The development and ownership of commercial real estate almost always involves some level of financing. Most parties do not have the cash on hand needed to develop, acquire, and operate investment property. Moreover, even for those who do, and especially in recent years where interest rates fell to historical lows, there are tax and other incentives which make the borrowing of funds desirable and prudent. The commercial real estate practice group at Dworken & Bernstein Co. has been involved in a wide variety of real estate financings, including conventional purchase financing, securitized loans, mortgage assumptions, constructions loans, and the refinancing of existing mortgage debt.
By far the most common occurrence in our practice is the conventional mortgage loan to finance the purchase and/or development of a commercial property. As with the purchase and sale of real estate, most lenders have refined and standardized their loan documents and underwriting practices. Usually, our clients shop the lending market but have not secured a financing commitment at the time they enter into a purchase agreement. It is typical that at the same time we are assisting clients with drafting a purchase agreement and then assisting with diligence matters, that we are called upon to review, comment on, and negotiate loan documents in an effort to finalize the financing on commercially reasonable terms.
Certain types of commercial loans carry with them unique requirements. A securitized loan is one in which the lender packages the loan with a number of other loans, which are then sold to investors in the open market. In order to do so, the loan must meet certain standards in order that the entire loan portfolio can qualify as marketable securities. For instance, the borrowing entity must be a single purpose entity. We frequently assist clients with revisions needed to their organizational documents, or the formation of a new borrowing entity, in order to comply with these requirements. Similarly, HUD insured loans involve a specific set of loan documents that, for the most part, have relatively inflexible content. And a mortgage assumption, whereby a property purchaser steps into the shoes of a seller mortgage, contains its own set of complexities.
One of the primary considerations in commercial mortgage loans is the topic of personal guarantees. Even in a non-recourse loan, one or more enterprise owners is often required to personally guarantee certain borrower obligations, such as “bad boy” conduct and environmental liability.
Dworken & Bernstein’s real estate attorneys have extensive experience assisting clients with all manner of commercial mortgage transactions, and have the skillsets to handle these matters in a practical and cost-effective manner.