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Financing New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Financing New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
| New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate |
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| Written by Nick Copley | |||
| Thursday, 10 June 2010 15:40 | |||
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David M. Disick, private residence club pioneer and fractional finance expert, announced today that his company, Securities Based Fractional Funding, (SBFF) and Equities First Holdings, (EFH), have formed an alliance to provide securities based financing to domestic and foreign buyers, owners and developers of luxury fractional properties. Steve Gordon, SBFF partner, noted that “today’s fractional investor requires a product that fills the gaps created by the credit crunch. Lending against the borrower’s securities portfolio eliminates those gaps and provides many other unique financing advantages over a traditional mortgage, margin loan, cash such as”:
Despite the credit crunch and while access to liquidity through traditional capital markets is difficult, the SBFF loan enables borrowers to obtain funding at below-market rates by pledging the securities they own, under a collateralized re-purchase agreement, as collateral for the loan. Eligible securities are publicly traded stocks, bonds, tradable mutual funds, unit investment and real estate investment trusts as well as foreign positions on certain international exchanges. Ineligible securities include privately held stocks and securities held in retirement accounts. Successful stock-lending transactions have been executed involving the American Stock Exchange, NASDAQ National Stock Market, NASDAQ Small-Cap Stock Market, New York Stock Exchange, Over-the-Counter Bulletin Board and certain foreign exchanges. EFH is a direct lender specializing in securities-based lending to investors, worldwide, in need of prompt funding. Securities Based Fractional Funding will be the exclusive worldwide fractional lending representative for EFH. SBFF is a specialized fractional financing and consulting firm. Mr. Disick, a former Wall Street attorney, was recently named by Fractional Life to its list of The Top 21 Fractional Real Estate Professionals of 2010. Mr. Gordon has been originating mortgages for 30 years and was most recently the founder of Carteret Mortgage Corporation’s Fractional mortgage division For more information visit their website or contact David Disick or Steve Gordon at the contact points below. David M. Disick, Esq. Steve Gordon
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Discuss (26 posts)
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 01:23:23 David, what is the relationship between your company, Securities Based Fractional Funding (SBFF) and Equities First Holdings LLC (EFH)?
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#236 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 01:27:04 Our company, SBFF, is the "sole exclusive worldwide representative for securities based lending to fractional developers and purchasers of fractional interests, with the sole and exclusive right to offer the EFH loan product.”
In addition, while not exclusive, our company can also originate the EFH Securities Based Lending program for the prompt funding of loans for other real estate and non-real estate loan transactions. |
#237 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 01:28:40 This program sounds like a typical margin loan. Are there differences and if so, please describe them.?
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#238 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 01:30:55 Our securities based loan is superior in all aspects as compared to the typical margin loan. Some of the major advantages of our loan are:
• Our loan product is 100% non-recourse; borrowers have no personal liability. In contrast, the typical margin loan is fully recourse and additional liabilities, fees and penalties may be assessed. • Our loan has a below market fixed rate for the loan term. The typical margin loan is a variable rate loan with short interest rate adjustment periods, which can sometimes be daily. After initial adjustment periods, the typical margin loan interest rate will generally exceed our fixed rate loan. • The loan amount of the margin loan cannot exceed 50% of the market value of the pledged stock and by regulation, not all securities are eligible. The EFH loan amount can be as high as 80% of the market value of the pledged security and many more securities are eligible for our loan product. • In a margin loan, if the value of the pledged securities falls below 80% of the market value used to determine the loan amount, the loan is subject to an immediate "call". The owner has 24 hours within which to respond to the call and increase the collateral or lose the stock and remain personally liable for any deficiency. In contrast, with the EFH loan program, should the value of the pledged securities fall below 80% of the loan amount (a huge difference) for three consecutive days a five day call provision can be invoked. If the value of the stock pledged to EFH increases to a level above the call point anytime during the call period, the call will be nullified. If the stock value does not increase, the borrower has five business days within which to increase the amount of the collateral or walk away from the loan without additional liability or adverse impact to their credit report. |
#239 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 01:33:12 For what types of individuals might this program be appropriate?
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#240 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 01:33:59 This program is appropriate for any individual, corporation, LLC, or other entity desiring to purchase fractional or other resort real estate. It is especially appropriate for those individuals that may not wish to liquidate their securities to enable their purchase or individuals who do not have access to, or the inclination to take down, a home equity loan to generate capital for the purchase.
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#241 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 02:49:43 Please describe the loan application process.
