|Condo Developer Turns to Private Lender
THE CRITTENDEN REPORT
Reprinted with permission from the June 2003 Issue
Expect to see more money from private lenders reach the residential construction market in tertiary markets throughout the nation. Most construction lenders are looking for healthy markets and are targeting specific geographic locations, but opportunities abound for private money in places that would not immediately spring to mind. Especially if a developer has money tied up on projects and not enough equity to pass muster with local banks, with which the developer may have a long standing working relationship. In come bridge lenders to fill that gap.
Private lender Meecorp closed a 36- month, 1.6M revolving construction loans in Marion County, Ind. The project is gated community for affluent retirees to be known as Baden Manor. The 17.2-acre subdivision has been approved for a 68-unit duplex condominium complex. The lender priced the bridge loan around 11% Meecorp charged 3% for the interest only deal.
The borrower came to Meecorp to fund both the acquisition of the vacant land in suburban Indianapolis and the construction of the Class A units. The developer had a limited amount of equity, and was unable to secure funding from traditional sources. The Fort Lee, N.J.- based private lender liked his extensive experience in construction and real estate sales, the 60% pre-sale on the condos and his willingness to produce performance guarantees for completion. The revolution line of credit will be funded at 60% LTV on the as-is property and 100% for the construction. Target sell out date is 2005, with condos averaging $159T.
Meecorp also writes conduit loans with major Wall Street investment banks. Meecorp underwrites loans from $1M to $30M, backed by commercial properties nationwide. The president of the family-owned firm, Michael Edrei, said 25% of the money for Meecorp’s investments comes from high net worth individuals and 75% from investors.