PulsePoints

Lenders usually get accurate data, but it’s almost always incomplete. Borrowers need to carefully review all statements, census data, and legal documentation. If the borrower will be paying off the debt, it’s important to make certain that the debt is open to prepayment.

It’s never a good idea to fudge even a little bit when presenting information to lenders. However, lenders routinely deal with projections and projections can get very aggressive.

A pragmatic approach is most desirable. It’s important to spend the necessary time and energy needed to generate and project the most accurate information possible.”

There are many ways to organize census data, none better than others. The key when presenting a rent roll or similar document is for the borrower to generate as much detail as possible. More information is generally better than less.

When lenders ask for current debt information, the important items are outstanding debt amount, term, interest rate, amortization, prepayment option, and personal recourse. Ideally, the lender will get a copy of the mortgage and note.

There are many reasons why it’s important for borrowers to be diligent and careful when presenting information to lenders.

Productive, long-term relationships are built on the expectation that the information provided by borrowers will be accurate and reliable. Long-term relationships are important because they enable borrowers to gain greater understanding of the capital markets but also because they make the outcome of any loan application more predictable.

Shake a hand, make a deal with Cambridge.

The arrival of Labor Day weekend means that summer is waning, that it’s back-to-school time, and for Cambridge, it also means that “NIC” is just around the corner.

The Sheraton Chicago Hotel and Towers will be buzzing with activity from September 22^nd through the 24^th – with movers and shakers from the entire senior housing/healthcare industry on hand for the 20^th Annual National Investment Center Conference, or “NIC,” as we call it.  There will be seminars, keynote speakers, strategies for providing value and revenue growth in this tough economic climate, and meetings – lots of meetings – for everyone in the industry, whether you are an owner, lender, or broker.  The NIC Conference provides a valuable networking opportunity for face-to-face conversations and developing new business relationships.

We’ve participated in nearly every NIC Conference over the past 20 years, and are again proud to be a Sustaining Research Sponsor of this top deal-making event. We are gearing up and getting ready for this important chance to meet with our industry partners, clients and friends. We hope to see you there.

Don’t worry about having all the answers. In fact, nothing turns lenders off faster than a borrower who thinks they already know everything. Keep an open mind when searching for the funding solution that will best fit your particular needs.

Trust your lender’s expertise. If you can’t, then the best option for you is to find another lender.

Lenders generally welcome questions. When checking out a lender, take the same sort of approach a personnel director might take when interviewing and hiring new employees.

Don’t be afraid to ask questions, and don’t be afraid to seem like you’re prying. A lender should be an open book. Ask about the number and type of deals the lender has closed, and about the amount of time various funding options might take to process in the current economic cycle. Also, ask your potential lender to explain the differences between quotes and final commitments, and they should be ready to candidly field questions related to timing or execution. Remember, keep an open mind, but expect your lender to be open with you.

Horse.

Cart.

In that order.

Be excited about new about new initiates that will increase your funding options, but don’t let your excitement cloud your judgment.

Remember, some things never change.

“Before opening a dialogue with a lender or financial intermediary, senior housing and healthcare borrowers should carefully evaluate their needs and the various types of funding options that may be available to them. But it’s rarely a good idea for borrowers to presume they understand the capital markets well enough to sort everything out on their own,” says our CEO, Jeff Davis.

In today’s market, borrowers may qualify for a variety of different products from short-term bridge loans to fixed-rate long term loans, he points out.

For example, Government-insured HUD loans are available for nursing homes and assisted living facilities, and Fannie Mae and Freddie Mac have programs for independent living and assisted living properties. Credit companies are now underwriting loans for assisted living and independent living properties, and banks, finance companies and brokerage companies are becoming more active across the board.

“Although the spigot is not as tight as it once was, lenders aren’t throwing caution to the wind. They still expect borrowers to demonstrate business acumen. And they expect them to be able to show their operations are either making money or have the potential to do so,” Davis said.

“Borrowers most typically need advice or direction when dealing with the process of gathering and presenting information about their business to prospective lenders. Usually, the type of loan they’ll qualify for will be dependent upon the performance and location of the property and the borrower’s financial strength,” he added.

Get advice from a funding expert.

Then proceed with your loan.

In that order.

If economists at the Federal Reserve Board have it right, a return to economic normalcy is not in the cards anytime soon.

In the Dickensian picture painted by the Fed, unemployment remains high but the odds of inflation ramping out of control are low. Both household and business spending have been increasing, but international spillover from the European debt crisis is causing further contraction in the U.S. capital market. Says Jeff Davis,

From the perspective of senior housing/healthcare owners and investors, it is the best of times because interest rates are near historic lows and drifting lower. But tight credit markets remain problematic. The Fed is suggesting that it could take another five to seven years for the economy to work its way back to what passed for normalcy not long ago.

In the meantime, senior housing/healthcare owners may be well advised to consider a long-term financial strategy that is both patient and opportunistic. Although opportunities for funding new construction are limited, refinancing an existing loan using the new HUD Lean product should make sense to a growing number senior housing/healthcare owners.

For example, for borrowers who can take advantage, interest rates on HUD 232 LEAN loans are near rock bottom after drifting steadily lower in recent weeks.

HUD rates tend to move up and down based on developments in the U.S. government bond market. And rates on 10-year Treasury notes have been moving steadily lower, from 3.76 percent in April to 3.03 percent by mid-July, as investors forsook volatility in the stock market.

Fred Tannenbaum recalls watching Jeffrey Davis walk away from more than one deal because it couldn’t be made to work for all involved parties.

“For Cambridge, it’s an integrity issue. The deal that doesn’t produce a favorable or desired outcome for everyone is not worth doing,” Fred observed.

