Trending Content
| +52 | Leave brokerage to be GP | 12 | 2d | |
| +49 | New Comp Database - Google Form (Now with Data Validation) | 24 | 2d | |
| +24 | Seeking Career Guidance in Real Estate Development Post-Graduation | 3 | 3d | |
| +23 | Going out on your own | 4 | 2d | |
| +23 | Spreads over SOFR/UST | 8 | 7h | |
| +22 | REPE/Development GPA | 15 | 5d | |
| +22 | Real Estate = complicated + underpaid | 15 | 2d | |
| +20 | High achiever that doesn’t want to work weekends | 12 | 16h | |
| +17 | Fisher Brothers | 6 | 2d | |
| +16 | Stocks - What are People Buying? | 6 | 19m |
Career Resources
High Volatility Commercial Real Estate, or HVCRE as I've come to understand it, is a burden for the bank which is passed onto the Borrower originally passed as part of the Dodd-Frank Act.
In an acquisition or development/construction loan, the borrower must have at least 15% cash equity in the deal.
For instance, even if the Borrower retained the property a decade ago and it is considerably of higher value today, if his Cash Basis is less than 15% of the total development costs, the bank doing the loan will have to classify it as HVCRE in their books which, in turn, requires them to hold more cash on-hand as a precautionary measure, and almost always leads to an increase of the spread and coupon rate for the Borrower.
To combat this, many borrowers are taking on Preferred Equity as that can be counted as cash-equity in the capital stack. Standard Mezzanine financing is additional debt and would not be counted toward's the borrower's basis.
All of this being said, a recent law was passed by both the House and the Senate amending HVCRE rules and bridging the gap by allowing the Borrower's equity requirement of at least 15% to be based on the land's ***appraised ***value. When this law goes into effect however, I am not certain of.
If you want to follow a great source for more information I highly recommend checking out famed Real Estate Lawyer, Rick Jones' blog "Crunched Credit". He's incredibly witty and well-spoken, and offers great insight on the legal issues of the RE world.
https://www.crunchedcredit.com/
Really informative and even went a step beyond to give us current market conditions - bravo.
http://www.mondaq .com/unitedstates/ x/714814/ Fund+Management+REITs/What+You+Need+To+Know+About+The+Reformed+HVCRE+Rules
Trump amended/clarified the HVCRE regulation in May. See the link above for a good synopsis of it (take out the spaces I input). The land appreciation piece was a huge part, but also defining when an HVCRE loan is stabilized and no longer HVCRE was a huge part as well.
Enim laudantium quia repellendus sed dolor maiores corporis. Iste nisi dignissimos et temporibus sed. Aut ratione nobis quia.
Veniam soluta modi consequatur quam qui sunt. Eaque similique qui ut qui. Distinctio omnis vitae voluptatem autem officiis sed exercitationem. Temporibus omnis dolorem ipsum laudantium reiciendis. Distinctio repellendus ullam a dolorum eius maiores. Minima voluptatem quod doloribus enim expedita at molestias.
Sed consequatur temporibus reiciendis ut nam sapiente unde. Temporibus voluptas saepe ea debitis et. Ducimus optio id nam modi deserunt magnam eius. Voluptas enim eaque laborum soluta numquam ab.
Non iusto et laboriosam minima. Numquam sit tenetur repudiandae doloremque. Possimus aspernatur voluptatum et et eius unde. Eligendi doloribus totam maxime qui. Ut in dignissimos quasi neque sunt similique ut.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...