4 Qualities Philadelphia Borrowers Should Look For In A Lender
New York City may be the financial capital of the world, but nowhere in the country do banking roots run deeper than The City of Brotherly Love. The country's first commercial bank, first national bank, first savings bank and first savings and loan association all were established in Philadelphia.
The density of local commercial real estate owners, operators and developers ensure a consistent demand for capital in Philadelphia, but those who fail to look at lenders' non-monetary offerings may be setting themselves up for failure.
Since CRE projects and markets are diverse, complex and subject to change, borrowers should look to establish a relationship with a lender that has local knowledge, a range of financial products and a comprehensive team with deep expertise.
1. A Close Relationship
Many borrowers in Philadelphia believe that going to a loan broker will allow them to get the best rates. According to KeyBank Senior Vice President John Manginelli, this is a short-term strategy that can produce suboptimal results in complex deals.
“Taking the transactional approach view favors immediate wins with a bias toward commoditization of price, proceeds and structure,” Manginelli said. “It ignores contingencies and the value of intangibles such as advice and market intelligence.”
According to Manginelli, using a loan broker can lead to fragmented solutions and too-good-to-be-true rates and deal terms.
Borrowers will appreciate a team that understands and can effectively work toward their goals throughout their projects’ life cycles. According to KeyBank Eastern Pennsylvania Market Leader Christophe Terlizzi, this process builds trust and vests interest, motivating the lending institution to protect and promote the relationship.
2. Enterprise Experience And Depth Of Expertise
Developers should look for a lender that can provide them with advice, guidance and market intelligence based on the current Philadelphia market trends. These are accrued and honed through years of on-the-ground experience and many deals across asset classes.
“We all know the market operates in cycles, and you want to form relationships with businesses that conduct themselves in ethical and responsible ways that enable them to be there in good times and bad,” Manginelli said.
Teams with tenure and a broad product platform will have a larger, more diverse pool of deal experience to draw from. This empowers the lender to give its clients insight and advice based on historical data that complements the wealth of real-time information that new technologies have made readily available.
“A lot of banks have whiz-bang technology, but can’t interpret it,” Manginelli said. “We have experts who understand how users are organized and what their hot buttons are, whereas other banks don’t invest in providing that level of conceptualization."
3. A Team That Thinks Holistically About Strategy
Lenders who look to their banks solely for funds are missing out on valuable guidance and provisions.
“We had a client who took our bid, which didn’t appear to be the best bid, but the way we structured it showed we understood the inherent complexity of the deal,” Manginelli said. “The borrower knew that if he needed accommodations in the future, the other lenders would not respond properly, or might react in a panicked way.”
As the relationship between bank and borrower matures, the banking team gets to know the clients’ requirements and preferences, leading to better, more customized service.
"We recently had a real estate investor enter into a time of the essence purchase contract to acquire an income-producing property," Terlizzi said. "The developer liked the idea of a CMBS loan, but needed certainty of execution. KeyBank sized the loan using CMBS criteria and backstopped the CMBS terms with a balance sheet bridge loan to guarantee closing certainty."
4. A One-Stop Shop
A one-stop shop lender must offer a variety of financial products. They need the versatility to cater to the client with a million-dollar project, the client with a massive billion-dollar development and everything in between.
According to Terlizzi, KeyBank’s departments are integrated, rather than siloed, which allows the team to come up with holistic solutions to each project. Its national platform brings together debt and equity, balance sheet and permanent loan offerings to move complex deals forward. With 190 years in business, $130B in assets and a proven track record, it is many Philadelphia CRE pros' go-to lender.
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