8.18.17: Dennis Suh to Represent ValueXpress at SSA Conference & Trade Show

Dennis Suh will be representing ValueXpress at the Self-Storage Association’s (SSA) 2017 Fall Conference & Trade Show. The conference, which will be held at Caesar’s Palace in Las Vegas, Nevada, begins on Tuesday, September 5 with conference and trade show registration. Concurrent education sessions begin at 1 p.m. on Wednesday, September 6 and run through 8:20 a.m. on Friday, September 8. The Trade Show is open Wednesday and Thursday 11:30 a.m.-3:00 p.m. For additional information, please visit www.selfstorage.org.

Back by popular demand this year are Roundtable Discussions. These lively sessions always occur in front of a packed audience. The two Roundtable Discussions to be held in Las Vegas will offer a wide variety of topics — educational on Wednesday and exhibitor products and services on Thursday.

Dennis will be meeting with clients to discuss the benefits of CMBS conduit loans for self-storage owners during the conference. Self-storage loans have been one of the best performing asset classes in CMBS, and CMBS conduit loans for self-storage are highly sought after. As with all eligible asset classes, the CMBS conduit loan program provides for unrestricted cash out for any purpose on a refinance, and all CMBS conduit loans are non-recourse, meaning there are no personal guarantees for repayment of the loan.

“The self-storage industry continues to grow rapidly, and owners want to continue to build more units to satisfy demand,” commented Dennis. “CMBS conduit loans are really the only loan product that allows for unrestricted cash out that can be used as equity to obtain a construction loan to build additional self-storage facilities.” To visit with Dennis at the show, send him an email at dsuh@valuexpress.com or call him at 212-883-6487.

 

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8.14.17: Which Hotel Brands Are Eligible for CMBS Conduit Loans?

Most borrowers are aware that hotel properties are eligible for CMBS conduit loans. However, some sponsors mistakenly believe that all hotels are eligible for CMBS conduit loans, but that is not true. In general, independent hotels that are not operated under a nationally recognized franchise brand are generally ineligible for a CMBS conduit loan. An exception to this guideline is beachfront hotels in desirable locations that do not require a franchise to provide room demand; the beachfront location drives the demand. In addition, luxury and upscale hotels generally located in major metropolitan area that provide a unique experience at an elevated price point are also typically eligible for CMBS conduit loans, even if they do not have a franchise brand.

Furthermore, not all franchise brands are eligible for CMBS conduit loans. In general, economy brands, sometimes referred to as “budget” brands, are not eligible for CMBS conduit loans. “Often I am asked ‘how do I determine a budget brand from other brands to determine if the brand is eligible for a CMBS conduit loan?’ ” commented Michael D. Sneden, Executive Vice President at ValueXpress. Luckily there is a resource that publishes the answer.

STR, a Hendersonville, Tennessee, company that tracks supply and demand data globally for hotels publishes a list of “Hotel Chain Scales” that categorizes each hotel franchise brand into the following categories – Economy, Midscale, Upper Midscale, Upscale, Upper Upscale and Luxury. All categories except Economy are eligible for a CMBS conduit loan.

To download a one-page summary of the Hotel Chain Scales, last published in 2015, for all the major chains, click STR_Chain_Scales – Summary.

If you do not see your franchise brand on that list, click STR-ChainScales2017-Detail to see the Hotel Chain Scale – Detail” file, which has all 1,000 brand franchise as of 2017. As a final note, the hotel needs to be interior corridor (except for beachfront hotels) in order to qualify for a CMBS conduit loan.

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8.9.17: Remember, ValueXpress Will Help Clients Through the Assumption Process

ValueXpress has many borrower clients who obtain CMBS conduit loans for the sole purpose of selling the property under the assumption clause. How many times have we heard “the acquisition deal fell apart because the buyer could not secure financing?” Selling the property under the loan assumption provision can eliminate the financing risk related to the sale. Very simply, the seller just needs proof the buyer has the equity to close. In addition, low-rate, non-recourse assumable financing can help achieve a higher purchase price for the buyer.

However, all assumptions are not automatically approved. The buyer needs to complete the assumption approval process, which can be lengthy and burdensome if the buyer and seller are not familiar with the process and do not know what they are doing.

Fortunately, ValueXpress has successfully navigated the assumption process for many of its clients and will continue to do so. We know how to qualify purchasers up front to determine that they will qualify as a replacement non-recourse guarantor for the selling guarantor. We are knowledgeable regarding the rules for foreign buyers, group buyers and buyers attempting to utilize a non-credit entity to be the guarantor for non-recourse carve-outs (not going to happen).

The process of getting CMBS conduit loan assumptions approved is more difficult since the restart of the CMBS market in 2010 compared with pre-2007. New standards in underwriting, additional layers of approvals, and a laundry list of conditions make it critical that you work with an experienced advisor. This is just another reason to utilize ValueXpress for your next CMBS conduit loan.

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ValueXpress Obtains $1,725,000 Bridge Loan for the Acquisition of a Mixed-Use Retail/Office Building in Staten Island, NY

ValueXpress obtained a $1,725,000 bridge loan that was utilized to acquire a 13,652 square feet mixed-use building located in Staten Island, New York. The building is 97% occupied and leased to a mix of local retail and office tenants.

