By Sanford Herrick, founder and managing principal
Case Real Estate Capital, LLC
In commercial real estate investing, each situation is unique and must be carefully considered on its own, particularly in today’s uncertain environment. Financing providers with a disciplined approach, coupled with deep market knowledge and access to funding, are continuing to identify assets with upside potential, helping owners and developers achieve their business plans.
For private lenders, even those with extensive knowledge of a local market and a grounded understanding of fundamentals and trends, engaging in due diligence is essential in order to develop solutions quickly and efficiently. Lenders must also be satisfied with the borrower’s experience, track record and creditworthiness.
A tempered approach to real estate investing is illustrated through Case Real Estate Capital, LLC’s (Case) drama-free exit strategy, within 15 months, in a $15,150,000 first mortgage bridge loan transaction for fully entitled land in Middlesex County, N.J. The bridge loan was for a 7.1-acre property approved for construction of a 355-unit multifamily complex on the site of a former manufacturing facility.
Case had been asked to assist with the financing after the original lender withdrew over concerns of overexposure in the area. We were approached by the developer’s lawyer, an attorney with a firm that we have a mutual trust and respect.
The borrower, an experienced multi-family developer, required a lender that could structure the financing in a timely manner with competitive terms. Case matched the original terms and conditions – and beat the borrower’s timeframe for closing on the funds – with first mortgage financing for a one-year term with certain rights to extend.
Given our experience and our comprehensive analysis of the area, the Iselin market proved attractive due to its proximity to New York City and road and train transportation, including a NJ Transit station. Consequently, there is a healthy amount of corporate and residential development, with enough demand to absorb the supply.
Some lenders might have been concerned about the site itself: a former industrial property. We were presented with an environmental guarantee – essentially a clean bill of health testifying to the remediation activity that had been accomplished at the site – from a creditworthy entity. That sort of warranty is not common, and made it easier for us to move ahead in a timely manner, which is a necessity in today’s competitive, liquid market. We also familiarized ourselves with the borrower and were satisfied with his track record and creditworthiness.
Despite continuing concerns about the economy’s direction and its potential impact on cap rates and real estate values, experienced investors with a tempered approach to lending will continue to identify properties with upside potential. In addition, that discipline will enable them to execute successful exit strategies.
A northern N.J.-based commercial real estate investment firm, Case concentrates on transactions in the $2.5 million to $40 million range for transitional properties in the New York metro area, Northeast and Mid-Atlantic regions, and south Florida. Case is active as a high-yield private lender; a financier of transitional properties; a purchaser of performing, sub- and non-performing debt; and a mezzanine and equity investor. Funds can be deployed as note purchases, bridge and acquisition loans or rescue and restructure capital.