LOAN PEDDLERS

Brian Brady closes acquisition loan for Kokomo Carribean Restaurant in Brooklyn, NY

Early last year, Bryan Kirk and Dj Johnston, investment sales brokers in the Manhattan office of Matthews Real Estate Investment Services asked Brian Brady to speak with the owners of Kokomo Carribean Restaurant.  Kokomo was leasing the retail space for a mixed-use property, they just listed, in the thriving Williamsburg section of Brooklyn.  Kokomo was the best buyer for this property and the owners' story was compelling.

The Caribbean-inspired spot in Williamsburg, Brooklyn, opened in July 2020 — four months after COVID lockdowns started and the owners second child was born.  The two had worked in the restaurant business previously: Ria Graham had experience in marketing and sales for another Caribbean restaurant and her husband Kevol is a a chef. Neither of them had opened their own restaurant before, and the timing, well, couldn’t have been worse.

“We had invested our life savings and also enlisted our parents to invest in this venture. It was a huge bet on ourselves,” Ria told Forbes. “Adding the pressure of COVID-19 took it to another level.”

Moreover, nobody in their family had experience owning commercial real estate but did have experience in accounting an owning business.  Ria's mother is from Trinidad and had a successful career in accounting in the US. Her father hails from Grenada and owned  and sold several businesses in New York.

Most commercial loans require a 25-30% equity injection but because Kokomo was leasing more than 50.1 % of the Gross Leasable Area, Brady saw this as a perfect SBA 504 loan opportunity; Kokomo could possibly secure a loan to acquire the property with as little as 10% down payment.  

While their opening, during COVID restrictions, was rocky, the owners and their families banded together, got creative, and found ways to operate profitably.  When the restrictions on restaurants were lifted by New York City, their business took off.  That perseverance and savvy business operation made them a likely candidate for SBA financing.  

Brady flew up to New York  in June of 2024 and met with the Kokomo ownership group.  He coached them on what would be needed to secure SBA financing, explained how paperwork intensive an SBA oan could be and that, while the process could take months, if they did not give up, would own the property by the end of the year.

 

In July, the buyers and seller agreed on terms and executed a purchase and sales agreement. Brady compiled a debt memorandum and first had a Certified Development Corporation (CDC review it to insure that the subsidized second lien would be in place. Once Brady had a commitment from a CDC, he knew shopping for bank lenders would be a "commodity"; most banks won't issue a term sheet until they run it by a CDC. At the time, bank SBA rates were in the 7.5% range and combined with the CDC lien, blended debt costs would be a tad over 7%.

"I approach SBA loans differently from most brokers." Brady said.  "The loan is driven by the CDC approval.  Once secured, the lender selection comes down to the best terms because the guesswork is removed"

Brady shopped over a dozen banks and secured three term sheets. The buyers ultimately chose a bank which was offering 7.0%. When the CDC funds their portion of the loan, Brady expect the buyers to have permanent, blended debt costs around 6.625%, 50 basis points below what their expectations were in the summer of 2024.

 

There was a bump in the road with the Certificate of Occupancy, which delayed the closing by 45-60 days, but the Matthews investment sales brokers did a great job of keeping all parties motivated and focused on the outcome.

 

In February of 2025, a generational asset was purchased by an immigrant family, to house the growing Kokomo restaurant. in the thriving Williamsburg section of Brooklyn and Brian Brady proud to have advised the buyers and sourced the debt.

Florida Hotel Loans: CMBS v Fully Amortizing

There is a weird spread today, for hotel loans in Florida, between CMBS rates and what a Florida lender is offering.  Many hotel owners like CMBS financing because they underwrite to a debt yield rather than DSCR and offer full-term, interest only loans,  That generally maximizes loan proceeds and maximizes cash flow by keeping the annual debt service down.

Let's start the analysis with rates. 

CMBS rates, for hospitality properties, are generally priced at a minimum of 325 basis points over the corresponding treasury yield.  Today's 5-year treasury yield is 4.426 so the CMBS rate, if locked today, would be 7.681%.  The Florida-based lender, admittedly picky with properties (major flags only), is offering a rate of 6.5%.  There is no prepayment penalty for the 25-year amortizing loan from the Florida lender while CMBS loans most often have hefty prepayment penalties which loack the borrower into the full term.

I like the fully amortizing loan from the Florida lender better but let's run some numbers to show why.  In this scenario (based on a hotel I have "pitched"), the T-12 net operating income is $1,500,000 and the maturing loan balance is $10,000,000.

Let's compare a straight up debt refinance at $10,000,000:

CMBS Loan Annual Debt Service= $768,100
Amortizing Loan Annual Debt Service- $810,240
"Lost" Flow by choosing the amortizing loan= $42,240/year or $211,200 over the term

That makes the CMBS option better, right?  Consider this; the loan balance, at the end of the term would be $10,000,000 for the CMBS loan while the amortizing loan balance would be $9,056,216.

