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Mastering the puzzle of a successful commercial real estate loan requires more than due diligence on the borrower. To execute a solid loan transaction, shrewd originators make sure all of the existing pieces fit together — and consider how future pieces might fit into the equation. Beyond the Borrower While the history and financial health of a borrower are top concern for originators, there are many more factors at play. “Having a strong borrower is important, but it’s also critical to research the current tenants, the leasibility of the property, the desirability of the location and the long-term activity of the market,” says Peter Margolin, commercial loan originator with Chicago-based Alliant Credit Union. He describes a recently closed loan to show how lenders analyze some of the underlying factors that drive financing packages. In April of this year, Alliant provided a $6.4 million loan to refinance a 64,637-square-foot industrial building located on Statesville Road in Charlotte, North Carolina. The borrower was a REIT that focuses on single-tenant R&D and industrial properties throughout the Southeast. Husqvarna North America, a producer of outdoor power equipment, utilizes the property as a research and development facility. Terms of the 10-year loan include five years …

Providing and securing financing for student housing properties — whether acquisition, refinancing or new development — is a competitive market. “The rewards of working in student housing are numerous. There is a constant supply of tenants, revenue tends to be stable, and the sector is considered recession-resistant,” says Justyna Daniuk, commercial real estate lending analyst with Alliant Credit Union. However, Daniuk notes, student housing financing does have risks, including occupancy stability, changing taste of student residents and market competition. A lender’s familiarity with the nuances of student housing — like yearly turnover and unique leasing cycles — will lead to a better lending experience for both the borrower and lender. For example, Daniuk explains, lenders should understand that sometimes landlords have to offer shorter leases and incentives to win the business of their student-residents and their parents, who often guarantee the leases. While most financing arrangements are a case-by-case situation, there is a particular set of criteria that lenders look for to ensure a successful lending package in the ever-evolving student housing sector. Top Five Considerations for Student Housing Lenders • Proximity — A property’s distance from a university or college campus is often a top concern for lenders. Ideally, …

With a strong commercial real estate market nationwide, many originators are under increased pressure to say “yes” to financing terms and conditions that they would shy away from in a less competitive lending environment. “I don’t see the frenzy dying down anytime soon, with at least one to two more years of fairly intense competition,” says Tim Madigan, a commercial loan originator for Alliant Credit Union. With more than 15 years of experience as an underwriter before moving to loan originations, Madigan has first-hand knowledge of the commercial real estate lending market, as well as its fluctuations. “At Alliant, we’re doing our best to maintain discipline, but we are seeing a lot of aggressive terms, which I’m afraid will have unintended consequences for borrowers who jump at the shiniest offer,” Madigan says. “For example, borrowers may get re-traded, which means the financial package’s initial terms may change after the originator’s due diligence, resulting in borrowers getting burned if they’ve already committed to a transaction based on the initial financing terms.” Watch Out for Terms/Pricing Outliers Terms and pricing for any given financing package should be fairly similar – or at least within a range – for the property type, location …

Advances in artificial intelligence and machine learning are slowly changing the processes of buying and selling commercial real estate. Although widespread adaptation appears to be several years off, the application of new technology within commercial real estate appears inevitable and of enormous value. In particular, the opportunity appears greatest within the realm of property valuations, according to David Mitchell, business intelligence and operational specialist with Chicago-based Alliant Credit Union. “Developing more accurate evaluation techniques will help set healthy interest rates and lower credit costs,” he says. “This points to more efficient loan capital in the market. That’s the ultimate outcome: more efficiency and more liquidity in the market.” Valuing commercial real estate is a tremendous exercise in synthesizing information, Mitchell notes. “Understanding factors such as rental rates, vacancy rates, employment growth, demographics, new construction supply, interest rates and capital availability are not simple propositions. Understanding the interdependence of these variables, as well as accounting for historical data and knowing how to properly weight the variables is more than any one human can synthesize in a rigorous manner.” By contrast, a machine-learning model excels in an environment with massive amounts of interdependent variables. In many cases, the algorithms used in machine …

Credit unions may not be top of mind for commercial real estate investors seeking financing. In fact, many people do not realize that these lending institutions offer commercial financing alongside a variety of consumer and residential loans. These not-for-profit organizations fundamentally operate to serve their members, typically by providing attractive yields on depository accounts and by offering lower interest rates on vehicle loans, mortgages, and yes, commercial loans. As a not-for-profit organization, a credit union essentially returns profits to its membership as opposed to shareholders. Credit unions can widely vary in their ideas about what type of services and offerings best benefit their members, notes Larry Silberman, manager of commercial loan originations with Chicago-based Alliant Credit Union. Some credit unions may focus on serving a local geographic region, while others offer loans nationwide. Some may target niche markets and employers, while others look for a diverse membership base in a local community. Alliant offers nationwide commercial real estate financing from $7.5 million to $35 million with terms up to 15 years. As a credit union with a national membership base, Alliant’s commercial lending platform has no geographical limitations. Silberman notes that for Alliant, the enhanced returns that the national commercial …