BRIDGE LENDERS TAKE OVER WHERE BANKS LEFT OFF
The prospect that borrowers will need short-term solutions to ride out the bank write downs of their portfolios fuesl bridge lenders' anticipation of higher volumes in 2010. Expect bridge lenders including Mager Capital, Mercury Capital, Newport Capital Advisors, Dominion Healthcare Financial & Lexden Capital to step into the breech via increased lending, new loan programs, geographic extension, or different property types. Both Mager Capital & Dominion Healthcare see the opertunity to put out more money, with Mager Capital taking aim at southern California hard money and Mercury Capital eyeing retail properties with loans coming due. Lone Oak fund will take its unleveraged fund to smaller California coastal markets to write bridge loans. Mager Capital launches a new bridge loan program that competes with Lone Oak fund. Lexden Capital could make a bridge play in multifamily with plans to role out a bridge to HUD program.
The coming year likely will be prime time for bridge lenders. From the $1.4 trillion in commercial real estate loans that need to be refinanced by 2012 to 2008/2009-vintage loans extended by banks, there will be no shortage of borrowers needing money. Many of these bridge lenders will do deals of $10M to $30M - the range expected to have the least amount of competition from traditional financiers. LC's will take bigger loans while a host of lenders will tap the small-balance market, joined, of course, by some players like Mager Capital.
The biggest obstacle facing bridge lenders will be a possible reemergence of CMBS in 2010. Private investors and banks have already begun starting up or reopening conduit arms. CMBS issuances so far have been for deep-pocketed borrowers. If the faucet turns into a flood of conduit lending offering five-year loans, it would be heavy competition for bridge lenders, beating out the typical two- to three-year lenders operating in the $10M to $30M range will be the primary source of loans.
NEW PROGRAM COUNTS TO BEATING CMBS WITH PRICING, FASTER CLOSING
Mager Capital ramps up its bridge efforts to take advantage of the continuing lack of capital. CEO Sasha Mager sees impending pressure from the money losing FDIC on banks to write down properties, sell off notes, and shake down borrowers. Banks haven't done done much of these things lately, but eventuall FDIC pressure should create movement that would create a space for Mager Capital to continue bridge funding. Even the prospect of a resurgence in CMBS doesn't dampen Mager's hopes as he sees fthe first conduit loans as being pricey and possibly slow to execute. Meanwhile, newport will chase first mortgages with the potential to close within 20 days. Newport will do loans in the $2M to $20M range with pricing at 10% to 14%.
Mercury Capital's focus on retail feeds into Director of Originations Ryan Farkas' idea that this sector will offer a unique opportunity since positive growth should come about during the next few years with increase in consumer spending. Mercury's 12% interest rate capital offers the gap funding for many types. Its loans are a bit shorter than three years with amounts ranging from $1M to $10M. Mercury expects to lend more in 2010 than 2009 though it has no specific loan allocation goal.
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About Mager Capital: We make 1st and 2nd position, hard money, bridge loans on California real estate.