CASE STUDY – Land…they are not making more of it

Another big file off our desk this week.  We completed our third transaction for a group that purchases land and then works to increase the value for eventual sale or development.  At a little less than a quarter of an acre the borrower did a great job of negotiating the purchase price and undoubtedly will have a successful development on their hands in the future.  This transaction is interesting for many reasons the least of which is

CASE STUDY – Build a restaurant and they will come

I am just wrapping up a construction mortgage for a group of folks that are opening a second restaurant in Calgary, Alberta.  There are several things that make this transaction unique from other conventional commercial mortgages I broker and advise on – the cost of construction and the single use of the building.

Land financing back in play

It would appear that with the limited amount of lending opportunities available in the marketplace that private lenders have been prepared to reconsider their policies for providing mortgages on parcels of land and future development sites. For the past few years it was difficult or nearly impossible to obtain financing for land as most lenders chose to finance income producing real estate that generated the required cash flow to service a mortgage payment. Recently we have seen private lenders being selective about the land deals they finance by limiting the amount they lend (typically less than 50% of what a property is worth) and ensuring the location of the property is strong. With market values having stabilized a private lender can put out their capital with limited exposure and feel confident that they will be able to earn their required return even if they need to foreclose and take a property back. At conservative loan to value levels the chance of them losing their principal and interest is relatively low. While there is still a lot of land in the market that is over financed opportunities still exist for developers (and investment groups) that have not over leveraged their land to now consider developing out and bringing new supply to market.

If you have a land deal you would like to discuss, please email dylan@bridgecap.ca or visit www.bridgecap.ca/dylan