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#242 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 02:51:48 The loan application process is extremely simple and on average takes only two weeks from the initial submission of a copy of your most recent portfolio statement(s) to the funding of the loan. The steps are as follow:
1) Provide proof of ownership of your securities, bonds, or options with either electronic or physical certificate documents. 2) EFH will review the proof of ownership documents. Normal turnaround time for review is 24-48 hours to determine and calculate a loan-to-value (LTV) ratio and the fixed interest rate. 3) If the loan proposal is acceptable, the appropriate paperwork is signed and the loan is funded. |
#243 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 02:52:53 One more question, David, much of the existing, in-place, financing for owners of fractional properties were originated as ARMS with much higher interest rates, that can even go higher. Can your loan be used to refinance the existing high rate ARMS into the low fixed rate 2.50% - 4.50% loan?
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#244 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 02:53:18 Yes
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#245 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 02:55:58 Jeff, tell us something about your company, Equities First Holdings (EFH). When was the company founded; how many loan transactions have you done; what is the aggregate value of the transactions and what is your performance record?
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#246 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 03:04:37 Equities First was founded in 2001. Since inception EFH has funded over 600 loans for hundreds of millions of dollars. We take great pride in our perfect record of always funding on time and always returning the borrower's collateral at loan maturity. Equities First is unique in that our loan is against the borrowers' securities that they own, and is not tied to the fractional purchase or any other personal or real assets. Therefore, the underwriting is only on what types of securities are pledged and that's what determines the loan to value-- which can be as high as 80% and our low fixed interest rate -- usually between 2.50% to 4.50%.
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#247 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 03:07:16 Jeff, I know that your company is privately held. But tell us something about the principal, your professional staff, your operating philosophy at EFH.
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#248 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 03:08:13 Our CEO and Founder is Al Christy, Jr. Al has over 20 years of capital markets experience and founded EFH in 2001. I also have over 20 years of capital markets experience which includes managing the mortgage conduit groups at Goldman Sachs and Lehman Brothers. Our operating philosophy is one of no shortcuts when it comes to only using the best law firms, broker dealers, custodians and accountants. We are very hands on with frequent communication with our clients. This ensures the best possible service so the transaction closes in a fast and smooth manner. One example of this is that I personally speak with every borrower to answer any questions that they may have.
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#249 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 03:09:14 A number of the fractional developers will be in need of hundreds of million dollars of financing for the end user within the next 2-3 years. Can you handle this volume? How are you able to do so?
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#250 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 03:09:56 Yes, absolutely. We are cash heavy and have no debt. We would love to provide our low rate financing for the fractional developers.
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#251 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 03:11:36 Jeff, why do you feel the fractional real estate industry presents an opportunity for EFH?
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#252 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 03:12:09 This is a growth industry but like any industry it needs low cost liquidity which we provide. Unlike traditional financing our loan is not tied to the fractional purchase or any other personal or real assets of the borrower. The only lien is on the securities which are pledged for the loan. The enormous growth of the fractional market over the last 10 years with expectations of future growth present a tremendous opportunity for us to take part and facilitate in that growth.
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#253 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 03:13:33 What types of securities can be used as collateral; do you accept securities from most exchanges; are loans restricted by nationality of the borrower?
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#254 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 03:14:12 Publicly traded securities which trade are eligible. In other words, equities, mutual funds, exchange traded funds, US Treasuries, and many other fixed income securities. Most of the world exchanges are eligible and the loans are not restricted by the nationality of the borrower. The only underwriting is on the securities, not the borrower's nationality, credit score, purpose of the loan proceeds, appraisal of the property, or any of the other traditional underwriting parameters. This is one reason why the normal funding time takes less than two weeks.
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#255 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 03:15:16 How has the current economic environment affected loan production?
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#256 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 26 2010 03:15:42 It actually has helped our business because we are always ready to transact if the borrower has eligible securities. We're not affected by the credit tightening exhibited by the traditional lenders.
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#257 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 29 2010 08:21:27 David, another question for you. Why did you and Steve Gordon choose EFH as the lender?
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#258 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jun 29 2010 08:23:10 We realized even before the current economic environment that the process of obtaining financing for fractionals and resort real estate generally needed to be improved. Our desire was to revitalize the entire lending process and where possible eliminate the costly and out of control obstacles and guidelines faced by borrowers. To that end, our main goal was to make this process as consumer friendly, simple, reliable, timely and cost effective as possible. Based on these factors we knew we had to find a lender that had the ability to lend using accepted but non-traditional guidelines, had a fine track record, expertise, integrity and customer service. Our exhaustive research and experience in working with lenders over the years brought us to one direct lender. EFH.
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#259 |
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Re:New Availability of Financing for Domestic and Foreign Buyers of Fractional Real Estate
Jul 20 2011 22:47:55 Thank you for this post
Sounds interesting |
#280 |
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