Mr. Tannenbaum is one of five managing partners at the prestigious Gould & Ratner law firm in Chicago. The 50-member firm serves as legal and business advisors to entrepreneurs and to closely held family-owned, middle market and Fortune 500 companies.

The Illinois Venture Capital Association describes him as a leading expert on private equity and venture capital, and he is a well-established authority on mergers and acquisitions as well. During his 20-year career at Gould & Ratner, Mr. Tannenbaum has represented clients in more than 500 mergers, acquisitions, divestitures and strategic alliance transactions and has been involved in more than 250 venture capital transactions as well. He says his professional association with Cambridge dates back more than 10 years.

“Over the years, Cambridge has emerged as one of the most knowledgeable and uniquely positioned companies in America dealing with senior assisted living. Among the niche companies serving this broad and growing demographic Cambridge is without peer,” he believes.

“Jeff routinely bounces ideas off me and we look at investments together. His knowledge and understanding of the business, from every conceivable angle, is impressive. And the company’s wealth and breath of industry contacts is overwhelming,” he maintains.

Mr. Tannenbaum describes Cambridge as an accessible, “hands on” company. Bureaucratic posturing is not part of the company’s corporate culture.

“You get to the top rather quickly. And indecisiveness isn’t something you’re likely to encounter when you get there,” he noted.

“Cambridge knows exactly what it wants and expects to see in a deal. No effort is made to force things.  If specific criteria isn‘t met for whatever reason, the company will move on — no matter how much time has been invested in the deal,” he said.

Have you ever walked away from a deal?  What helped you make the decision?

Searching for answers to your finance questions? You’ve come to the right place. We want to answer those questions: any question about finance, senior housing, mortgage lending, or whatever else you can think of. We’re offering free, no-strings-attached 30-minute consultations to our blog readers.

There’s just one catch: first, you have to go on a scavenger hunt.

Here are the rules:

1)      Read the questions posted below.

2)      Answer the questions by reading our summer blog posts (June 1-August 6)

3)      Submit your answers to ew@cambridgecap.com

4)      If you get at least 4 out of 5 answers right, we’ll contact you to set up your 30-minute consultation.

The Questions:

1)      Name three tips for financing in a tight market.

2)      How long should it take to process a conventional HUD loan?

3)      What is the projected rate of inflation, according to Dr. Charles Evans?

4)      Name one of the three steps to start your financing search.

5)      How many people attended our summer party?

Submit your answers to ew@cambridgecap.com by September 21, and we’ll set up your meeting!

We are excited to announce that recent college graduates and former Cambridge interns Ashley Bauers and Agnes Gruba have been hired for entry-level positions in the financial services industry.

Brent Holman-Gomez, senior vice president, says, “It is particularly remarkable in the present job market that both were able to start jobs immediately following graduation. We’re very proud of them.”

Ashley, DePaul graduate, completed a 14 month internship at Cambridge and was promoted by the company to Senior Associate. She joined Discover Financial Services, in the firm’s operations leadership program.

Agnes, a graduate of the University of Illinois-Chicago, was in the intern program for eight months and now is employed by Bank Leumi as a credit analyst.

Our intern program is designed to provide an opportunity for students to apply knowledge learned in the classroom in a professional environment. Over the years, Cambridge has employed more than 30 paid interns from DePaul, Loyola University, UIC and Roosevelt University, as well as other schools.

“Our corporate culture embraces the idea that student interns expect to be challenged and are capable of making worthwhile contributions to the business,” Brent said.

Four former Cambridge interns have senior positions with the firm today. In this group are senior vice-president Brent Holman-Gomez, senior vice president Sampada d’Silva, vice president Anthony Marino, and Loan Manager Katie Trice. These four employees play key roles in guiding the internship program, and  their experience means that they take the time  to mentor and teach student participants.

Interested in learning more about the program? Students can submit a resume hrdept@cambridgecap.com.

Did you have an internship before you began your full-time career? How did it help you? What did you learn?

We closed six transactions totaling $40.4 million during the first half of 2010. Jeff Davis, our President and CEO, reports that activity totals should be even more robust in the third quarter:

Given the economic challenges, we’re very pleased with the way the year is shaping up. Based on loans currently being processed, it now appears that third quarter closings alone could exceed totals for the first six months of the year. With interest rates at current low levels, borrowers are reconsidering the economics of their current situation and giving more serious thought to the refinance option.

Have the low interest rates caused you to consider refinancing, or do you plan to wait until an economic turn-around?

When you think of long-term relationships, you think commitment, trust, understanding, HUD LEAN programs…Oh no?

Maybe you should.

A long-term relationship with a lender brings you the same kind of commitment, trust, and understanding that you look for in other relationships, but this time, the rewards are financial.

For example: a solid relationship with a lender can mean you can move ahead on a property acquisition without worrying about where the money is coming from. You’re better positioned to predict your lender’s behavior, and you’ll be able to take ownership of the funding program.

Try thinking of your next loan as a first date. Look for the qualities you’d want in a long-term partner. Does the lender deliver on their promises? Do they inspire confidence? Did they set realistic time frames?

If these questions aren’t answered quickly and satisfactorily, it’s time to start looking for a new potential partner.

In a perfect world, a lender would be able to fund any type of transaction, but in reality, this doesn’t often happen. Put together a list of the types of transactions that you’re likely to consider in the future. Compare possible lender partners to this list. If they can’t measure up to your standards, they aren’t worth your time.

Look for a lender that you can see yourself spending many years with. Financial relationships are the kind that get better with age.

We’re constantly trying to improve our relationships with borrowers, and always looking for new ways to build that trust and understanding. What are you looking for in a long-term lending partner?