|
Special Reports
Commercial Lending
Advising Borrowers
By Jennifer Harmon
Now more than ever, senior housing and health care borrowers need to carefully
evaluate their motives and make a supreme effort to match their objectives with the financing options available
to them, according to Jeffrey A. Davis, chairman of Cambridge Realty Capital Cos. here, a national senior housing/health
care lender. "Usually, this will mean looking beyond the obvious," said Mr. Davis, whose firm has closed
more than 280 separate transactions totaling more than $2 billion since the 1990s. "The number of lenders
offering products to senior housing/health care borrowers has increased dramatically as the economic outlook for
these properties has improved. But it's always a good idea to consider all the angles."
Mr. Davis says the "obvious" things borrowers routinely consider are
the interest rate, loan-to-value percentage, term length and amortization schedule. But there may be other "hidden"
specifications that would make certain loans more appealing than others.
For example, some loans have "floating" rates that are updated at predictable
intervals throughout the life of the loan based on various developments impacting the capital markets. Over time,
and depending upon how economic events unfold, these loans may or may not prove to be a bargain. "It's not
possible to predict the future. But borrowers can and should evaluate how much risk they are willing to assume,"
he said.
Mr. Davis points out that an assumable loan that can be transferred to another
party may be important to some borrowers. Others may have concerns about accountability and personal liability.
"Some conventional recourse loans hold individual borrowers personally responsible for payment if the debt
isn't paid because the business benefiting from the loan has failed or filed for bankruptcy. It's important to
understand what the consequences would be in this situation," he said. "In the final analysis, the borrower
is responsible for knowing and understanding the terms and conditions of their loan. The lender's job is to provide
knowledgeable answers to any questions borrowers might have and to make certain they are aware of options they
may want to consider."
|
