Commercial Property Equity
I wish we could take credit for this brilliant idea, but we can’t. So How Does one Tap into Commerical Property Equity without refinancing. One of our commercial lenders gave us the idea. Read on…..
Reprint from Karen Schimpf May 11
You know the situation…..client owns a property that cash flows nicely and has appreciated in value but it has a HUGE pre-payment on it like Defeasance or Yield Maintenance. You don’t want to sell it yet and the large pre-payment penalty prohibits you from refinancing. What do you do?
How about tapping the equity with a lien against the shares? WE NOW HAVE A PRODUCT THAT CAN GIVE YOU A LOAN AGAINST YOUR PERCENTAGE OF OWNERSHIP, YOUR SHARES, RATHER THAN THE PROPERTY ITSELF. This loan will not show up on the title and will not trigger any clauses in the documents. You essentially pledge your minority interest to tap QUICK CASH. This works great for PARTNERSHIP buyouts as well. CLOSINGS ARE QUICK, TYPICALLY LESS THAN TWO (2) WEEKS! And the loan is TAX FREE.
Let me give you an example. I have a borrower who constructed an assisted living facility and it is renting up. The cost to build was $20 Million and they took out a loan of $13 Million. They are mostly full and in about a year they will have the occupancy percentages and will qualify for a HUD loan with a rate in the 3’s. The property is worth $26 Million now and some of the investors are wanting to cash out. They want to tap about $3 Million in equity and do a $16 million refinance but all the refinance options available are not working for the client. Instead, they could just get a $3 Million loan, pledging the shares, and tap the equity quicker and easier.
This works for any cash-flowing commercial property where the value now is much greater than the amount owed and you want to tap the money in it without touching the first mortgage lien for whatever reason. These “Equity Loans” can go from $1 Million to $10 Million. They are NOT available on Ground up construction, must be existing and cash flowing.
If you or anyone you know has a commercial property that cash flows and they want to tap some of the built-up equity and want to get a quick $1-10 Million out, give us a call and we’ll introduce you to Karen Schimpf.