Commercial Lender Types
Each lender type has its own general box for the deals where it's usually a proper fit. CCG maintains close relationships across every category and tracks changes to their programs continuously.
Banking Institutions
The most well-known commercial lenders fall under this category and include banks, credit unions, and savings & loan institutions. These institutions source capital from their customer deposit base to make available for commercial lending purposes. Most banks have a specialty commercial real estate loan department to handle these requests, separate from the consumer lending departments available to the general public. CCG provides preferred access to these specialty departments, and where a pre-existing relationship exists, helps you leverage it for better rates and terms.
Banks are also a primary source for construction lending, being mostly footprint lenders that allocate funds for the communities they serve. Banking institutions typically have the lowest processing fees and a variety of flexible programs, but are recourse lenders for the most part and can be conservative, more paperwork-heavy, and scrutinize a borrower's personal cash flow and credit more than other lender types.
Life Insurance Companies
Many life insurance companies have dedicated departments to invest their customer premiums, and one of the largest asset classes for that is commercial real estate debt. Life companies rely on the origination and servicing of commercial mortgage companies to execute this, and are very rarely available to borrowers directly — you must be an approved correspondent lender or brokerage with a track record to originate new loans for them. CCG is an approved correspondent lender for a variety of life insurance companies.
Due to the nature of life insurance, their debt investments need to be more conservative than other lender types. They tend to target low leverage (low LTV) opportunities in larger MSAs and require experienced real estate investors with a good liquidity position. Sponsor and property requirements are fairly strict, but qualified borrowers can benefit from very low, long-term fixed rates and commonly non-recourse loans.
Conduit Lenders (CMBS)
Conduit lenders finance loans under a Commercial Mortgage-Backed Security (CMBS) execution platform — bonds collateralized by a pool of commercial real estate properties. CMBS loans are securitized, so originators pursue loan requests locked in for the long term, and can typically offer higher leverage, longer amortizations, full-term interest-only options, and attractive rates. CMBS loans are always non-recourse, since collateralization is primarily based on the property.
However, CMBS loans can be complex — loan structures can become involved with conditions not found in other loan types, rates aren't locked until right before closing, and CMBS loans require defeasance as their prepayment penalty, which can be costly if you want to sell or refinance. Given these implications, CMBS loans are usually a better fit for long-term hold properties and larger loan amounts that justify the higher fees to execute.
Government Sponsored Entities (GSEs)
Government agencies or government-sponsored entities among others include SBA, HUD, Fannie Mae, and Freddie Mac. GSEs do not directly originate loans, but instead have approved correspondent lenders and brokerage companies like CCG originate new loans that meet specific criteria. These agencies are primarily strong candidates for multifamily financing and small-cap owner-user business real estate for companies.
Government agencies account for almost half of all multifamily and small business real estate loans financed in the US. Programs are typically competitively priced and always non-recourse, which can be attractive to syndicated entities or foreign investors. SBA real estate loans can offer up to 90% LTV financing — many times the only option for companies with minimal equity to expand or purchase instead of leasing.
Debt Funds
A commercial real estate debt fund is a private equity backed fund that pools individual investor capital and deploys that capital into commercial real estate debt opportunities. These funds became more prominent after the 2008 recession, as banking regulations tightened. Debt funds usually specialize in a specific asset type, location, or strategy, and are less regulated — giving them better flexibility to work with buyers and landlords and negotiate more favorable rates and terms.
This category also includes online marketplace or 'crowdfunding' platforms. Debt funds are a preferred capital source for CCG, as they tend to be more investor-friendly — strategic, flexible, and negotiable compared to other lender types.
Private Lenders
Private lenders are a fantastic source of capital when other lender types cannot perform, or the loan request requires extremely strategic execution. These are usually individuals or family office lenders lending their own funds — seller financing technically falls under this category. Private lenders are lightly regulated, providing very flexible terms and structure, and can make decisions based on pro-forma numbers if a property or borrower doesn't currently qualify for stabilized programs elsewhere. Expedited closings are usually available.
Private loans usually cannot offer high leverage and are comparatively expensive on both rate and fees. Many are short term, which can be a risk if the loan comes due and the property or borrower still doesn't qualify for a takeout loan. CCG has refined our private money capital sources over the years to only include lenders with a proven track record with our team.