Eastern Union Funding has announced plans to form a new structured finance division headed by Shaya Ackerman, a top producer at the company.
Ackerman will be working with Dov Zabrowsky, a director of underwriting who will play a key role in the logistics of this operation, serving as the senior analyst in the new division.
Zabrowsky said their task involves dealing with more complicated projects which are constantly popping up at Eastern Union.
In one case, he recalls a client who bought a 50 percent vacant building in a major downtown market, where the typical vacancy rate was roughly 25 percent.
Filling the space as it was looked unlikely, but the market had recently experienced a major upsurge in residential demand, so the client changed his game plan, converting the office into multi-family units.
An unconventional situation like this is where structured finance comes in.
Eastern Union structured a 24 month construction loan with mezzanine debt bringing the loan to value up to 80 percent, an arrangement impossible to secure without shopping around for different lending sources.
“The new department would not be possible were it not for Eastern’s banking relationships,” company president Ira Zlotowitz said.
The company deals regularly with over 50 banks and is one of the top three producers at 18 of them.
Although the division is new, Ackerman is no stranger to structured finance. He closed on a $49,749,000 financing package encompassing five buildings. This had a complex debt allocation with multiple borrowers inside of a three member TIC including an earn-out.
Another structured loan scenario included a $20,000,000 loan which was a full cash-out to the borrower. Additional to this was a hold back structure pending issuance of a 421a tax abatement as well as an earn-out for more funds once the commercial spaces were fully leased.
In a hold-back arrangement, the lender commits to the full loan but holds back a certain amount of the proceeds until more value is added to a property, or until issues which decrease profits are resolved.
Earn-out means granting the borrower a larger loan should their property increase its revenue in an agreed-upon fashion. Both are traits of a structured deal.
Production at Eastern Union has groan to over 400 deals a month and the firm recently added a department dealing exclusively with small loans.
On the other end of the spectrum, the structured finance division will help with much bigger deals the company generates.
“In today’s market there are many transitional properties that are targeted by investors because of potential for higher returns,” Ackerman said. “The opportunities are complex and require structure and expertise to facilitate a resolution of the financial requirements that can mean the difference between a successful venture or a bust.”