Working with Commercial Real Estate Brokers
Clarification added 11 months ago:
I am a Commercial Loan Officer at Meridian Capital. In the past our company has worked with Commercial Real Estate Brokers by reviewing the properties they are marketing. This allows the RE Broker to know what their buyers can expect to to finance and what their rates & payments will look like. This also gives the RE Broker an idea of what the property is worth based on the lenders’ valuation method rather than the seller’s. All this with no obligation to use our financing or cost to anyone. It is my understanding that in this market a larger percentage of deals fall apart after a lot of work and expense because the buyers cannot secure financing. Yet, when speaking to RE Brokers they are not excited about this opportunity. I’ve tried to understand why and thought that maybe they don’t have enough confidence in our firm, but that is unlikely as we are well know and closed close to $17 billion in loans, last year alone. We have some very impressive clients and past deals. So, the question is why aren’t more RE Brokers are taking advantage of this kind of relationship? Also, what is the best way to market this service to RE Brokers?
Answers (11)
I don't know many RE brokers or their needs and habits. But, my feeling is most people don't like to be apporoached cold by people looking for business. When I reach out to people for networking, I typically try to set up a coffee meeting. Easy, cheap, and nothing beats face to face.
My suggestion is to reach out to a few and offer a coffee meeting.
Gary A
CEO at Aminoff & Co. Realty Advisors, Inc.
Best Answers in: Government Policy (3), Personal Real Estate (3), Commercial Real Estate (1), Criminal Law (1), Wealth Management (1)
Gregory, I am a commercial real estate broker. I welcome information from lenders about what kind of loans are available on a given property.
I think the problem stems from the fact that many real estate brokers have lenders that they have relationships with and that they rely on those lenders to give them quotes and loan information.
I have a few people that I can send property information to and get general loan information. Of course no loan quote is really accurate without the lender doing due diligence on both the property and the borrower, so, at best, any quote would be an estimate.
I think your solution would be to cultivate relationships with commercial brokers without trying to review their properties for loan quotes. Get to know them on a personal basis and let them know your qualifications. Once you have developed a relationship you will find that they are calling on you to help them with loan quotes.
Gary
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Geoff W
Senior Associate at Frost Brown Todd
Best Answers in: Commercial Real Estate (1), Employment and Labor Law (1), Property Law (1), Personal Real Estate (1), Using LinkedIn (1)
Gregory as an attorney that has represented multiple commercial real estate lenders selling multiple products over the last couple of years, I am guessing the big issue is that many commercial brokerages are telling their clients (owners/borrowers) to stay on the sidelines until the credit crunch runs its course and there is some sort of normalcy in the commercial real estate market. As I am sure you are aware, this is ultimately a result of the general lack of liquidity in the capital markets and thus inability to achieve the optimal loan proceeds to make deals work for their clients. At this point, this slowdown has lasted nearly a year and I would certainly assume that they are begining to realize this may be reality and they might need to bring their clients back to the table.
Many of your points above are also pertinent, considering just how many loans I have seen fail to close due to reduced loan proceeds resulting from changing underwriting standards over the past few months. Thus relationships are even more important. I would be more than willing to discuss this with you further, please feel free to contact me per the contact information per the link below.
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Jon G
Senior Vice President, Licensed CA Real Estate Broker, LEED AP at Premier Properties, Palo Alto
Best Answers in: Commercial Real Estate (1)
Many real estate brokers are leery of new lenders who don't have experience in their specific market area / market segment. In any submarket there are typically a few lenders who've captured most of the loans. These lenders have local underwriting teams / appraisers and are familiar with the sales and leasing comparables, the strengths, weaknesses, and sensitivities in the market, etc. Any lender can deliver a 60% LTV loan for a fully leased building with credit tenants. But, developers and aggressive portfolio owners don't buy properties like that because they are looking for value-added opportunities. We look for lenders willing to deliver 65% - 70% LTV based on conservative valuation of the property when improved / fully leased. I've seen deals fall apart because a buyer starts the deal with a major bank (no local underwriting or decision-making), an out-of-town appraiser, etc. I definitely agree with you that it's important for a prospective buyer to have a lender on the team from Day 1.
Have you tried to network with brokers? There are several local associations you could join to access numerous types of commercial real estate brokers. See link below for resource links.
