget hearing on recently, it was quite obvious that many organizations are in panic...
Your Business or Your Life - Why Not Both?
Bring LIFE into the strategic planning process
Face it – you didn’t go into business for yourself to give up all semblance of the life of your dreams! You had a great idea and/ or wanted to be your own boss. But you quickly found that you...
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Bridge Loans: Everything You Wanted To Know
As the name implies, bridge loans fulfill a vital need for active developers by giving life to a new project in the months before lenders feel confident enough to make available a construction loan, or a repositioning loan in the case of an existing project. But real estate bridge loans have other uses, both tactical and strategic, that make them indispensable in today's New York marketplace.
For new development projects, bridge loans provide financing for property assemblages, site acquisition, and development expenses. Not only do such loans provide the developer with the funds to acquire a site, they also supply the breathing room that the developer needs to create the architectural designs and analyses for new construction projects. Just as important, bridge loans offer an opportunity to refine the developer's property repositioning or acquisition plan in the case of an existing project.
During the development--or repositioning--planning stage, the developer's financial advisor has the time to arrange senior construction and mezzanine loan financing. For example, in recent months our firm has arranged highly competitive financing for projects under the 80/20 Bond Financing Program, and other projects under the recent Liberty Bond Program for downtown Manhattan. Still others have been condominium or office projects in which the fiercely competitive New York marketplace requires developers to move extremely rapidly to acquire control of desirable locations.
Bridge loans have other strategic uses for developers. By enabling construction to commence before a formal construction loan is in place, a developer may time construction to avoid a heavy winter schedule with the attendant extra
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costs, or plan the completion of construction to coincide with the primary rental and sales months beginning in the spring and continuing into the summer season.
A typical bridge loan has a term of 12 months or less, with spreads ranging upwards from 225 over 30-day LIBOR depending upon the lender's view of the location, viability of the project, and reputation and financial strength of the developer. Commitment fees of 1% are common, although lower fees can sometimes be negotiated. In some instances, commitment fees on bridge loans can be credited against fees on subsequent loans from the same lender. Guarantees required for such loans are highly negotiable.
Our firm, The Singer & Bassuk Organization, has recently arranged over $250 million in bridge loans for seven separate transactions. In each instance, these loans have enabled developers such as The Moinian Group; Nathan Berman; a joint venture consisting of Cornerstone Real Estate Advisers, a wholly owned subsidiary of Massachusetts Mutual Life Insurance Company and Adellco LLC; and a joint venture comprised of Jeffrey Levine's Douglaston Development and Continental Properties owned by the Fisch family, to acquire site control and arrange for the orderly start of construction.
I expect bridge loans to play an increasing role in New York financing and see a trend where lenders providing the ultimate financing for a project's development to provide bridge loans in order to cement the business and the relationship at an early stage in an increasingly competitive market.
About the Author
Marc Sylvester is expect based in Edison, NJ . He holds expertise in the banking and finance sector and is a conultant to leading business houses.
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