Letter of Intent - Alternative Debt

Alternative debt products are becoming a new standard as the N.Y.C. property market has gotten so competitive that the need for immediate access to debt has risen greatly. These products can be procured from various lenders, ranging from REITs to debt funds to private lenders, and with that comes a large spectrum of interest rates, albeit decreasing more and more recently. Alternative debt products have become a much more viable option for commercial real estate acquisitions, where the prospective purchaser needs to quickly place a property under control, requiring a quick closing on the property. Other circumstances may involve retrieving real estate from foreclosure or repositioning transitional assets. An example of an alternative debt product may include a bridge loan to a developer during the pre-construction cycle, who needs to secure the acquisition of the land and to fund the soft costs associated with drawing up plans and obtaining requisite permits and approvals. With traditional bank financing for commercial real estate (CRE) being difficult to obtain, the barriers to entry in the CRE financing market dropped substantially while simultaneously the appetite for alternate financing sources increased. As a result, there is a substantial and continually growing opportunity in the market for alternative debt lenders to satisfy this demand. Rapidly falling rates, alternative debt products can be tailored to the specific needs of the borrower, and can generally be closed within two weeks. Michael Korine, managing director of the Finance & Capital Markets Group at Berko & Associates, said, "We have seen rates continue to drop and some lenders will now conduct some of their due diligence 'post-closing' in order to expedite the transaction." As a brokerage with a notably large lender network, we have the unique ability to sort through some of the more avaricious lenders and only address lenders willing to work with us at below market rates. Lee Silpe is the senior analyst at Berko & Associates, New York, N.Y.