“If there has ever been a time to work with people, lenders and investors that have experience, that time is now,” according to Cambridge Realty Capital President Jeffrey Davis. Living in the throes of a pandemic that is, after more than 18 months, still raging on, there is no room for error when it comes to financing. The COVID-19 pandemic has ravaged the economy, making it more important than ever to maximize the impact and effectiveness of not only every dollar but every nickel. “Anybody learning on your nickel and not getting your deal done should be eliminated from your thought process,” Davis urged.
Choosing an experienced and effective capital partner is key to maximizing your dollars (and nickels) and making them work harder for you in a post-COVID environment. Davis particularly asserts that senior living borrowers keep three points in mind when proceeding with a lender.
Ask the right questions. Davis notes that borrowers are often rife with questions that are specific to their own situations. However, they don’t always know how to determine how competent a particular lender is at closing deals. Davis advises borrowers to ask direct questions of a potential lender like:
How many deals like the deal you are working on right now have you closed? How long does it take to move forward?
When do you ask for any good-faith deposit? Why do you need it now? Why can’t it be longer until you’ve cleared this hurdle up?
How do clients react to your programs? When can you lock the rate?
“If a lender has trouble answering these questions, or gives you an answer that’s cause for pause, these are red flags that shouldn’t be ignored,” said Davis, adding “do not be fooled by a term sheet, but a closing as promised is what’s required.” It’s also a smart idea to review other deals a lender has closed and ask them how the closing process goes so that you know what you can expect. Finally, and perhaps most importantly, ask how many deals like the deal you are talking about that the lender has closed.
“As a potential client, you can ask as many questions as you need to in order to understand what you’re getting into,” Davis stressed. “You cannot be too specific in the questions you ask. Do not hold anything back; put everything on the table prior to writing a check.
Talk and understand how your deal will move forward and who will be doing what.”
Enter a partnership with full confidence. You know the saying “live and learn?” Now is not the time for living and learning, Davis emphasized. “In a post-COVID economy, there is simply too much at stake to risk choosing a first-time professional. Make sure your lender 100% understands what you’re looking for on the deal you’re working on together. Experience in many deals, such as Cambridge has completed, will set your deal apart and make sure the lender works and prioritizes your type of deal.”
Know how to decipher the lingo, especially when it comes to language that may indicate a delayed or failed deal. A lender may say something like:
We love the deal but need to take more time to understand. We need to share with our final underwriters and committee.
Please share updated numbers so we can share them with our preliminary committee. We can get the deal done in a few more weeks, if not sooner.
Any of these phrases may be “lenderspeak” for a delayed deal. Additionally, Davis points out that actions like being slow to return telephone or email inquiries may also be indicative of a lender’s inability or reluctance to move forward in a timely manner on your deal.
Researching lenders and doing one’s due diligence to properly vet lenders is key to a successful deal. “There’s simply too much at stake to choose a financial partner from the Yellow Pages,” Davis reiterated, reminding that “in a market like this, all questions are fair game. No question by a borrower is a bad question. Never be in doubt when you sign your term sheet, and make sure your lender has a thorough understanding of your loan and has presented that deal to their preliminary committee. With interest rates continuing to be at all-time lows, it’s the right time to work with a capital partner who can do what they say they can do and nothing.”