Over the past several years, there has been a flood of private investor capital entering the real estate lending space. Large funds backed by Wall Street have made an especially big splash in both the Northern and Southern California markets giving borrowers more choices when it comes to alternative, non-bank sources of capital. But what borrowers need to understand is this - large funds typically can't and won't do certain type of bridge loans that the small, yet well capitalized firms such as Equity Bridge Capital can do. Let me give you some insights and recent examples:
1. JUNIOR POSITION 2ND AND 3RD LOANS (and sometimes even 4ths). The large funds I have spoken with, for the most part, either are restricted within their business structure or have a firm policy not to offer secondary financing. This means a borrower who wants to get a bridge loan, but who has an existing favorable low rate bank loan, would need to replace that loan with new 1st Position financing - so not only would they lose their existing loan to a higher rate loan, but the new proposed 1st loan may cost the borrower significantly more money in terms of origination fees due to the larger loan amount being required by the Fund.
This is where Equity Bridge Capital has been able to step in and assist borrowers time and time again in providing the junior bridge financing option . Here are three recent examples:
A borrower in San Francisco who needed a quick $500K bridge loan to assist them in the operation of their business. They had an existing 1st Position $900,000 bank loan at 4.25% and wanted to keep that loan in place. Equity Bridge Capital was able to execute on that request in a matter of days - after confirming that the LTV was less than 60%, a 2nd was funded giving the borrowers the "instant" liquidity they needed and at the same time allowing the borrowers to keep their low rate bank loan in place.
A Bay Area investor borrower had 2 bank loans totaling $2.1M and came to us requesting a $300K 3rd position loan in order to make a deposit on a purchase contract to acquire an investment property in Southern California. The property we were asked to lend on was worth over $5M which put us at approximately at a 50% Loan-to-Value. Immediately, we took swift action to underwrite, document, and fund the request resulting in the borrower being to able make their purchase deposit, acquire the property, and keep their existing bank loans.
Lastly, we recently did a $2.7M 2nd Position Bridge Loan for a borrower who had a 1st position bank loan and needed a new 2nd to pay off maturing 2nd and 3rd position business loans. The borrower's exit was to sell the property, which at a 45% LTV, gave us plenty of comfort and room to make that junior position loan.
2. CONSTRUCTION/REHAB LOANS - Ground up construction, rehab and construction completion loans all fall into a category that the majority of the large private money funds will not consider. These loans usually require more time to underwrite, are often complex in nature, and the inherent risk in providing construction financing is far greater than the "vanilla" loans the majority of funds focus on. Combine this with loan requests for junior position construction financing and you will find only a handful of private money lenders in California willing to take on such loans. And again this is where Equity Bridge Capital shines. Here are some examples of recent construction bridge loans we have done:
A Napa County home builder needed a $1.2M construction completion loan. The borrower had spent a considerable amount of money on acquiring and entitling the land and had started construction, but then had run out of funds to complete the project. Equity Bridge Capital came to the rescue and provided the Builder with the requisite funds needed not only to complete the project, but to also carry them through the marketing period until the property was sold.
In San Francisco, an investor recently requested $1.1M as a 2nd to complete a spec rehab project. The 1st was a low interest rate bank loan and of course the borrowers wanted to keep that loan in place. Equity Bridge Capital agreed to provide the requested completion funds by having the borrower put up another property they owned as additional collateral to secure the loan. The property when done is estimated to be worth in excess of $4M and the CLTV ( combined loan to value ) using the other property was less than 55%.
Finally, we have been making acquisition and rehab loans to residential and commercial spec developers throughout the Bay Area and Southern California. Often the purchase money loan requests are highly leveraged loans based on the upside after repair value. These borrowers like working with us as we are truly a "one stop shop" - underwriting and funding both the purchase and rehab loan on a project and working closely with the builder borrowers to assist them all along the way - in fact, it is not unusual for us to get involved in modifying loans as needed where either more time or capital is needed to complete a project.
Feel free to call or email me anytime regarding a bridge loan you need - be it a 1st, 2nd, or 3rd position loan. Equity Bridge Capital has competitive rates, fees, and terms and we will respond quickly to any request be it residential or commercial. We do loans from $200K to $20M+ in Northern, Central, and Southern California.
Art Gilberg, Broker/Owner DBA Equity Bridge Capital Tel: 415-760-2338 / Email: Art@EquityBridge.com California BRE #01868465