Staten Island NY Bridge Loan Property

“The transaction demonstrated our ability to provide financing solutions for our clients even when circumstances change at the last minute,” commented Dennis Suh, Senior Vice President of ValueXpress. “The transaction was structured as a standard fixed-rate CMBS conduit loan, which is not readily available in the market for under $3 million. However, ValueXpress has a long-standing relationship with a small-balance CMBS lender that will write loans as small as $1 million for ValueXpress clients.”

However, during underwriting it was discovered that expense reimbursements were not being collected by the seller in accordance with the leases, and the loan did not meet minimum debt-service coverage requirements for a loan equal to 75% of the purchase price. “I petitioned the lender to fund the deal on a floating rate basis at full proceeds, and they agreed,” stated Dennis. “In return, I agreed to assist the buyer in setting up billing and collections, and once the buyer begins to receive reimbursements from the tenants, the lender has agreed to convert the loan to a 10-year fixed-rate loan.”

“It is rare to see a bridge loan in the marketplace for less than $5 million, but this transaction is yet another example of how our relationships with our partners can be called upon to find solutions for clients. It was critically important in this situation since the client risked losing his purchase deposit if the purchase of the property did not close with a 75% loan,” commented Mike Sneden, Executive Vice President at ValueXpress.

 

 

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8.4.17: Dennis Suh Promoted to Senior Vice President at ValueXpress

ValueXpress LLC has announced the promotion of Dennis Suh to Senior Vice President, Originations. The announcement was made by Michael D. Sneden, Executive Vice President at ValueXpress.

“Dennis’s passion for structuring loan transactions that provide the best terms for his clients has been evident in every transaction that Dennis has been involved since joining our firm last year,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “As anticipated, Dennis has utilized his extensive investment banking knowledge and relationships to problem-solve complex issues on a number of transactions and he was able to close transactions in which borrowers were unsure that a loan closing was possible.”

“I take great personal satisfaction when I am able to close a loan for a client that provides a financing solution that allows a borrower to grow his real estate business,” commented Suh. “Along the way, I have successfully worked through some intricate issues that provided some stress relief for the borrower and I often get that satisfying “thank you” call at the closing of the transaction.”

“I am pleased to recognize Dennis’s achievements through this promotion,” commented Sneden, “Dennis represents what ValueXpress is all about, namely a group of talented individuals with extensive experience and relationships in lending and an ability to utilize their capabilities to provide best-in-class financing solutions to our clients.”

Please contact Dennis for your next financing at 212-883-6487 or via email at dsuh@valuexpress.com.

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7.31.17: ValueXpress Actively Pursuing Bridge Loans

One method to increase CMBS conduit loan originations is to provide bridge loans on assets that are eligible for CMBS conduit loans, but are temporarily underperforming. Typical situations are properties that may be in lease-up, perhaps in conjunction with a rehabilitation program that will make the property more appealing to new tenants, or a situation in which the property has lost one or two key tenants, but is well located in a strong market and is likely to re-lease quickly. The borrowers on these transactions would not want to lock in long-term CMBS conduit loan refinancing while the property is sub-performing because the property would qualify for a bigger loan once the property is stabilized and the cash flow is maximized.

However, capital may be required to reach stabilization as often costs are incurred for leasing commissions, tenant improvements and possibly building improvements. Therefore, a bridge loan with a manageable prepayment provision allowing for refinancing into a CMBS loan can be a perfect solution in these situations.

Typical bridge loan terms are 65%-70% loan-to-value and are interest-only based on 30-day LIBOR plus a margin. The margin typically ranges from 500-700 basis points depending on the perceived risk and asset type (hotels usually fall at the higher end of the range). The loan term is 12 months, but can be extended for another 12 months on payment of an extension fee. Bridge loans require the payment of an origination fee of 1%-2% and have an exit fee of 1%-2%. However, as incentive to refinance into a CMBS conduit loan on stabilization, the exit fee is typically waived.

Please contact Mike Sneden (msneden@valuexpress.com) if you have any situation in which a bridge loan would be a suitable solution.

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7.26.17: Today’s Blue Light Special … a Refund of Your CMBS Good Faith Deposit at Closing

With the potential demise of Kmart the old “Blue Light Special” may become a thing of the past. Kmart became known for its “Blue Light Specials” that occurred at surprise moments when a store worker would light up a mobile police light and offer a discount in a specific department of the store, while announcing the discounted special over the store’s public address system.

Well, we have the current version of a “Blue Light Special” going on in the CMBS conduit loan world. To increase originations one of our partners is offering an expense credit at closing of $25,000. The way the program works is a borrower will send in the typical deposit of $35,000-$45,000 along with the executed Term Sheet. At closing, the settlement statement will reflect a credit of $25,000 against transaction costs.

The credit will offset the cost of third-party reports and a big chunk of the lender’s legal charges. This is quite a deal, and the promotion applies to all Term Sheets executed by Labor Day.

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