The credit line includes a provision for the credit provider to increase its line to a total of $100 million through internal funds and/or syndication. The term of the credit facility is three years.
"Due to its substantial experience and excellent contacts in the New York financial community, CFA plans to grow substantially over the next several years by making loans to high-end hard money borrowers," says Nathan Auslander, senior vice president at George Smith Partners, who along with Gary Tenzer, principal and senior director, arranged the financing. "These additional funds will enable them to continuing pursuing and achieving their business goals."
Auslander tells GlobeSt.com that the name of the borrower fund is Commercial Capital Holdings or CCH, and "it was created specifically for the purpose of borrowing this money." He adds that in the past, CFA has had a similar structure with a different fund. "Their existing fund is about the same size as the new fund; this therefore doubles their capacity. The existing fund is going to be used for equity and other special transactions going forward. It is the company's intent to grow this fund and/or add additional funds as needed to manage their growth."
CFA specializes in bridge loans on commercial income producing properties throughout the US in the $1 million to $5 million range. "CFA sources, underwrites, closes, and services loans," he says, and "CCH provides the capital for the transaction." Auslander tells GlobeSt.com that CFA sees a tremendous growth opportunity in the world of private lending, "due in part to the recent demise of the capital markets. Their market is to lend on good properties to borrowers who either don't have the time to go through a traditional bank process, or who have more complex or harder to document credit that might not make it through a bank's credit underwriting process." He explains that banks tend to loan against credit and companies like CFA loan against the collateral, with the view that "if worst comes to worst, they will own the collateral for their loan balance, and will be O.K. It is not their intent to 'loan to own;' however, they underwrite the collateral in such a way that if they did have to foreclose, there would be no resulting loss. Banks generally rely upon the credit of their borrower to make them whole in event of default."
Auslander says that CFA tries to charge less fees than some other hard money lenders, although their interest rate is the same or even higher than some. "It is their intent to make their profit on the spread between their cost of funds, and their income from lending. Other private lenders might view the fee income as their primary source of revenue. CFA tries to approach the good end of the market for private capital, and avoids lending on land and development, where truly high pricing would be required to cover the risk. CFA mostly wants to loan on income properties, whether or not the property currently can support or cover the debt." Auslander again notes that in some cases, the collateral is the same as what a bank would loan on, "but there is a need for speed, or underwriting issues that prevent a traditional bank from making the loan."
CFA was unable to be reached for comment by deadline.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
