FEATURE ARTICLE, AUGUST 2004

CREATING CUSTOM LOANS THAT PAY OFF
Fremont Investment & Loan uses a combination of creativity, reliability and flexibility to build relationships with developers.
Luci Cason

Commercial developers look for responsive lenders that are flexible in their parameters and know and believe in the projects they are financing.

Fremont recently completed an $82.5 million loan to finance the 22-story luxury oceanfront Bellini condominiums in Bal Harbour, Florida, for Bellini Associates.

In these respects, the Southeast office of Anaheim, California-based Fremont Investment & Loan aims to please.

Located in Atlanta, Fremont’s Southeast office is manned by Vice President and Regional Manager Greg Newman, Vice President Thomas Moore and Vice President Gerry Robbins.

The three-man staff allows for a close one-on-one relationship between borrower and lender.

“We personally have control over the deal from the time it’s quoted to the time it closes, so it’s not going to get handed off,” notes Robbins. “We take a great deal of pride in delivering the deals that we quote.”

It’s this kind of personal attention that brings business to Fremont.

The lender recently garnered an $82.5 million deal financing the 22-story luxury oceanfront Bellini condominiums in Bal Harbour, Florida, based on Newman’s prior successful dealings with Bellini’s developer, Marty Margulies of Bellini Associates.

“Because of the relationship I had with Marty and knowing the quality builder and developer he is and the success of his other two projects, we were comfortable going in at a very low pre-sale requirement,” says Newman of the Bellini deal.

Newman

Because of the developer’s strong track record in South Florida and the lack of new product available in Bal Harbour, Fremont required that 37 percent of the loan be covered up-front by pre-sales, rather than the 70 percent that most banks in the area would typically require, says Newman.

“That was a big factor because we could get him started sooner,” he says of Margulies’ 81-unit project, scheduled to open in October.

It was this special consideration that will make Fremont Margulies’ first choice on any future projects.

“This deal went as smoothly as any deal I’ve done in the past 30 years,” says Margulies, who notes Fremont’s prompt responsiveness.

“They acted very quickly and they were extremely professional,” he explains. “I got a commitment from them in 2 weeks. I’ve never had an experience like that.”

Fremont’s in-house construction group also sets it apart from the competition.

A team of three construction consultants covers all of Fremont’s nine regional offices.

Moore

“Our in-house construction group is involved in the process the whole time,” says Moore. “We try to let the borrower meet everyone early in the game so that they know whom they are going to be dealing with throughout the whole process.”

“That’s a great selling point,” adds Newman, “because when we do a review of construction costs, my construction team can sit down with the developer’s construction team and talk the same language.”

“A lot of lenders will hire a third-party construction company to review the costs,” continues Newman. “We made the decision that for us to be the best construction lender, we would manage our risks and have in-house people who can detect problems early on.”

Another of the company’s strengths is its position as a portfolio lender, holding to its own account, which gives Fremont greater flexibility in choosing projects and developing optimal loan structures tailored to each project.

“We can do up to $85 million without syndication and holding to our own portfolio,” says Newman. “Whereas, you deal with some other, larger lenders, they do an $80 million deal and they’re going to keep $20 [million] to $25 million to try to sell off the rest of the loan prior to closing. We’re willing to step up and close the deal.”

In anticipation of the high-cost projects that would be developed as a result of South Florida’s condominium boom, Fremont’s Atlanta office upped its loan threshold over the past 18 months. The increase has presented a new market of opportunities.

“It kind of opened up a whole new world for us,” says Newman.

“We’re able to do some of the larger deals and not have to syndicate them,” says Moore.

Fremont recently financed Terra Archiplan’s Metropolis at Dadeland project in Miami in two phases, for a total of $85.55 million.

The office recently financed Terra Archiplan’s Metropolis at Dadeland project in Miami in two phases, for a total of $85.55 million.

“The principals had no previous experience with that type of project, but they assembled a team that did,” says Robbins. “So, collectively, they had the resumé to complete the project.”

Fremont’s non-recourse financing of the project played out well — by the time the loan on the second phase was closed this March, 99 percent of the 25-story, 190-unit condo’s first phase had been leased, in addition to almost 75 percent of Phase II.

