CRE Finance: Where to Find the Money

Towards the end of 2019, BH LLC secured a high-leverage, $12-million senior loan on two retail-and-residential buildings in Manhattan’s East Village. At one of the properties, Momofuku Noodle Bar serves as the anchor tenant and is secured in a long-term lease; however, aside from the restaurant tenant, the investment is a value-add play for the company. Fortunately, BH’s finance partners were understanding of the investment. Infinity Real Estate teamed up with BridgeInvest to provide the capital for BH’s $14-million acquisition.

“We understand the upside that the borrower is trying to capture through the value-add program and see a clear path for the borrower to do so, and we’re comfortable providing financing through this lens,” says David Berg, partner at Infinity Real Estate.

Lenders, such as Infinity Real Estate and BridgeInvest, are one part of commercial real estate’s robust capital markets ecosystem, however, they play a particular role that is increasingly coming into play as the real estate cycle matures. Often, value-add deals have a low in-place cash flow or a business plan that intends to alter the cash flow, which in many cases makes traditional lenders that focus on debt-yield and coverage ratios reluctant to move forward with a deal. As a result, alternative lenders, such as Infinity, have found a niche in providing higher leverage to borrowers to execute on a renovation or repositioning investment strategy.