Commercial Real Estate Financing — What to Do Now

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.

RD: 30-50?

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
george@blackburne.com

Give us your comments. What’s your take on the present and future of commercial financing?

Copyright 2010, RealData® Inc. All Rights Reserved
* See related interview from Realty Times with 2010 CCIM President Richard Juge, where he says “…for the first time in many years our members, our own CCIM members, are saying, “This is the time to buy.””
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