It's evident that the strongest real estate investors and developers have incredibly strong and long-lasting relationships with lenders. Their easy access to finance set them apart when trying to close deals under time pressure. They are first in line for the off market deals since the vendor & real estate agent / broker knows that the buyer will not have financing or legal issues during the transaction. My question is how do such investors and developers build these strong relationships with lenders? Of course, it starts out with small deals but do they always borrow from their specific lender? Do they not shop around for the lowest interest rates? Or do they think that choosing a different lender for a low rate is penny wise pound foolish in the long term?
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Time.
Over time, you build up a resume of accomplishment and a network of both the lenders themselves and other people who can refer or vouch for you to them.
Depends on the deal, asset class, balance sheet of sponsor, experience of sponsor etc. If you’re a newer developer, hitching your wagon to an emerging but future successful bank is always a good move.
Big picture, @CRE is right. Time.
I work at a bank, and a bigpart of the relationship for banks (versus say life co's and debt funds) is "ancillary business" or "cross-sell." In other words, non-credit, non-loan business:
Are we their main treasury management bank (i.e. do we hold most of their corporate and property-level checking accounts? Do they use our A/R software?).
Capital markets -- fees from syndicated deals/being a lead bank, maybe we've been a bookrunner on a bond offering, derivative income on swaps, etc.
Wealth management - harder to win and not as common, but if you're managing the money of the CFO or Principal, that obviously goes a long way.
How robust our ancillary business is with a client can be the deciding factor in committee of whether or not to quote a new loan, or how aggressive we'll get on structure and/or pricing. In the beginning of a relationship, it's understood that we won't have all this side-business with a borrower, but if you've done 3 construction loans and 2 term loans with a company and don't have any cross-sell (or haven't tried to get some), people might start questioning why we're doing business with this developer/investor.
A lot of the bigger RE firms and REIT's with syndicated facilities know this is the banks' game and are good at "rotating" cross-sell opportunities and making sure each bank gets a piece of the pie. They'll still have their main/lead bank that's pulling in the majority of the ancillary fees/revenue, but might give bank #3 an opportunity to take a larger hold in a deal so that they can get some Treasury Management business afterwards.
This is obviously specific to banks. In exchange for flexibility and lower pricing, you have a banker that will be hitting you up constantly for intro meetings with their TM team, capital markets advisor, etc. (i.e. selling you stuff). Alternatively you can go to a debt fund, pay more in pricing, go non-recourse and not have to deal with the ancillary business.
Regardless of bank, life co, or debt fund, as @CRE mentioned what ultimately matters is your track record and network that you build over time. No amount of derivative income or treasury management fees will make someone lend to a developer with a track record of blown budgets or handing back the keys to lenders.
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