Aspen developer Camilla Auger needed cash fast to preserve 10 acres of open space at Hunter Creek Way, so she appealed to a Denver-based real estate bridge lender for help.
In a matter of weeks, Western Capital Partners loaned Auger $4.9 million to help with the acquisition of the property, which also included a historic Victorian home.
As a self-funded private lender, Western Capital Partners can accommodate challenging real estate lending situations that conventional banks and lenders are unable or unwilling to fund. The company generally works with borrowers, from the first-time developer with limited resources to experienced real estate investors who need cash to complete their deals.
“In the development business, when an opportunity arises or you have a schedule to meet, it’s important that the financing be done quickly,” Auger said.
Bret Berglund, president of the company, said: “Typically, our borrowers are saying, ‘When can you get me the money?’ We’re designed to bridge a short-term need.”
Bridge lenders fill the financing gap between the amount the primary lender provides and the equity in a project.
“The biggest piece is the secured debt by a bank or institution,” said Byron Koste, director of the real estate center at the University of Colorado at Boulder. “They will just do the safest piece. The mezzanine lender knows they’re going to get a higher return for their dollar than the bank, but they’re unsecured.”
Western Capital has funded about $140 million in projects nationwide since its founding in 1999. It has, on average, loans outstanding of $30 million, with a goal of $100 million by the end of this year.
The typical loan ranges from $750,000 to $7.5 million, with interest rates of 10 percent to 18 percent, and matures in less than a year.
“They’re priced commensurate with the risk profile of the transaction,” Berglund said.
Western Capital spends a lot of time evaluating property before making the loan, said Jeff Adams, the company’s chief executive. Two of the firm’s partners as well as an analyst make site visits on short notice.
In addition to Adams and Berglund, the company’s partners include brothers Don and Patrick Bailey of Triton Properties; Mike Hilbert and William Lyons II of Creekside Properties; and Rick Pederson of Foundation Properties and Ross Consulting Group.
Pederson said he got involved because of the number of small projects he saw that couldn’t get funding because they don’t fit into traditional banking guidelines. He was impressed with Western Capital because of the firm’s ethical nature.
“The industry doesn’t have the best reputation. It’s characterized as vultures who want to take the property,” he said.
But Western Capital will do a loan only if the partners have confidence the borrower will be able to pay it off.
“We’ll only do the loan if we think the real estate value is sufficient to pay off our note if there’s a problem,” he said. “If we’ve called our property values right, we don’t have much sweat in not getting paid back.”
In fact, of the 75 loans the company has made over the past six years, it’s taken back the property on just four deals.
Said Adams: “We’re prepared to do it, but we don’t like to do it. We want to help our borrowers.”
Staff writer Margaret Jackson can be reached at 303-820-1473 or mjackson@denverpost.com.
