The majority of commercial real estate (CRE) private lenders will only consider the four asset classes commonly known as “core properties”:
Every other type of property besides these four can be considered “specialty”, and here are a few examples:
- Assisted Living Facility
- Cattle Ranch
- Race Track
- Car Wash
You can group specialty commercial properties into one of a few popular categories:
Some private lenders in our network will consider specialty commercial properties, but only specific types. For example, within the Healthcare sector, some lenders will consider a clinic, but they won’t consider an assisted living facility. In the Automotive sector, they may consider a parking garage, but not a gas station or auto body shop because those properties tend to have environmental issues.
Why won’t most bridge lenders consider specialty commercial properties?
It’s all about the possibility of foreclosure. If the borrower defaults on the loan, the lender may have to start the foreclosure process and could end up owning the property. Most lenders would want to quickly sell the property to recover their loss, and specialty properties are difficult to sell because there aren’t as many potential buyers as there would be for a core commercial property.
Some lenders will only consider a specialty property that has the potential to be repurposed into a core commercial property, which would be easier to sell. But the majority of lenders would not want to make an effort to repurpose the property. That could take a lot of time and money which may add to their loss from the loan default.
Lender’s Risk of Having to Operate the Business
Besides disposing of the property in case of a foreclosure, another thing for lenders to consider is having to operate the business using the property, prior to the sale, if the borrower is also operating the business. Some examples include a hotel, an assisted living facility, a car wash, or a gas station. Most provide lenders cannot just step in and operate these businesses to keep up the property’s cash flow.
Perhaps if the borrower is leasing the property and not operating it, or if the lender has relationships with local competitors to that business who would be ready to immediately take over, a private lender may consider it.
We know a few private lenders that love to lend on hotels because they also own and operate a portfolio of hotels, separate from their lending business. This doesn’t mean that they just loan to own, but they have a deep understanding of the hotel business, and can easily take over operations in case of a foreclosure.
Guidelines for Specialty Property Bridge Loans
Although they are not easy to find, we do have several private lending companies in our network that lend on a variety of specialty commercial properties, including wineries, marinas, schools, hospitals, and even places of worship. The maximum loan-to-value will be much more conservative than a core commercial property. For example, a lender may go up to 70% LTV for a warehouse, but a specialty property would max out at 50% or 60%. If the borrower can pledge another investment property as collateral, that may help get the deal done.
Interest Rates and Fees for Specialty CRE Bridge Loans
The pricing is typically higher for a specialty property versus a core commercial property. The interest rates for core commercial real estate ranges from 7% to 9.5%. Specialty properties could be in this range as well, but most lenders will price in the range of 9% to 12%. As of late 2021, we are not seeing bridge loan rates go higher than 12%.
Most lenders charge an origination fee (points) ranging from 1% to 2.5% of the loan amount, for core commercial properties. Specialty properties could be priced higher, ranging from 2% to 3.5%.
How to Find Bridge Lenders for Specialty Commercial Real Estate
If you’re looking for a private lender to fund a specialty commercial property, use our website as a resource. There is no fee to search, and we have a filter you can use to find out which lenders consider specialty properties.
- Start at the Commercial Bridge Lenders page
- Type in a state or major metro area, and click SEARCH
- Click REFINE RESULTS in the Filters section
- Click the PROPERTY TYPE field
- As soon as you select a property type, the search results will be filtered
- View each lender’s profile to learn about their guidelines, pricing and more
- Click the green CONTACT button and reach out to the lender directly
The companies listed pay us a monthly advertising fee, so there is no cost to make contact through our website. Please remind each company that you found them on PrivateLenderLink.com.