July 2015 Newsletter:
Dear Friend,
We have had a very robust 2015 and wanted to bring you up to date on our most recent successes, as well as some new debt and equity financing tools. We are only going to describe two of our recent successes, which are as follows:
1. $29,500,000 Construction and Interim Loan for the Albany International Building, Albany, NY- This project is an adaptive reuse of a commercial loft building, which is on the National Register for Historic Properties. The building is being converted into a multifamily usage, as well as some ancillary uses for daycare and self-storage. Our customer wanted to knock the ball out of the park with leverage and we did our best Giancarlo Stanton impression for him. We obtained a five-year loan for close to 90% of project costs. So, how were we able to finance a very high percentage of project costs without running afoul of the HVCRE rules imposed on banks? Hmm, you will have to reach out to us for that answer, as we still have some unique tools in our toolbox! The pricing for the debt was at 3% or so (on a floating basis), so the solution was not simply to obtain more expensive financing.
We also assisted in obtaining an equity investor for the project, which invested in the historic tax credits. If you own or seek to own a building, which has or might have historic significance, do not simply assume that obtaining historic tax credits is too burdensome. It is a fantastic way to bring cash into a project as part of an adaptive reuse project. We also understand the historic tax credit business and can help you through the process; and
2. $23,900,000 Loan and Equity Investment for Multifamily Purchase Near New Haven, Connecticut- One of our better customers was selected as the purchaser for an underperforming multifamily property, just outside of the core of New Haven, after a deal fell through with another purchaser (always a concern when a multifamily deal falls through in today’s climate). The property had been poorly operated by an absentee owner, and some of the capital components had also been neglected. Our customer sought our assistance in obtaining debt and equity, and we succeeded on both fronts. Our customer wanted a long term fixed rate loan and the investor wanted a shorter term loan. Our customer also wanted significant cap ex dollars out of the debt. Hmm, sounds like a tough assignment? We were able to persuade a fixed rate lender to give us a loan for approximately 88% of the purchase price (though some of the funds were to be used for capital improvements) on a fixed rate basis for seven years (loan closed in June of 2015). Theprepay was based on Yield maintenance for four years (out of the seven year term), and then reduces to 1% for the last three years (with the last six months being at par). We paid a little more for these liberal prepayment rights, but our FIXED rate was still under 3.90% (and that is for high leverage). This structured fixed rate loan satisfied the long term needs of our customer and the exit flexibility desired by the investor (this lender has rarely even offered this kind of fixed rate loan).
We hear so many horror stories about equity investors. Like the old song from the 1970s, we think most of you are simply “looking for love in the all wrong places” (it was a pretty lame song, but you get the picture). Let us help to guide you on the right path as there are so many critical factors in selecting an equity investor outside of percentage of equity funding, current return, look back and promotes.
We do well in these kind of deals where we can marry fantastic debt with a new equity investor and still make everyone happy. Some of our long time customers believe that my personal success in making tough deals and new relationships work is the direct result of growing up in a large Irish family with five older sisters. I think they are right.
Give me a call if you want to chat and find out the many ways to better capitalize your real estate deals. We are still doing all of the food chains, including hotels and skilled nursing.
If you want to be excluded on future emails, just let me know. Have a great summer!
Emmet Delany
Chief Executive Officer
Email: emmet@capitalvr.com
Phone: (203) 431- 3262 (CT Office)
(508) 348- 1831 (MA Office)
2 Hull Place Ridgefield, CT 06877