Western Capital Newsletter Oct. 2019
We’ve been lucky enough to close a lot of deals in the past few months, several SBA 7a hotel purchases, a $27 Million Apartment construction loan in mid SLC, a $6 million construction loan on an apartment in Bountiful, a $6 million self-storage construction loan in Las Vegas, a $9.4 Million a & d loan with vertical in Hideout, and a lot of smaller deals as well.
Many of the larger lenders have really cut back on construction loan amounts because their portfolios are full of hotel deals, apartment deals, and office deals. But we have some other lenders that are still doing deals in the 70 to 75% LTC range. We’re sometimes able to count a portion of the developer fee as “equity” going in, but every lender is different in this regard. We’ve also been able to give a forward rate lock on some of our deals at about 4.5%. We’re able to do 30-year amortizations on our construction loans that convert to perm on Apartments.
We closed a non-recourse perm refinance on a hotel in Wendover. It’s lower leverage, great borrower and get this: no prepayment penalty.
With the ten-year treasury rate at 1.54% as I write this, permanent loan rates are very low and many of our insurance companies are swamped with deals. Smaller loans are getting quotes in the 4% range, fixed for 10 years and some of our larger low leverage deals are getting quotes in the 3.5% fixed for ten years. Needless to say, a great time to do permanent loans.
We have more A & D and vertical construction loans in our pipeline. LTC on A & D loans range from 65% to 75% LTC. One of our lenders is willing to allow “short funding” on vertical construction, meaning that the developer doesn’t have to fund their equity portion at closing. The lender relies on them to pay the cost over and above the construction loans out of their own funds as they need to after the construction loan budget is depleted. A nice bonus.
We have a lot of great hard money available. I like the new name, “easy money.” Two of our new relationships are able to do larger deals, up to $50 Million. Their rates range from 10% to 12% with 2 to 4 points depending on the quality of the borrower and project. Normally, maximum LTC is 75%. Sometimes, if the LTV is low enough, they’ll exceed 75%.
Let’s hope that the economy stays stable for a while. It’s remarkable how quickly projects are leasing up and at all time dollar/foot rents.