EB5 Investors Magazine | Page 29

One last note on timing – lenders do not respond well to last-minute surprises. If a borrower anticipates property-specific challenges or loan-specific complications that may threaten the ability to refinance at loan maturity, it is generally advisable to notify the existing lender early on in the process. Early lender involvement tends to build good will and trust, leading to better, more rational outcomes. 3. Recourse redux CRE development is not for the faint of heart, and the risk of property-level losses is part and parcel to owning real estate through economic cycles. However, the risk of losing personal assets through recourse provisions should be avoided when possible, and all borrowers refinancing a completed construction project should place a high priority on obtaining non-recourse financing. While partial or full recourse has been a standard provision for construction loans originated since the start of the recession, non-recourse financing is often available upon project stabilization. For situations where partial recourse is unavoidable upon refinancing, developer-owners should work to negotiate “burn-off” provisions that scale back the recourse requirements as the property achieves performance thresholds. These are just a handful of the most common mistakes borrowers make, regardless of whether there is EB-5 capital in the project. On occasion, even seasoned CRE developers and owners fall victim to the missteps highlighted above. Situational specifics may vary, but lack of capital markets awareness is almost always a contributing factor. Many borrowers simply do not have the time and expertise to assess the full range of financing options available when it is time to refinance. The following market overview is intended to broaden borrower awareness of common features of CRE debt capital markets. Overview of CRE Lending Markets This capital markets overview is a generalization of terms and conditions observed in each lending market. Not every description characterized herein is true of every lender in each category. It is always a good idea to solicit feedback from lenders in multiple lending markets to confirm current market features and achieve optimal execution. This summary covers the three traditional CRE mortgage lending markets, commercial banks, CMBS and insurance companies, as well as agency lenders and non-traditional high yield options. Commercial Banks Commercial banks come in all shapes and sizes, from local community banks to multinational conglomerates. Most co