With change comes opportunity.  We are seeing many, very interesting developments with commercial mortgage loans.  One happens to be banks offering to reduce balances owed and waive any prepayment penalties in an effort to entice strong borrowers to refinance their commercial debt. 

And no, we are not referring to borrowers that are late, have negative trends, etc.  We are talking about stable commercial mortgage loans, that the existing bank needs out of, for their own internal issues.  I.e. the bank needs liquidity to survive.  They have their own capital problems and, apparently freeing up commercial loans is a potential solution. 

Commercial Mortgage Loans

For example, a hotel client of ours called this week.  They owe $3.5 million with a property value at approximately $5.2 million.  Their occupancy is great at 84% year end and they have strong cash flow which easily services the existing debt.  Their existing bank has offered to waive the existing 3% prepayment penalty and reduce their balance by $300,000 to get them to "go away".  The bank called them out of the blue.   

Fluke???

Another borrower called us this week as well that happens to own 14 Kentucky Fried Chickens restaurants.  They owe their existing bank over $7 million and where offered a reduction of $3,000,000 dollars...  Again the borrower is strong, cash flowing, etc.  These by the way are not the same banks. 

Borrowers that are in good financial position may want to make a few phone calls to see if they can save a substantially amount of money.  Borrowers should keep in mind that just because your existing bank maybe in trouble doesn't mean that you can't find a healthy bank, as we and some of our competition continue to grind out commercial mortgage loans.   

The old saying, "got lemons, make lemonade" comes to mind.