Lenders Competitive But Not Overreaching

LOS ANGELES—While some lenders have been flexible on terms and leverage to stay competitive, most lenders are still adhering to core fundamentals, according to Sagiv Rosano, founder and president of Rosano Partners. The firm recently secured acquisition and refinance funding for three different borrowers on apartment complexes. These more commonly sized transactions illustrate that lenders are being flexible but careful.

“The 'loosening of the reins' is happening only on a deal by deal basis, so it's not rampant. Naturally, we've seen more of this activity in class-A properties,” Rosano tells GlobeSt.com. “In smaller, urban markets, we often work with bridge lenders who are actively competing for market share, and as a result, they are often willing to reduce rates to make a deal sweeter for a borrower. We believe core fundamentals are still being weighed heavily by lenders.  That said, many of the bridge lenders are comfortable owning a property if needed, and for this reason, they are often willing to stretch the fundamentals a bit more than others.”

Rosano arranged acquisition financing for a 6-unit complex in Santa Monica, securing 77% LTV for the borrower. Lone Oak provided a first-trust deed for the property, and Rosano was able to bring the blended interest rate from 10% down to 7%. The second acquisition financing was arranged on behalf of a borrower who had a bankruptcy background. Rosano secured a $1.5 million loan at a 4.5% rate for the borrower to purchase a 12-unit apartment property. Finally, Rosano also secured a refinancing loan on a syndicated deal.  The syndicator owned less than 20% of the property, which is typically an obstacle for lenders. Rosano was able to secure the funds needed to refinance the property, $1.9 million.

Because these are smaller, more common deals, it is easier to see the more typical trends in lending—rather than what we see on some of the huge, more uncommon deals. “Terms on bridge lending for small-to-medium size deals (approximately $1 million to $5 million) are advertised between 5% and 7% in the current market,” says Rosano. “In this size range, we are most often seeing leverage of between 65-80%.”