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AEI Consultants VP Gene Belli
Many five-year notes are coming due and will require updated environmental and engineering due diligence. But unlike 2007, lenders are much more cautious about what they’ll accept, says AEI Consultants VP Gene Belli, whose firm provides environmental and property condition due diligence for lending, pre-foreclosures, and acquisitions. “Some things are not the same and may require greater scrutiny,” he tells us. AEI recently worked on two refinancing deals where the potential for vapor intrusion into a structure needed to be evaluated, and it wasn’t evaluated in the previous loan. Computer modeling was utilized to determine health risk and exposure due to migrating vapors from nearby sites.
Lead Paint
“Environmental concerns can delay funding,” Gene says. Every lender has its own hot button issues, whether vapor, lead-based paint, radon, or other concerns. It’s important to work with a consultant that understands the lender's risk tolerance and policies toward risk. Once the concern is identified, the consultant can assist the lender with identifying the risks and how to quantify the financial liability associated with the issue. (The lender can then move forward since it understands the financial aspects of the risk.) Overall, lenders are competitive and pricing aggressively, he says. Over the past year, we’ve seen an increase of CMBS lenders coming back into market, with agencies (Fannie Mae and Freddie Mac) continuing to be strong players in multifamily. Most balance sheet lenders, however, don’t have the ability to handle large loan balances, so watch for a continuing ramp up in CMBS.