Need advice on re-financing my commercial real estate, if possible.
I have a production facility in Indiana.  It is 35,000 square feet.  It was recently appraised for 680K, and I have 135K note against it that has been paid on time.

There is one tenant at the moment who pays, although that tenant is in financial difficulty.  I would like to refi and clear 300K, so that would be a 435K loan on the 680 equity.  Of the proceeds of the loan, I would be starting another business that would then rent some of the space, so that would be two tenants.

The collateral is strong as it is right by a major armed forces base.  I have high bays, paint booths, and other stuff like that.

Any advice on finding a lender for this plan?

[{"id": "c4qdsjk", "text": "Are you asking this question because you been turned down or because you think that nobody will lend you money? If you have been turned down I would call 5 other banks. They are desperate to lend money especially on a healthy loan to value ratio like this deal. The appraisal is usually  based on market income, not actual income. \n\n It's none of the above applies, I would start calling commercial real estate brokers and asking for referrals. Commercial real estate appraisers would also know who is lending money.", "replies": [{"id": "c4qdxsy", "text": "Thanks.  Here is the situation.  When I say \"I\" own it, I own it with my two other business partners.  \n\nOne of my business partners had been in charge of this operation, although it has become apparent that he is hopeless on financial operations (although he is a great business development guy).\n\nSo, I got home from the unit I was working on, and for various reasons am suddenly in charge of this.  \n\nMy basic problem in dealing with banks is that they nod along and you spend a month filling out forms only for then to tell you no for some reason that really they could have told you up front.\n\nSo for example, if it is a hopeless situation to refinance because the tenant's finances are bad, I am hoping to just kind of know that without spending two months hopelessly trying to refinance.", "replies": [{"id": "c4qejhn", "text": "The lenders that I talk to typically give an answer within a day or two. If you have a least 2 years of real estate income reported on your tax return, 6 months of reserves equivalent to all mortgage payments on all of your properties, and at least 700 credit score, you should be good to go. You should get a list of required documentation at the very beginning of the process. I haven't had to wait more than a week for an answer and usually I have an answer that same day. \n\n An alternative would be a private lender, like somebody who wants to get x percent on their retirement money.", "replies": [{"id": "c4qf1ok", "text": "interesting.  This is all new to me.  This property was not bought as an investment, it was bought to service government contracts that my other company has.  So, I really have no experience in this.  I personally have no real estate income on my tax return.  Any ideas for lender to talk to?", "replies": [{"id": "c4qii88", "text": "Always start at where you bank regularly, or where you keep the operating account for that particular property. Some key terms that you need to know are:  loan to value ratio (LTV) and debt (service) coverage ratio. Real estate is local and so are lender requirements. In my neck of the woods, lenders will lend up to 75% of the appraised value as long as Net Operating Income (NOI) divided by annual debt service (ADS) is greater than 1.3. Colloquially you may hear:  we will lend 75% LTV with a one three debt ratio.\n\nLTV:  commercial banks/lenders will lend on appraised value only, regardless of what you paid and regardless of your cost basis. \n\nNOI:  take the gross rental income and subtract a vacancy allowance (5 to 15%), re taxes, hazard insurance, owner-paid utilities, management fee - even if owner managed, and an allowance for a capital expenditure reserve. Do not subtract depreciation or income taxes.\n\nThese calcs are your ticket to the dance.", "replies": [{"id": "c4qima5", "text": "Thanks.  My problem is that the tenant, which happens to be another one of my companies, is a credit risk.", "replies": [{"id": "c4qkqal", "text": "I am not telling you to lie but I am telling you not to volunteer that kind of information. Bankers have a set of ethics and they are required to not ignore certain types of information. They need you more than you need them is a better tone to take. You did not get where you are by being a pushover.", "replies": [{"id": "c4qky6h", "text": "thanks for the advice.  Won't they ask for the financials of the tenant though?", "replies": [{"id": "c4qlqmn", "text": "Doubtful, unless it's some kind of long term triple net lease. I come from the appraisal side and for many many years I thought I couldn't become an investor or landlord until I started calling the banks and asking the rules. You could call a mortgage specialist anonymously and pepper the region specific questions. \n\nWhat a wild story about the cat being saved by a Marion fireman!", "replies": [{"id": "c4qm5m4", "text": "awesome, thanks", "replies": [{"id": "c4xmgkr", "text": "I'd be careful with this.  