It's a Good Time to Be a Borrower

LOS ANGELES—Low interest rates that look to remain that way and competition among lenders for deals make it an ideal time to be borrowing, say speakers at RealShare Los Angeles here last week. Because of the competition, lenders are looking for ways to distinguish themselves from other capital sources and to provide needed solutions and services for borrowers.

Moderator Gary Tenzer, principal and managing director for George Smith Partners, asked the panelists how they get past borrower issues such as falling upon hard times, credit problems and bankruptcies. “We do,” said Karine Clark, senior director of lending for Bolour Associates. “It's all about the asset—we are an asset-based lender.”

Adam Petriella, EVP for Coldwell Banker Commercial Alliance, said the small-balance community produces a high yield. “We will look at collateral or non-recourse and look for mitigants in the collateral.”

Michael Klein, co-founder/CEO and managing director for Partners Capital Solutions Inc., said, “We will listen to [borrowers'] stories. If you fought through the down times and did all the right things, you can still fall on hard times.”

Alexa Mizrahi, loan originator for Lone Oak Fund, said, “We deal with blemished borrowers. We all got hurt in the downturn.”

Brent Lister, SVP for Walker & Dunlop, added, “Life companies are most skittish about that. Fannie and Freddie will do the right thing, and CMBS will do anything to try to understand what happened.”

Tenzer said that Janet Yellen recently indicated that short-term interest rates will be moving up again soon and asked how this affects lenders' approach to underwriting. Clark said competition has been causing lenders to drop rates and extend terms, but “two to three years ahead, we will be looking at higher rates. We are looking to watch our leverage because of that.”

Tenzer also asked, with lots of capital sources out there, how do you differentiate yourself from others? “It's tough out there,” said Mizrahi. “There's lots of competition, lots of capital chasing deals and rates are low. There's pressure to get the money out, but they don't want to put their investors at risk. We stress certainty of execution, speed and service—we aim to be a one-stop shop for our clients.” Earlier, Tenzer had pointed out that Lone Oak Fund had recently closed a loan in six hours.

Klein said, “Our repeat customer rate is 75%. Many borrowers today are completely bankable, but they come to us despite our higher costs because the service we give from start to finish distinguishes us.”

Tenzer asked the panelists for their thoughts on crowdfunding: is it a niche or will it continue to grow? Klein said, “There's both debt and equity in crowdfunding. What does a workout look like with crowdfunded equity? Do you work with all the investors or the crowdfunded platform in the deal? On the debt side, single-funded deals are OK, but how do you do it with multiple fundings?”

Tenzer said we'll see how the chips settle in 2018, and he asked what panelists were seeing with regard to CMBS. Lister said, “We have our own CMBS program, and yes, there is blowback. If borrowers can get leverage from another lender, they'll go there first. But for a lot of borrowers, the only way to get the money they want with the issues they have is to go with CMBS.”