Creating a commercial real estate business proposal is not for beginners. In today’s complicated commercial real estate development financing environment, even experienced developers and sponsors can find themselves being repeatedly rejected because commercial real estate financing has changed due to recent regulatory changes the United States has agreed to abide by regarding the international banking convention known as “Basel III“. This spells trouble for CRE developers and sponsors who are proceeding under the assumption their new deal will be funded just as quick as the previous ones.
That may no longer be the case as many are finding out…
In many cases, supervised banks find themselves caught in a spiderweb of doubt regarding how the CRE loan is to be classified under the Basel III framework. The result is an ambiguous cloud of potential costs that start with the bank having to contribute 150% of the previous loan loss reserve funding requirement if the loan doesn’t meet the Basel III requirements to not be classified a “High Volatility Commercial Real Estate” (or “HVCRE”) loan. This means the business proposal for financing at both the equity and the debt level has to demonstrate outstanding execution risk management documentation that can back up the business plan or face the prospect of an outright rejection where a warm welcome was previously the expected outcome. This demands more careful preparation, enhancements in the form of greater third-party credibility regarding all of the key aspects of the proposal for financing, and a yield to investors that is above current capital market expectations (otherwise, why would the investors switch horses?).
INVIZEN offers a bold, new way forward for commercial real estate developers seeking financing that is based upon an end-to-end solution construct that engages all of the key players in the capital financing food chain for the benefit of our clients. This solution is part of our overall INVIZEN Stop Loss System program that includes this critical component (known as “CapPro”) as part of the overall systemic solution for CRE finance and investment performance assurance AFTER the money changes hands for the entire term of the investment holding period.
INVIZEN Stop Loss System offers a component program of planning modules that includes the operations plan, risk management plans, loss event mitigation plans, and the final outcome product – the capital funding proposal that is now fully backed by a component underwriting and due diligence review of all the key aspects of the transaction.
What does your plan have?
Be The One…