May 2009
Getting Your Property Financed
Being Capital Markets Savvy in a Down Economy
Presented by Mark J. Mayfield & Randy Graham
Managing Directors, Sperry Van Ness – Rock Hill, South Carolina
I rarely have a conversation these days where the topic of financing doesn’t arise as a serious concern for my clients. When the economy is robust, and the capital markets are frothy, financing a commercial real estate transaction is a relatively simple matter. However during today’s recessionary times, the commercial capital markets are severely constrained. Not only is the supply of capital tight, but the demand may be near all time highs as well. Depending on which industry source you quote there is between $150 and $200 billion dollars of CMBS debt maturing in 2009 alone. This figure doesn’t include maturing loans from insurance companies, banks and other lenders, which means that many borrowers will be forced to secure financing in a market that presently offers little liquidity.
Given the current lack of liquidity and financing options described above, only the savviest of sponsors with solid projects will be receiving attention from lenders and investors. In the text that follows I’ll provide you with an overview of the information you need to possess in order to speak fluent finance and to increase the odds of getting your project financed.
The first thing to keep in mind is that financing serves multiple purposes beyond rate and term considerations. The proper financing strategy can allow you to increase project velocity, improve operating efficiency, conserve internal capital, increase leverage, and lower the overall cost of capital. Good sponsors focus on developing an integrated capital formation strategy surrounding acquisition, development, construction, refinancing and recapitalization initiatives. The following items are just a few of the things commercial borrowers need to address when seeking capital:
- The selection of the appropriate capital provider;
- Level(s) of the capital structure to be addressed;
- Operating considerations;
- Control provisions;
- Rate, term, pricing and structure;
- Closing time frame;
- Third party requirements;
- Certainty of execution;
- Recourse provisions;
- Exit and pre-payment options;
- Inter-creditor or other multi-party agreements;
- Post closing servicing issues;
- The effect of the capital acquired on tax, balance sheet, future projects or portfolio considerations, and;
- A whole host of other value-added considerations.
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In 1996, Mark Mayfield and Randy Graham started in business together and in 1999 started their own company Southern Commercial Real Estate, LLC (“SCRE”) in Rock Hill, South Carolina located 15 miles south of Charlotte, NC. With a successful track record and established entity, SCRE expanded its services and national reach on January 1, 2007, by joining forces with a nationally recognized leader in commercial real estate brokerage, Sperry Van Ness, to form Sperry Van Ness/Southern Commercial Real Estate, LLC.
- Sperry Van Ness was founded in 1987, when Rand Sperry and Mark Van Ness created a commercial investment real estate firm with one key mission: To create unprecedented value for commercial real estate investors. Today Sperry Van Ness is one of the largest, most respected and fastest growing commercial real estate brokerage firms in the industry.
- Sperry Van Ness currently has more than 1004 advisors internationally.
- Sperry Van Ness is located in more than 150 cities across the US, as well as in Costa Rica and Panama.
- Sperry Van Ness completed over $11.6 billion in sales and leasing transactions in 2007.
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Mark J. Mayfield
Managing Director|BIC
Randy Graham
Managing Director
1926 India Hook Road | Rock Hill, SC 29732
803.325.1000 | 803.325.1214 | www.svn-scre.com | info@svn-scre.com