1 The most common recommendation is: Don’t stop doing what earned you the loan approval in the first place.
“Treat your lender like a business partner,” adds Steve Gilleland, senior director of real estate for CapitalSource. “We like to be informed of things as they happen. In case something negative happens, we’d much rather tackle it with them having full disclosure rather than one of our employee nurses saying, ‘ABC facility had an ‘I’ or a bad tag.’ Then we have to call them.”
2 Jeff Binder, who views the situation not as a typical lender but rather an investment banker/brokerage firm, agrees consistency is a key.
“From operations to financial reporting, it is important to keep things consistent throughout the lending process,” says the managing director at Senior Living Investment Brokerage. “Irregularities in census, financial performance and/or in the consistency of reporting documents will certainly raise a red flag and bring increased scrutiny from lenders.”
3 He also wants to know everything, good or bad.
“If there is a survey issue, a blip in census, etc., it is paramount that these items are reported to the lender in a timely manner,” Binder says. “Confidence in the deal, and the relationship, can be negatively impacted if the issue is not reported quickly or if the lender finds out from an outside source.”
4 Keep up regular communications, emphasizes John D. Calabro, executive vice president and National Portfolio Manager for Healthcare Finance Group.
“A well-informed lender can move quickly when the need arises. If they are in the dark, it takes a while to see the bright light,” he notes.
A lender should be “someone you can brainstorm ideas and situations with. If not, find a new lender,” he recommends.
5 Continue to take the bull by the horns.
“Be proactive in getting the necessary information,” advises Kevin McMeen, president-real estate, MidCap Financial, MC Serviceco of Chicago. “Take control of the process and your counsel.”
Delegate tasks specifically to avoid having things fall between the cracks, he adds. Vague or insufficient understanding of responsibilities can lead to excessive editing and, ultimately, higher legal bills.
Also, don’t underestimate the potential for third-party delays — for things such as surveys and title insurance — especially under deadline pressure.
6 Keep thinking ahead, advises Tanya K. Hahn, senior vice president at Lancaster Pollard.
“Take the time to consider how your new loan will fit into your future plans,” she says. “If you plan to sell the property during the term of the loan, is the debt assumable, or are there onerous prepayment requirements? Is the loan cross collateralized with any other properties that could limit future flexibility? How will any personal guarantees impact future company efforts?
“Taking the time now to understand this new debt in the context of existing obligations should forestall any surprises later in the game.”
7 Hahn also advises making sure that you negotiate favorable distribution options. Be aggressive about it early on, she says.
“You may have limits on the ability to distribute profits out to the owner,” she notes. “Related to that, if the operator also runs the management company, be sure that the management fees are paid or payable as desired.”
8 McMeen says delivering comments on loan documents in a consolidated fashion is vital.
“Don’t incrementally negotiate,” he says. “It frustrates, causes delays and runs up legal bills. Take a principle-based approach to negotiating and check your emotions.
“Your lender will respect a principled approach that is rational and focused and will be more open to working with you.”
Mistakes to avoid
—Diverting your attention to other properties or tasks
—Being passive about gathering necessary information
—Allowing emotion to enter the negotiating process