Special Purpose Properties
Churches, marinas, bowling allies, medical clinics, feed mills, fishing/hunting lodges and free standing fast food properties are all examples of special purpose properties.
Properties are characterized as special purpose as a result of the specific utility of the property and the prohibitive costs to convert the special nature of the improvements to a more generic use, such as office, retail or service.
Special use properties play a large role in our everyday life, but to lenders or investors they are not what they typically want to own or make a loan on without receiving a premium over more generic properties.
The more special the real property improvements, such as a feed mill, the more undesirable it becomes to lenders. Institutional lenders will finance them for their long standing "A" customer where they look to the credit worthiness and cash flow of the borrower and not to the real property.
Private equity financing also is cautious about special purpose properties, but is willing to take the risk for the appropriate reward (interest rate). Loan to value ratios, cash flow, additional collateral, credit and personal guarantees are among the things analyzed to determine if the risk is acceptable to a private equity lender.
It is difficult to determine in general terms if a special use property is a candidate for either institutional or private financing. CICG is adept at quickly reviewing a special purpose loan request to determine if the property, borrower, loan to value and credit are acceptable either as an institutional loan or private equity financing. Please talk to one of our experienced agents to discuss a loan on special purpose properties.