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anelists at a recent session on Internet-based capital sources had their work cut out for them. The speakers were part of the program at a NAIOP (National Assoc. of Industrial and Office Properties) conference in Orlando, Fla., in October. “We hope you get so comfortable using the technology that you don’t even think about it,” said Benjamin Milde, CEO of CapitalEngine.com (www.CapitalEngine.com). “We don’t sit up here and tout technology. We sit up here and tout the better service we can provide you.”
The audience’s blatant skepticism was best illustrated by the blank stares issued in response to moderator Steven Felix’s inquiry as to who had used some of the new dot-com companies offering real estate financing. Not a single hand was raised. Felix, vice president of Institutional Real Estate (www.irei.com), and the other panelists pointed to the conservative nature of the real estate business as a leading reason for the Web-wariness. But developers in the audience said they were generally satisfied with their traditional mortgage bankers, which dampens the need for alternative, especially online, funding sources.
The speakers’ main task was to assure the audience that financing projects
dot-com style is not cookie-cutter process that eliminates the human element.
The Human Touch
The speakers’ main task was to assure the audience that financing projects dot-com style is not cookie-cutter process that eliminates the human element.
“We have a 30-minute application that includes about 60 questions, and then the application goes directly to our underwriters, each of whom have about 10 years of underwriting experience,” said Dennis DeAndre, CEO of LoopNet (www.loopnet.com), an online listing service that has broadened its offerings to include tansaction components. “The underwriters will go out and collect the rest of the necessary information.”
Panelists pointed out that the new dot-com companies also offer greater choices to loan-seeking developers in part because they may earn their profits in different ways from traditional lenders. “We’re compensated strictly by the owner-developers. No lenders compensate us,” said Milde.
On the other hand, LoopNet receives its compensation from the lenders. “We think it’s a very good blend for the borrower to take advantage of on-line capabilities,” DeAndre said.
CapitalEngine’s goal in dealing with a dozen or so possible lenders is to find the lowest possible loan cost and he best terms for the developers. The dot-com part of the company is its use of Internet tools to streamline and expedite transactions. But the human element is still an important part of the process, panelists stressed.
Panelist Brenda J. Mixson, executive vice president of CapitalThinking (www.capitalthinking.com), said her company streamlines the loan process. “We believe our system will allow your business to operate more efficiently,” she said. Mixson cited several ways of accomplishing that, including better document management and the elimination of unnecessary or duplicate paperwork. She and other panelists pointed out that the dot-com companies were not rigidly computer-oriented, but offered a variety of choices.
“We have certain products and tools that are somewhat standardized, but the beauty of our system is you don’t have to throw away anything you like to use,” she said.
How much time can dot-com systems save for developers? “What’s been traditionally a week-long process is a 48-hour process,” DeAndre asserted.
Greg Spevok, director of marketing at The Realm (www.TheRealm.com), talked about his plan to combine the “resources of the most prominent real estate software companies to offer a fully-integrated solution for the commercial and residential real estate industry. The company says it will supply paperless transactions and collaboration for specific real estate needs such as property management, rent collection, procurement and finance.
During a question and answer session, panelists were asked how many loan applications reached the completion stage.
The numbers, though low, probably compare favorably with traditional brick and mortgage operators, said DeAndre. “I wouldn’t expect our closing rates to be lower than any traditional mortgage broker,” he said. “I would say the opposite with the level of people we’re working with, and the quality of the deals we have. I’d say we’re held to a higher standard than typical brokers.”
A Question of Staying Power
Audience members also asked how many of the dot-com real estate companies would be around in the next five years. Panelists turned the question around by pointing out that traditional mortgage bankers are having their own problems.
“The question of who’s going to survive involves the mortgage bankers themselves,” said Spevok. He predicted lenders who become more competitive and efficient by reducing staff and harnessing new Internet tools would do the best in the future. “Those who don’t will very well fall by the wayside,” he said.
Knowledgeable loan-seekers in the future increasingly will not be asking about technology, noted DeAndre, but rather, does this service save time, and does this service save money?
— David Wilkening is a free lance writer based in Altamonte Springs, Fla.
