Alternative Commercial Mortgage Lenders – Hedge Funds and Private Equity

Hedge funds and private equity firms are investment companies set up by Wall Street investment banks and funded by wealthy individuals and well-funded companies. Unlike traditional, publicly traded mutual funds, hedge funds are largely unregulated and have much more leeway in their investment decisions. Recognizing the opportunities that have emerged in commercial real estate financing, many of these funds have stepped in to close the financing gap. The money managers responsible for these vast pools of capital are savvy investment professionals, they know a lot when they see it and can be very nimble. Hedge funds and private equity funds are not afraid of risk; in fact, they thrive on it. If they like a deal, they make decisions quickly and can close loan or equity financing in just a few days.

There are many private funds that specialize in commercial real estate investments or have a commercial mortgage loan division. They are cash rich and actively seek quality deals to fund them. They can be an excellent alternative to banks and other traditional lenders.

But be aware that they are very professional and sophisticated. Don’t approach hedge funds with shabby or incomplete packages. They are professionals and work exclusively with other professionals.

Hedge fund and private equity people have a Wall Street mentality; You are the trader’s artificial heart. When they’re looking at a deal, they want to be able to make decisions quickly.

When you approach a fund, you should have a complete, well-documented package ready to show them right away, but don’t give it to them all at once. After working for Wall Street firms for more than 20 years, I’ve found that the best way to address finance executives is with a concise, well-written 1-page business summary.

Summarize the selling points of your deal on a single piece of paper, emphasizing the profit potential, the investor’s level of experience, the strength of the location, and some of the other strengths of the project. They will appreciate the fact that you respected their time by keeping it short. If they like what they see, they will ask for more. Give them exactly what they ask for; don’t bog them down with documentation until they tell you they want to see it. Sell ​​them the big story before you try to sell them the details.

If you are looking to secure funding from a large private equity deal or hedge fund, I strongly recommend hiring a professional broker with Wall Street experience. They speak the fund manager’s language and know exactly what is important in a particular transaction. These funds tend to work like private clubs, it helps a lot if you have an “in”. If you’re lucky enough to develop a relationship with this unique type of lender, you’ll be in for a seemingly endless source of capital.