An Interview with George Blackburne
We hear something like this from our customers almost every day: “It’s really a great time to buy property, and if I could get the financing I would certainly do more deals.”*
We hold ourselves out to know a few things about real estate finance, but we must confess that we don’t know where the treasure is buried. So we decided to ask an expert: George Blackburne, III , founder of C-Loans and Blackburne & Sons Realty Capital Corporation.
RD: George, we know you’ve been in commercial finance for decades. Give us your boots-on-the-ground assessment of where we are now.
GB: Clearly, it is much more difficult to finance commercial property than it has been in a very long time. But I don’t agree with the conventional wisdom that you simply can’t get a loan. It’s going to require a lot more digging, but if the deal is a good one then it’s not impossible.
RD: Who’s lending now?
GB: It’s pretty much the hard money lenders and the banks. Gone are the conduits, mortgage REITS and other players.
RD: But a lot of our customers say the banks they’ve always done business with don’t want to talk to them.
GB: They have to understand that it’s a whole new ballgame, a sea change. You can’t rely on your usual lenders anymore. Perhaps most important, you have to forget about visiting just two or three lenders and expecting to get a loan. Plan on submitting your deal to 30-50 lenders. That’s what it will probably take right now.
GB: Yes. I know one guy who approached 112 lenders – but he got the loan and closed the deal.
RD: I want to ask you more in a minute about what borrowers should be doing when they approach these lenders – how they can improve their chances of success – but first I want to ask about terms and underwriting.
GB: Interest rates are still attractive. They depend very much on the deal, but probably somewhere in the 6.5% to 7.375% range. A term of 25 years with a 5-year balloon is typical. Also, expect to be asked for a personal guarantee.
RD: What about LTV and DCR?
GB: DCR is still around 1.25 for most property types, but loan-to-value is likely to be about 60%. Most banks will use whichever of these is more limiting.
RD: Are buyers willing and able to put down 40%?
GB: Sometimes, of course, a couple of investors pool resources. Another technique I’ve been seeing is this: The seller agrees to take a second on some other property that is owned by the buyer – not on the property being sold. That way the buyer gets his secondary financing, and the bank is still lending on a property that has 60% LTV.
RD: Getting back now to the topic I was on earlier: What does the borrower have to do to maximize his or her chances of getting the loan?
GB: There are several things you can do. One of the most important is to create an executive summary of your deal – property info, financial info, photos – and put it into a pdf file that you can submit as part of your loan request.
RD: George, you just gave a pretty good description of some of the reports we produce with our Real Estate Investment Analysis software. Thanks for the plug.
GB: That’s good, that’s the kind of stuff you need to send.
RD: What else can a borrower do to improve the chances of getting a loan?
GB: It seems to me that banks are much more interested than they were in the past in having a deposit relationship with the borrower. Go talk to the bank president or someone high enough up the food chain about bringing over some of your accounts – personal, business, IRAs. These can make a difference.
RD: So where should we be looking for these 30-50 banks to approach?
GB: In general, you have a better chance with banks that are local to the property being financed. Here’s a quick-and-easy: Go to maps.yahoo.com and put in the property address. Where it says, “Find a business on the map,” type in “bank” and click search. Then zoom out the map until you have a big enough radius to give you a nice list. You can click on “view results as a list” to print out your shopping list.
RD: Why didn’t I think of that? If you have a crystal ball, would you care to give any forward-looking advice?
GB: Sorry, no crystal ball, but I will say this: If you currently have a commercial loan that’s going to balloon in the next two years, don’t sit around. I would start looking now to stretch as long as possible.
RD: George, I really appreciate your sharing your expertise. Can you to tell us just a bit about C-Loans and how it might help our readers in their search for financing?
GB: C-Loans.com is a commercial mortgage lender databank, a portal where you can submit your commercial loan to 750 different banks and hard money lenders. It’s also free. Just go to c-loans.com.
RD: Thanks again.
You can contact George Blackburne at
C-Loans, Inc., Blackburne & Sons, and Realty Capital Corp.
Plymouth, IN 46563
(574) 360-2486 Cell (Best)
(574) 936-6387 Office
Give us your comments. What’s your take on the present and future of commercial financing?