If cash flow isn't an issue (and it's not), I like the fully amortizing loan from the Florida lender better .

Let's solve for max proceeds with the CMBS loan (usually where CMBS shines).  CMBS lenders usually underwrite to a 12% debt yield when solving for max proceeds.  That would produce a loan amount of $12,500,000.

CMBS Loan Annual Debt Service= $960,125
Amortizing Loan Annual Debt Service- $1,012,800
"Lost" Flow by choosing the amortizing loan= $52,675/year or $263,275 over the term

That makes the CMBS option better, right?  Consider this; the loan balance, at the end of the term would be $12,500,000 for the CMBS loan while the amortizing loan balance would be $11,343,228.

If cash flow isn't an issue (and it's not), I like the fully amortizing loan from the Florida lender better .

Finally, let's solve for max proceeds with the amortizing loan.  This lender requires a 1.35 Debt Service Coverage Ratio (DSCR) which would yield loan proceeds of $13,500,000.  The max loan amount is HIGHER than the CMBS loan

Amortizing Loan Annual Debt Service- $1,093.824

As you can tell, TODAY, I REALLY like the fully amortizing loan from the Florida lender:
lower rate, no prepayment penalty, and if cash flow isn't an issue, it pays down that loan balance. 

Each client has different capital requirements and unique scenarios but, for the right hospitality property in Florida, because of the wacky rate spread between local, Florida-based lenders and National CMBS lenders, it's woert your time to let me do this analysis for you.

Just Closed: $2,700,000 Multi Family Bridge Loan-- San Diego

RECENT CLOSING: $2,700,000 bridge loan in San Diego

First-time sponsor Housebender purchased a 10-unit multi-family property in the Mission Valley section of San Diego. I knew the principal Adit Shah from his work in "upsizing" residential properties with ADUs (my wife Debra Brady is a residential mortgage broker).

Some of the challenges we faced were:

- Sponsor had no experience in commercial real estate ownership.
- The capitalization rate was 3%, limiting our debt proceeds

Some of the advantages we had were:

- Sponsor had experience syndicating real estate opportunities and experience managing commercial real estate
- Current rents were way under market
- The property came with 8 stand-alone garages, perfect for ADU
conversions
- Sponsor wrote a great business plan, demonstrating that he had knew exactly how to add value and bring the capitalization rate to over 9.7% (based on purchase price) or a future value of $8,000,000 (based on an exit capitalization rate of 5.25%)
- Sponsor had a high net-worth, partner/co-guarantor

I took this loan to market through the Janover (NASDAQ: JNVR) PRO Marketplace search engine, developed by Blake Janover. We identified 8 possible bridge lenders for the sponsor, submitted the debt memorandum, and immediately received interest from three lenders. Two issued term sheets but we chose the lender who agreed to finance 65% of the $4,200,000 purchase price and $750,000 in construction costs.

We took the application in early December and closed in the first week of January.

VA/FHA Assumptions Power Point

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Zooming into the Sellers' email to get buyers' offers accepted

I attended the USD free negotiation class the other day (presented via Zoom). I got a few takeways from it:

 

• virtual negotiations don't show inflection or emotions
• virtual negotiations dont have a time for sides to "caucus" or consult
• virtual negotations are going to be more popular, even after the COVID scare is over

 

The Barcaks had some good suggestions for how to get over these challenges but I thought, for the most part, real estate brokers and agents really don't "negotiate" anymore-- they just email offers and counter offers. The art of "presenting in person" is lost (and that's a shame).

 

I was lamenting this to a friend of mine, who is a real estate broker in Florida, and he told me of an experiment he tried last month. He assembled the buyers, the lender, and him, all together on a Zoom call, and outlined the offer to purchase property. Here is the best part-- he used the "record" function and created a video, uploaded it to Dropbox (with password protection) and shared the video link with the listing agent.

 

Voila! He just created an offer presentation "in person". Rather than "write a buyer letter" and "enclose a lender pre-approval" (which he did anyway), his buyers had 2-3 minutes to tell the seller all about their family and why they wanted the seller's house. The lender was able to talk about the buyers' strong loan approval. He outlined the offer, along with an estimated sellers's net sheet (he does his research)

 

He got the offer accepted. Maybe he was the highest offer but maybe, just maybe, the sellers felt more comfortable because they saw an offer "in person". My friend told me about this experiment and said he was going to expand it to his seller counter-offers too.

 

Real estate is a people business and the more we can humanize our clients, the more likely the other side will be willing to consider their offers and counteroffers. I dont know how to do this yet but, if you are interested in exploring this idea with me, please call me over the weekend or on Monday