Eastern Union has launched a Pooled Loan division that will deliver below-market interest rates for borrowers.
Borrowers will receive discounted rates by pooling multiple loans and approaching lenders as a group when seeking financing.
Lenders will offer lower rates to these pooled borrowers because of the savings and efficiencies these lenders will reap by processing multiple loans for a cluster of similar properties all at the same time, according to Eastern Union founder and president Ira Zlotowitz.
Aside from a reduction in interest rates that a bank will offer for a large cluster of loans, savings also arise primarily because a bank, or other lenders, will be using the same, single team of third-party professionals — attorneys, appraisers and others — to service a single pool of between 10 and 30 loans, instead of having to repeatedly deploy team members to handle each loan on an individual basis.
“Until now, lenders would close their transactions with borrowers on a one-loan-at-a-time basis,” said Zlotowitz.
“Eastern Union’s new Pooled Loan division revolutionizes this conventional model by injecting substantial new efficiencies into the process. As a result, both lenders and borrowers benefit.”
Using artificial intelligence combined with the resources of QTS, Eastern Union’s in-house banking department, Zlotowitz said that the Pooled Loan division will identify similar types of properties that can be “pooled’ into a suitable cluster of deals.
For example, a pooled asset category may consist entirely of garden apartment properties with between ten and 50 units, all located within the same geographical area, and all with existing mortgages maturing at the same time.
Eastern Union’s Pooled Loan division is aiming to bundle up to four such separate loan clusters valued at a total of roughly $250 million each.
In return for the new efficiencies engendered through group purchasing, Zlotowitz estimates that lenders will lower their interest rates by between one-eighth and one-quarter of a percentage point.
Zlotowitz said that the Pooled Loan initiative is targeting two categories of lenders: banks, which commonly finance properties like this but hardly ever lend to such a large cluster of them at once; and pension funds that commonly make “one large check” investments of this scale.
“Lenders will have the chance to streamline their traditional approach by closing 10 or 15 transactions — with a total value of a quarter-billion dollars — all as part of a single loan,” said Zlotowitz.
“In return for this new efficiency, lenders will offer the pooled borrowers lower rates.”
Eastern Union expects to place the first round of clustered loans by the second half of 2020.