Links:
Fred H
Loan Officer at Bay Sierra Financial, Inc.
Best Answers in: Commercial Real Estate (7), Personal Real Estate (5), Business Insurance (1), Facilities Management (1), Accounting (1), Economics (1), Government Policy (1), Philanthropy (1), Small Business (1)
Gregory:
I have a slightly different take. I think some (inexperienced) real estate brokers just don't want to know. When I was a loan officer, mortgage brokers would call me about general loan terms and conditions. Then they would tell me "I'll get back to you after the client's purchase proposal is accepted."
My answer was - doesn't your client want to know ahead of time what is available for financing in order to craft that proposal?
It has already been pointed out that many real estate brokers already have loan sources. That is true. However, I've found many brokers receptive to loan scenarios - particularly in this market where lenders are in and out so quickly.
The issue with "value added" properties is a good one. I think these can still get down with loan earn-outs or holdbacks. I think the days of lenders underwriting to future value/cash flow alone are over - and that's probably a good thing in the long run.
In short - work with the brokers who want to work with you. If you get turned down just say "Thanks for considering it" and move on. If that property hasn't moved in 60 days check back in and find out why. You might then discover you have an opportunity.
Clarification added 11 months ago:
I forgot an important element - "Presentation." I created a one-page spreadsheet for MFR (apartment) and commercial (office, retail, warehouse, flex, light industrial) properties that shows income and expense figures, purchase price, down payment, etc. - and most important of all, "Loan Amount Based on Property Income." This tool permits the real estate broker to show the client not only the estimated loan amount and terms but also "why."
Real estate brokers have told me this is a very helpful tool in working with their clients because it helps explain the importance of net cash flow supporting the loan. I've seen much more sophisticated presentations - at some point, of course, there is a risk that there could be too much information for many property sellers (and/or buyers).
My point being: If you are preparing a property financing scenario, an easty to understand presentation is a big help!
Marc W
Strategy, Negotiation and Execution at the Crossroads of Telecommunications, Technology and Real Estate
Your service is one piece in a big puzzle. You probably need to spend more face time with Brokers and get more deeply involved in developing transactions if you want to do the financing. - Marc Webb
As a RE Broker I can tell you it is tough finding a reliable lender. Some will tell you they can do the deal and then change the terms at the last minute, blowing the deal apart.
I would reach out to brokers - letting them know about you and the lender you work for; what type of programs you have available; what markets/product type you can finance in; how you can be an invaluable source matter expert (the good ol' SME) would be a great start.
It will take time but once we find lenders we know will help us with our deals we are very loyal.
As a commercial broker I welcome lender involvement on the front-end. Occasionally lenders will take initiative to develop marketing materials for my property showing their contact information (for the financing) along with mine. This is a win-win that gets lenders in the door with me.
Michael F
Senior Asset Manager at Grubb & Ellis Realty Investors
Best Answers in: Commercial Real Estate (1), Tax Law (1), Organizational Development (1), Personal Real Estate (1)
Experienced buyers typically have existing relationships with lenders that are independent of the broker. Certainly working with NAIOP which is one place buyers/owners hang out is important. Joining ICSC or a multi-family association is also good. The idea is that buyers/owners want to develop a relationship independent of the deal so that they feel comfortable that when something comes up, you'll be able to respond quickly. They want to know that you understand their criteria and needs. Best of luck.
Walter C
CEO, Figueroa Capital Group and Principal, Charles Dunn Company
Best Answers in: Commercial Real Estate (3), Venture Capital and Private Equity (2), Personal Real Estate (2), Hedge Funds (1), Option Markets (1), Using LinkedIn (1)
RE brokers are going to want to get their information, if they even want to get it, from lenders directly, instead of via a mortgage broker. You are fighting an up hill battle because you still have to seek out the quote, and are not the lender directly. Also, keep in mind that many times, the purchaser or borrower is not relying on the broker to assist with finance, just the purchase. They have their own banking and lending relationships, and go direct. Lastly, as stated a number of times already, this is a relationship business, and takes time. Get out and bond with some brokers, and keep in touch, providing them with some market insight. Better yet, bond with some borrowers and owners directly, instead of relying on third party referral. Go direct yourself, so to speak, and you will have more success.
