In a time when banks are reluctant to open their coffers to developers, Endeavor Capital is offering millions in bridge loans. Their money may not be cheap, but it gets out the door quickly.
Endeavor Capital was the result of a combination of finance companies Endeavor and Capital Trust. To date, the joint venture of Anthony Borghi, formerly president of Endeavor, and Kurt Stenhouse and Chris Anderson, founding partners of Capital Trust, has closed on $45 million to $50 million in alternative financing for investors and developers.
Anthony Borghi
Title: Principal, Endeavor Capital; Boston
Ages: 53
Experience: 20 years
Chris Anderson
Title: Principal, Endeavor Capital; Boston
Ages: 37
Experience: 10 years
Kurt Stenhouse
Title: Principal, Endeavor Capital; Boston
Ages: 44
Experience: 15 years
You’ve recently joined forces to provide loans at a time when many projects are at a standstill. It seems like the question everyone would ask is – Why now?
Anderson: Things have not slowed down for us. Things are very active with investors buying bank-owned, distressed properties. Every single day there are new [properties] coming onto the market. Investors come to us because they can’t get financing at the speed that they need to close on these bank transactions … and the banks are looking to get [the properties] off their books fast. So these investors come to us and know that … our legal team is ready to get the due diligence done to get the deal done quickly. There’s definitely a market for what we do, and there’s not a lot of competition. Banks are predominantly the only traditional source. We provide another avenue to borrow money.
Borghi: Within the sector that we deal in, most of my private lending experience was totally suburban-based, predominantly outside the [Interstate 495] belt, whereas Chris and Curt, as Capital Trust, were primarily a Greater Boston lender. We shared some deals with each other and worked together to underwrite different transactions. It was more or less during the beginning of the financial crisis when our desks were busy because banks were in the middle of a liquidity crisis, hence there was a much greater need for alternative financing sources. We ended up doing maybe $10 million or $15 million together in participating loans. Ultimately it culminated in this relationship we have today. It didn’t happen overnight.
How do your rates and loans differ from traditional lenders?
Borghi: The pricing of our capital is significantly higher than what you would typically see for a conventional loan. We’re in for a very short period of time, and consequently take on that risk exposure associated with closing in a very quick period of time. To find alternative loans like this, people are willing to pay a lot more money for that capital.
They’re not taking on a partner, which would typically cost them 50 percent of the equity in a project. When we’re paid off, they have 100 percent equity in the project. The people who borrow from alternative sources like us are sophisticated guys that have been around the block a couple times, so they know they’re going to pay more for our capital.
Stenhouse: On a million-dollar loan, a borrower may call us on Monday and may need to close on Wednesday. Basically it would be a 14 percent interest rate. We spend the next 48 hours straight out and we get the deal done. Simply put, the rate is indicative of the risk and speed.
What do your prospects look like over the next five years?
Anderson: We’re doing our deals on a day-to-day basis because the environment changes so fast. We look at that six-month to one-year horizon. That’s as far as we’re going to look for deals.
Borghi: We’re not being introduced to transactions that require 10- or 20-year financing. Every transaction that is presented to us is a special situation. Something is going on in the environment and this borrower’s business model with his primary lending institution that is causing him to seek alternative financing to get it done very quickly.
How many of these fast, in-and-out loans go upside down?
Borghi: Not a lot. They’re sophisticated borrowers, and we know the markets that we deal in. The amount of loans that we’ve had to foreclose [on] over the past 10 years is probably 2 or 3 percent of all our loans.
In the last few years, has there been a downside to what you do?
Anderson: The downside was when money was very easy to get. It was hard for us to do as many deals. We were patient and stuck to our plan. Now there’s more opportunity. Unfortunately, it’s because now it’s the downside for somebody else, like the big banks that are downsizing. There’s a lot more volume because it’s not so easy to get credit anymore.
5 Interests Anderson, Borghi And Stenhouse All Share:
- Surfing at Rincon, their favorite beach in Puerto Rico.
- Making wine together at the Boston Winery.
- Traveling to Naples, Fla. where they own property together.
- Noshing on ricotta gnocchi at Bon Caldo in Norwood.
- Their tastes in reading materials and movies.
