|One lender’s answer to LANDING A LOAN
For conventional lenders, land loans can be a daunting proposition. Reluctant to fund non-income-producing properties, they often impose stringent underwriting protocols. Until boutique firms stepped in to fill the gap, entrepreneurs were hard put finding the monies to fund land acquisition, infrastructure, and/or pre-construction work.
One lender carving a niche for itself with non-conforming loans is New Jersey-based MEECORP CAPITAL MARKETS. Extensive experience with land and construction nationwide gives them an edge that can translate to time and money for the borrower. This expertise also enables MEECORP to customize loans to the specific needs of a borrower and close on projects that other lenders regretfully turn away.
“We like these kinds of loans,” explains Daniel Edrei, Director of Origination at MEECORP. “One thing about land…they’re not making any more of it. Although the market for such properties may be volatile, historically land will always appreciate.”
Land loans can be pricey, but they’re a godsend to developers who hate to pass on a golden opportunity or face the prospect of taking on a partner and divvying up the profits. Borrowers can expect LTVs in the neighborhood of 50-60% on land and as much as 60-70% on infrastructure, depending on the strength of the exit. MEECORP will also fund land without an exit at considerably lower LTVs. The terms usually span 3 years, with no prepayment penalty. Some noteworthy closings at the firm include:
A developer who had the idea to construct a complex of hotels and condominiums on a riverfront lot (pictured above) in Wabasha, Minnesota. The property was located at the heart of a gentrified neighborhood, but housed a dilapidated mill and factory buildings. The borrower had obtained a commitment for a construction loan, but needed a bridge to satisfy its preconditions. He came to MEECORP to finance the purchase of the land, the demolition of existing structures, some environmental clean-up, and other pre-construction work. MEECORP extended a $1,750,000 line of credit over 3 years, offering LTV of 50% on the land and 80% on the infrastructure.
Another involves a major developer with projects nationwide who was looking to purchase an RV park consisting of 80 acres of bay-front property in North Carolina. The owner of the lot was in bankruptcy, and there was a court order for the sale of the property. The borrower had only a short window of opportunity. MEECORP was able to get him the funding within 7 days of court approval. The loan of $3,000,000 was issued at 60% LTV with a term of 3 years, though the developer paid it off within the first18 months.