The Basics of Financing Commercial Property

Commercial property finance is often more complex than normal residential funding says Rainer Stenzhorn of In2assets, the well-known South African commercial property broker company. Some financiers specialise in commercial property finance because of the complexity of some situations

The Basics of Financing Commercial Property

Normally commercial banks will lend up to 70% of the value of the property but this value is often based on the rent/yields achieved by the property.

Emphasis is placed on the following criteria when analysing a transaction explains Stenzhorn further:

Property fundamentals – This includes property type, condition, layout and location;

Market analysis – This ensures that the property is at its highest and best use and is in line with market valuations and demand;

Investor analysis – Each client behind a transaction must have the relevant knowledge and experience to maintain the property;

Counterparty strength – Tenants must have a strong operating history and sound financial standing to give comfort that, going forward, lease obligations will be met.

The Bank that is prepared to do finance for a specific commercial property, involves most of the time a commercial property valuer. This specialised person will analyse all the relevant factors around that specific property and document the same in a formal valuation, for final decision-making ends Stenzhorn his comments.

 

Posted by In2Assets