Extensive pre-financing research is one of the Atlanta office’s hallmarks. The office’s three executives analyze the collateral and market risks of each development on a case-by-case basis.

Fremont did its homework before providing $56 million in financing for the now under-construction Mary Brickell Village in Miami’s Brickell Avenue corridor.

“Through various ways of mitigating our risk, we were able to get comfortable with the borrower and provide them with a loan, even though they weren’t a local, U.S. company,” says Moore of Paris-based developer Constructa.

Fremont provided $56 million in financing to Brickell Main Street LLP for Mary Brickell Village, a mixed-use development in Miami.

The 5.2-acre, mixed-use project will include almost 200,000 square feet of retail space, anchored by Publix and Bally Total Fitness, and a 34-story, 350-unit high-rise residential component. Constructa also owns air rights, above the development’s parking garage, which it will contract to an apartment developer.

Says Moore, “It had a lot of moving parts to it that we were able to get comfortable with and structure a construction loan.”

“Fremont filled a very special need that most lending institutions could not, and that was that we needed a non-recourse construction loan,” says Tom Duncan of Aztec Group, which worked with Constructa on the project.

“We also had a project that was very much an in-fill location but lacked substantial pre-leasing from major tenants,” Duncan adds. “Fremont immediately understood the real estate and how the project would fit well and prosper. I think their understanding of how real estate works makes them a very good lender.”

Fremont’s Southeast regional office also has projects going on outside of Florida. In Atlanta, Fremont recently closed a deal to provide construction financing for a mixed-use project, called Twelve, at the Atlantic Station development in the city’s Midtown area. Twelve, which will include 404 condominium units and 101 boutique hotel units, will be located in the mixed-use “District” portion of Atlantic Station.

In the past year, Fremont has also structured deals in Greensboro, North Carolina, and Memphis, Tennessee, and is keeping an eye on possible development in the Florida Panhandle.

“We’ve done most of our deals in Florida, but we’re looking at all of the major markets throughout the Southeast,” says Moore.

Multifamily condos are the Atlanta office’s major product right now, but Moore says that Fremont will also finance retail, office and even some land deals.

Robbins

“The deals are provided to us through our broker relationships,” says Robbins. “Brokers send in packages on deals and we send them feedback on whether we are able to provide them with financing that works for them and us.”

And although the Atlanta office is keeping its ear to the ground and hoping for the best in other Southeast markets, it’s going to keep financing South Florida condominiums as long as that market is hot. And it doesn’t show signs of slowing down anytime soon, says Newman.

“It’s been going on for a couple of years now. We’ve been doing a lot of condominium projects because the market down there is just booming,” he says. “It’s just been on fire as far as the condos.”

Right now, business is good for Fremont. This year, the Atlanta office increased its lending to $500 million, as opposed to $300 million in 2003, and, despite the threat of rising interest rates, Newman says he expects $500 million in 2005 as well. Nationwide in 2003, Fremont closed more than $2.5 billion in structured, commercial real estate loans.

“It’ll be interesting to see the second half of the year as Greenspan starts to move rates — how that’s going to affect some of the projects,” says Newman. “It may slow down a little bit, but I think the rates are still relatively low compared to where they’ve been historically.”

He says that Fremont will continue to promote its flexibility and willingness to consider each development on an individual basis as selling points for borrowers.

“We’re not stringent on our guidelines. It’s all dependent on location, and the strength of the developer. We take a lot of things into consideration,” says Newman.

He uses Twelve at Atlantic Station as an example of Fremont’s readiness to relax pre-sale requirements as needed.

“Atlanta’s not a pre-sale market, so that one’s spec and we have no pre-sales,” Newman explains. “If you’re in a market where you can get pre-sales, we’re going to expect pre-sales. If it’s not a pre-sale market, then we can underwrite that as well.”

Fremont prides itself on the notion that no two projects — and, therefore, no two loans — are alike. It’s that kind of creativity and flexibility that will allow the company to continue to work around credit risks to realize ultimate potential.

Says Robbins, “We’re able to get creative and structure a deal to where it makes sense.”

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