Banking Solution Showcase 

Guidance Line of Credit for Commercial Real Estate Acquisitions

Banker: Max Bartholomew

Line of Business: Acquisition of value-add retail properties below market, for upfit, long-term lease to one of 14 different well-established national franchisees, and sold at a premium generally within 18 months. Track record of over 60 successful transactions since inception in 2018 with lowly leveraged portfolio.

Challenge: Client could negotiate better pricing on acquisitions if they could deliver an offer to purchase with a loan commitment more quickly.

Solution: A Guidance Lines of Credit – a preapproved line of credit with fixed parameters – loan to cost, loan to value, maximum loan amount, minimum debt service coverage – are commonly provided for construction or acquisition of single family residential real estate for sale or lease. A guidance line uncommon for commercial real estate investment given the variance in cash flow from deal to deal; however, due to the consistency in the historical transactions – strong franchisee relationships and track record – TBB offered a guidance line with established parameters/solutions for each takedown loan under the Guidance Facility.

Takedown Parameters:

• $5.0 million Guidance Facility, with individual takedown loans not to exceed $2.5 million
• Maximum loan to value
• Lease not to exceed loan term
• Minimum debt coverage ratio

Result: The ability to show sellers their immediate access to funds will provide an advantage over other buyers and enhancing profitability.