Usually this doesn't make for a good banking relationship, which can be important for future deals.  Also, if something like this is discovered in the underwriting process, then it's likely to kill your deal due to both the credit risk as well as character.", "replies": [{"id": "c4xmn3f", "text": "Thanks, this and your other answer are very helpful", "replies": [], "depth": 12}], "depth": 11}], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}, {"id": "c4xpd88", "text": "You are worrying too much about the tenant. Yes a bank will want to see a rent roll but they typically are not going to ask for anything more than the length of time your tenant has been there as well as how long of a lease they have. However, like harpler said, do not volunteer this information.\n\nI would be more worried about your business partners credit, income etc. I don't know how your business is structured but you and your partners will most likely all have to be on the loan. That means not only does the business have to qualify, but so do you and your partners.", "replies": [], "depth": 7}, {"id": "c6tmfe6", "text": "Does your company occupy the entire building?  Or is there space available to lease and increase the NOI?", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}, {"id": "c4xmhsx", "text": "Same day answers usually don't happen.  Underwriting a commercial loan and getting it approved by the credit committee or credit officer takes time, usually at least a week.  You might be able to get a term sheet within a day or be told No within a day, but it's very unlikely you'll get a commitment letter this fast.  If you did, I'd be skeptical.", "replies": [{"id": "c4xuf4w", "text": "I give them a personal financial statement and an outline of the deal. The loan officer will tell me if his/her bank can do it or not. The underwriter will always have final say. This is on the commercial side in Florida so maybe it is different where you are. It is still a buyers market for commercial down here and nobody's applying for loans. That's why I'm talking to commercial loan officers to lend on residential income deals; invariably  the residential side can't do it. The primary obstacle is the two years of schedule E's; commercial side will allow part of the proposed income into your debt ratio. ", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "c4xmfmn", "text": "I'm a former portfolio manager for a $300 million portfolio of commercial real estate loans.   For a pure investment deal a bank will look at the lesser of some loan to value and some debt service coverage ratio.  The particular numbers will come from their loan policy, which is why different banks offer different terms.  However, it sounds like this would be an owner-occupied deal, which is looked at as a commercial loan.  This basically means your global cash flow is the most important thing (especially since you want to cash out).  This will essentially be calculated based on your personal tax returns including your K-1 distributions.  Your business financials will also be looked at.  The bank will calculate the debt service on your loan and see how much of your net global cash flow covers the debt.  If this figure is in their loan policy and you also have an acceptable loan to value, then you'll be good to go.  More info here:\n\nhttp://oncre.com/questions/21/how-do-lenders-determine-maximum-loan-amount\n\n\n", "replies": [], "depth": 1}, {"id": "c4xpg8c", "text": "For an owner occupied deal on what sounds like a multi-purpose property, you'll probably get pretty favorable terms at any commercial lender.\n\nIf I were you, I'd call around as about what their guidelines are. Learn what they are looking for in the ratios they use. Figure out how you are positioned against those ratios and go from there. Basically, get real familiar with your balance sheet and income statement.", "replies": [], "depth": 1}, {"id": "c5koqj9", "text": "I am sorry but this is not an investment property. It is an \"owner occupied\" deal gordoha admitted as much in one of his posts \"My problem is that the tenant, which happens to be another one of my companies, is a credit risk.\" As such, the bank will most likely request financials from the related company. If the company is in dire straits, it might not be possible to do the deal because the loan would be a \"criticized asset\" from day one.\n\nThere are ways to get it done from a commercial bank perspective. There might be bankers that might be willing to lend if the principals are willing to co-borrow. That way they can use a global cash flow to show the repayment is there.", "replies": [], "depth": 1}]