PRIVATE LENDING OVERVIEW

BLCP Capital offers investors consistent, attractive and secure yields in the private lending space. This space exists as a response to the real estate market’s demand for acquisition and development capital in commercial real estate including Office, Retail, Multifamily and Industrial.

BLCP will consider financing some specialty real estate situations such as car dealerships, hospitals and other property classes. With today’s economic climate as the backdrop and financial institutions’ unwillingness to provide real estate investors liquidity, a “perfect storm” of financial gridlock has occurred. BLCP assists buyers who seek capital for real estate acquisition and development purposes.

It is our opinion that we have substantially tested and identified the low band of the residential, commercial and industrial sectors of the real estate market. We believe that the structure and parameters of the BLCP “credit facility” concept goes to great lengths to immunize the lender and investor from significant market risk. We also believe that the consistency, certainty and magnitude of returns from this bridge financing plan more than justify the associated risk of providing a “yield-seeking” investor with an attractive investment vehicle that balances opportunity and preservation of capital.

Historical View of Bridge Financing:

Historically, traditional lenders and lending practices have not properly valued developable land as a borrower’s source of repayment. While there is no question that a financing requirement exists, the traditional source of capital attempts to seek security and the source of repayment from the borrower rather than from the inherent value of the underlying collateral – the real estate asset.

Why? Mostly this occurs because, in the view of the traditional lender, the asset fails to produce a verifiable repayment stream of income until later in its development cycle – after acquisition and entitlement. As a result, the financial institution seeks repayment guarantees from the borrower rather than relying on the asset’s value for security.

We believe that this is a flawed model – particularly when BLCP possesses the professional capabilities to value the asset and ensure repayment based on the borrower’s clear objective to retain ownership of their appreciating asset as they pursue value-added entitlement activity. Historically, the private lender provides the capital between the period when an asset is acquired through and including the value-added entitlement process after which a traditional financial institution will provide the developer/owner with a more market-valued Acquisition and Development loan on the asset. It is at this stage and with this A&D credit facility that the bridge lender would be repaid. BLCP provides this bridge facility to qualified borrowers.

LENDING
PARAMETERS

BLCP is a private lender to real estate investors/developers (borrowers) who require short-term (typically 12-24 months) financing facilities to complete an acquisition or to refinance a current asset. BLCP anticipates charging borrowers in the range of 12-18% for private capital. The rate variance is based on market fluctuations, evaluated risk of specific loans and market opportunity. Return will be augmented by origination fees (points) of approximately 2%-6%.  A loan whose term is greater than one year will require extension fees similar to the origination fees in order to execute an extension.

BLCP imposes rigid parameters for Loan-To-Value (LTV) ratios for these loans meaning that BLCP will assess the value of the asset and restrict borrowing to a ratio in the realm of less than 60% of current asset value. BLCP will also impose internal limits on how much of its capital base is lent to any one borrower.

BLCP is initially focusing its loan underwriting to properties in the southwest  – our historic regional focus. BLCP’s principals have significant experience and exposure to this marketplace including acting as Pension Advisor for one of Arizona’s largest public pensions for over 12 years for it’s private lending portfolio.

Specifics

This details generally the parameters for a bridge loan to be considered by BLCP.
The borrower’s asset must be domiciled in a single purpose entity in order to transact with BLCP.  All BLCP loans are First Position loans. Cross collateralization is a possibility for those assets requiring additional collateral for loan approval.
BLCP requires a limited guarantee  – limited to events of bankruptcy, fraud or environmental contamination. In the event of a normal default or foreclosure, there is typically no recourse to the borrower.
Lending rates vary based on the asset profile and market conditions. Term of Loans:  The term of the loans will vary, but typically won’t exceed more than 24 months (12 month term + 12 month extension).
BLCP attempts to streamline the diligence process thereby enabling a borrower to act quickly on asset acquisitions, which, in many cases, can provide a competitive edge for a borrower.
BLCP has a standard application process that is not onerous but it is thorough.  The application seeks to identify qualified borrowers while tactically allowing BLCP to properly process and analyze the loan requests.
BLCP requests a site inspection fee of approximately $2,500 to make an initial visit to the property. If both parties agree to proceed with the underwriting process, we request a commitment fee to cover our out of pocket expenses in underwriting the loan. The commitment fee will be used to cover legal expenses and any other third party expenses incurred. Both the site inspection fee and the commitment fee are refundable less the out of pocket costs incurred regardless if the loan closes. We also request a small annual fee to inspect the site at least once a year. If necessary, we may need more frequent site inspections such as in the case of an infrastructure loan to verify work completion.
An applicant can expect a response from BLCP within 7-10 business days.

Confidence in Concept: Based on Market Timing and Environment

We believe that there is significantly less market risk in this type of financing because the assets being underwritten represent real value based on market valuation comparisons. Lending at or near a 50%-60% LTV on real estate assets in the current Arizona/Southwest market environment, in BLCP’s opinion, represents great value to anyone seeking consistent income-producing investments collateralized by appreciating, undervalued and well-vetted assets.

In only a very few instances can there be a scenario where the assets (against which the described loans will be made) are not valued at significantly greater than 50%-60% of the underwritten value – especially given the short term nature of the bridge loans and the fact that the market has compressed significantly in advance of these loans being issued. This provides great confidence in concept and collateral valuation.

BLCP possesses a high degree of confidence in being able to source and evaluate the assets and demand for capital for this business segment based on our historical success in this space. The same long-standing successful track record that BLCP principals possess in real estate investing underscores the reasons for expecting the bridge financing arm to thrive – strong diligence team, expertise in the Arizona/Southwest marketplace and the ability to track and manage a large portfolio of real estate assets.

Providing bridge financing to real estate borrowers is a core competency of BLCP Capital