What questions do you ask when evaluating banks and lenders?
[{"id": "f6vcpnk", "text": "What is the interest rate?", "replies": [], "depth": 1}, {"id": "f6vdwdr", "text": "Interest rate and origination fee. Also online portal. You\u2019ll be surprise at how many banks don\u2019t have great online portals to upload docs, and it can be so annoying.", "replies": [], "depth": 1}, {"id": "f6vfdyg", "text": "I am a banker, you should ask me if I am going to close at the quoted terms. Quoting a deal is easy, what is harder is actually closing at the quoted terms. If I retrade, I am fully aware that I will never see repeat business from the broker or sponsor.", "replies": [], "depth": 1}, {"id": "f6vhbik", "text": "If they have experience with the type of financing you\u2019re trying to obtain. And how they\u2019d dealt with fluctuations in markets and downturns that result in hardship for the borrower. You need a bank that is comfortable with the asset type and willing to work with you during hard times.", "replies": [], "depth": 1}, {"id": "f6vlg3a", "text": "I work closely with debt instruments on the lending side and also on equity side for acquisitions. \n\nThe things to be very mindful of:\n\n1) Assumption fees (should be ~0.5% initial, 1%-1.5% thereafter)\n\n2) If you\u2019re doing CMBS, ask about Guarantor requirements. Someone or some cash cow of a company is going to pledge Guarantorship in case things go Full Recourse. \n\n3) IO or PMI? I\u2019m a big fan of IO loans and then Refi that shit 1-3 years before the balloon is due. \n\n4) Reserve balances. This is huge with CMBS. You\u2019ll have to budget for them to collect a separate payment directly from your cash flow to fund rollover reserves and TI/LC reserves and such. \n\n5) Cash sweeps. Ensure your lender has fair terms and metrics to allow for sweeps only when truly necessary. This sort of skill comes with doing lots of financings firsthand. But it\u2019s critical. \n\n6) Lender\u2019s Consents. Don\u2019t agree on the Lender having lots of control over what they define as \u201ccollateral changes\u201d or \u201cmajor decisions\u201d. You will have to get prior consent to do even obvious fucking improvements to the property, including and not limiting to stuff like signing a new value-add tenant despite how great they are, doing changes to parking lots/other CapEx, terminating a Lease with a tenant. Etc. So read your loan documents WITH AN EXPERIENCE CRE LAWYER who can dumb these provisions down for you so you can negotiate less invasive oversight.", "replies": [{"id": "f6w9ge4", "text": "if you refi a CMBS  IO loan 3 years before the balloon is due aren't you getting hit with some pretty heavy defeasance?", "replies": [{"id": "f6wiqqu", "text": "Well it depends on your terms. Even if your window to refi is 1 year that\u2019s still a solid strategy", "replies": [], "depth": 3}, {"id": "f6ypzjx", "text": "Depends on your deal. Some CMBS lenders offer a 3-2-1 for the final 3 years (assuming a 10-year term)\n\nIt\u2019s all negotiable", "replies": [], "depth": 3}], "depth": 2}, {"id": "f6wauhg", "text": "Mind if I PM you regarding the type of work you do? I work closely with all of the above items and am wondering about rotating into a banking role at some point in my career.", "replies": [], "depth": 2}], "depth": 1}, {"id": "f6vsay6", "text": "Honestly, as a former banker... Asking if the bank can get the deal done. Anyone can quote you a rate and terms, but a good banker will know their underwriters risk appetite for the asset type you\u2019re wanting to finance. You would be surprised the number of deals that fall through at the nth hour that were never going to make it through in the first place. Some banks just don\u2019t like certain asset type.\n\nAlso, asking about tech is a good question. As a former banker at various banks, it was appalling how far behind banks are in regards to tech. They are like the govt in many ways - hanging on to systems of the past for way too long.", "replies": [], "depth": 1}]