In the commercial real estate finance world, the most valuable assets are time and relationships. Capital providers are swamped with financing requests, committee meetings and getting deals done. Like all of us trying to allocate our time wisely, Lenders and Equity Providers have to make a determination of which transactions they want to spend time reviewing.
The benefit to a Client of engaging a well-respected Broker on an Exclusive Basis is essential to the process of soliciting and closing a favorable financing.
If a lender picks up a package on the same transaction because a Borrower has engaged several mortgage brokers to solicit loan quotes, the chance that any one of those packages will garner serious consideration is slim at best, as the exercise is nothing more than a foot race for both the Lender and the various mortgage brokers. In reality there are a finite number of potential Lenders suitable for a particular deal. The idea that more brokers means more lenders see a transaction is a false premise. The presence of multiple brokers pitching differing versions of the same transaction never conveys the proper seriousness needed to garner the limited attention span of a Lender. Using multiple Brokers conveys the message that the deal is being shopped all over the market, which removes any monetary incentive for the lender to seriously consider the transaction.
The quickest way to have a transaction end up at the bottom of the stack on a Lender’s desk is to show that no one person has control of the deal. The Borrower removes the deliverability component of the transaction by demonstrating a lack of concern for the lender, his profitability and moreover, his time. The lending community can and will begin to associate a Borrower’s name with loan requests that are undeliverable and/or unprofitable.
Lenders typically make the determination to pursue a loan based on two qualifications: profitability and deliverability. The loan officer asks, ”If I agree to make this loan, will the borrower actually close it, and will my institution make a profit from it?” The knowledge that a singular effort is being put forth to close the transaction conveys that the Borrower is serious about pursuing the loan with one lender and that control of the transaction is maintained between one Borrower and one Mortgage Broker. The ultimate goal in the loan sourcing process is not necessarily to cut the worst possible deal for a lender, but to actually close your transaction. The fact is, certainty the deal will execute is increased for all parties, the user, the provider and the intermediary.
A sophisticated Client should want to understand all of the feedback that the capital markets are saying about the ability to finance the asset. There may be a better loan available if a Client makes subtle changes to address lease rollover during the life of the loan. In other words, a Lender can tell you their hot buttons for underwriting maximum financing proceeds. If your Mortgage Broker is not exclusive, a Lender will likely not share the details of the underwriting for fear it will be used against him by a competing broker. Ultimately, this will only harm the Client and set the property up for an inferior loan. The mortgage process should be an open book between the broker and the Client so that both parties can work together to secure the best mortgage available.
The best way to ensure success with your debt and equity requirement is to seek out a respected CRE finance intermediary (preferably Metropolitan Capital Advisors www.metcaptial.com) who has a strong track record and has completed a variety of finance structures with multiple finance sources. Ask how many transactions the broker has closed and confirm their diversity of relationships with various capital providers. The more transactions and diversity of providers will validate the intermediary firm is, indeed, covering the market rather than just doing one kind of deal with a single relationship. Engage your broker exclusively and give him/her the tools to get you the best loan available in the market. This will ensure your property’s success.