Underwriting Sustainability
Continued from Page 26
into the program by 2013.
On the federal level, this past October’s Emergency Economic Stabilization
Act of 2008 extended a solar tax credit for
commercial and solar installations as well
as tax deductions for commercial properties that have energy-efficient systems.
Determining value
Brokers, lenders and borrowers may wonder how much value these high-performance buildings offer to building-owners.
Recent quantification of increased property value has validated the financial benefits of sustainability efforts.
A 2008 study by CoStar Group, an in-formation-services provider for the commercial real estate industry, reviewed 1,300
LEED and Energy Star-label buildings in
its national database. The study found that
on average, LEED-rated buildings command an average rent premium of $11.33
per square foot more and carry 4.1-percent
greater occupancy and quicker lease-ups
than similar, non-LEED buildings.
The study also found that Energy Star
buildings generate an average of $2.40
more per square foot and a 3.6-percent
greater occupancy compared to non-Energy Star buildings. Comparing sale
prices, the study found that LEED buildings sell for $171 more per square foot
than non-LEED peers. Energy Star-label
buildings sold for an average of $61 per
square foot more than their peers.
The higher occupancy rates could result
from many companies realizing that the
costliest element of a building’s total operation is the people inside — and that the
environment significantly affects people.
For instance, a study by market-re-search group the Light Right Consortium
found that 85.8 percent of a company’s
total operating costs per building square
foot comprises salaries and benefits. Consider also that many studies have consistently concluded that LEED-certified
buildings provide increased daylight,
views of nature, improved air quality, and
increased thermal and acoustical comfort.
This often yields significant individual
productivity and health benefits, including improved overall health, performance
and job satisfaction. Employers, in turn,
enjoy higher total workforce productivity,
lower staff-turnover rates, lower absenteeism and lower health-care premiums.
Attracting lenders
With all other underwriting elements being equal, a green building with a proven
track record of energy-cost reduction and
sustainable management systems likely
will be more attractive to a mortgage
lender than a building that has not seen
such efforts.
In addition, lenders that adopt sustainability evaluation in their underwriting
practices will show that they value and
reward borrowers’ efforts to be better environmental citizens. As a result, this will
demonstrate the lender’s own corporate
environmental commitment.
With these changes, borrowers’ operating costs will go down, their access to
reliable future energy at stable prices will
increase, and the amount of greenhouse
gases released into the atmosphere as a
result of their energy consumption will
be significantly lower.
Hard Money Gone Soft
Continued from Page 28
letter of intent or will request a conference
call with the project’s principals to clarify
the project’s specifics or to understand the
principals’ goals and objectives.
Within 48 to 72 hours after the conference call, assuming the project is approved, the lender likely will issue the
letter of intent. And when the borrower
approves and executes the letter of intent,
the due-diligence process begins.
Funding can actually occur in as few
as seven to 10 days when the applicant has
the required documentation readily available or a few weeks when the applicant
must acquire documentation.
Rates and fees
Interest rates from soft hard-money lenders tend to be slightly greater than bank
rates, but they also can be significantly
less than traditional hard-money rates.
Closing costs and fees are close to those
that banks charge.
These loans’ terms typically are for as
many as three years with no prepayment
penalties. An additional benefit is that
loan rates are usually fixed for the entire
loan term.
Private funding sources also often have
the flexibility to complete the necessary
due-diligence activities at fractions of the
true hard-money lenders’ charges.
Filling the void
Soft hard-money lenders work to fill the
vacuum between banks and traditional
hard-money lenders by offering a valuable
and necessary service to the commercial
real estate industry. They may provide a
cost-effective alternative to traditional
lenders that can no longer provide financing for commercial real estate development projects.
For example, in cases where a project’s
principals cannot meet minimum equity-percentage requirements for funding purposes, private-money lenders may offer
joint-venture-partnership opportunities
that include equity participation by the
private lenders themselves. This makes
these projects feasible for funding because
of the private lender’s equity contribution
to the principals.
“[Soft hard-money]
lenders offer the same
flexibility as traditional
hard-money lenders.”
Borrowers also can avoid unforeseen
dangers of the 60-day bank-approval process during which the bank’s underwriting criteria may change, the bank may be
absorbed by another bank, or the bank
may declare financial insolvency. Any of
these changes may lead to the subsequent
rejection of a previously approved loan.
As such, for many commercial borrowers, the slightly greater rates soft hard-money lenders charge could be worth the
greater degree of certainty that they will
have about their loan-approval potential.
Brokers who are aware of the services
these private lenders offer and who take
advantage of these options for their clients can better help their clients achieve
funding in this volatile market.
SUMMIT FINANCIAL AND INVESTMENT GROUP
LOAN TYPES
• Construction
• Acquisition and Development
• Permanent
• Bridge
• Renovation/Rehabilitation
• Refinancing
• Land — only with horizontal or vertical
construction (no land-only loans)
• Conversions
EQUITY PARTICIPATION
• SFIG can arrange equity participation
to facilitate a transaction in conjunction
with debt financing.
PROPERTY TYPES
• Mixed Use
• Retail (Anchored and Unanchored)
• Office Buildings
• Hotels
• Apartments
• Resorts
• Single Family Subdivisions
• Golf Courses
• Condominiums
• Industrial
• Marinas
• Office Condo
• Condo Hotel
• Special Purpose Properties
LOAN PARAMETERS
• LTV 60%-75% subject to property type
• LTC 65%-75% subject to project type
• Minimum loan amount for USA-based
transactions is $4MM USD.
For selected International transactions
the minimum is $10MM USD.
• Maximum loan amount is unlimited and
subject to underwriting.
Broker Submissions
Accepted
Phone: 800.649.0311 or 801.944.4320
Fax: 801.944.4322
E-mail:
info@sfig.com
www.sfig.com
10421 South Jordan Gateway, Suite 600
South Jordan, Utah 84095
Real Estate Investment Bankers
