Answers - Real Estate

Investing in commercial property may open a whole new area of financial ventures for the savvy real estate investor. Opportunities abound in multi-family uni

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

ts, office buildings, warehouses, retail shops, car washes, laundromats, mobile home parks, hotels, apartments, strip malls and more.

The obtaining of comme

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

rcial property financing is usually more extensive and time consuming than for a residential loan. Guidelines for underwriting a commercial loan put more emp

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

hasis on the income that the property produces than on the borrower’s ability to repay the loan. Lenders rely on the income history and stability of the prop

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

erty to determine future income. Also considered, although less important, is the credit history, assets and financial strength of the borrower.

When applyi

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

g for a commercial loan the previous two years and year-to-date financial information concerning the property need to be considered. This data is put into a

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

format commonly known as a Pro Forma Operating Statement. This is probably to most important single document in the application process. A Pro Forma Operatin

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

g Statement is the operating budget for the property which lists the rents and any other income such as laundry, parking, etc. and also all expenses from adv

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

ertising to management fees to utilities. Your lender can supply you with this standard form and help you or the seller complete it correctly.

Also of impor

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

tance to the lender is the Loan to Value Ratio and the Debt Service Coverage Ratio, (DSCR). The DSCR is how much of the proposed monthly payment will be cove

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

ed by the net operating income as calculated on the Pro Forma Operating Statement. Lenders prefer to see 100% coverage and on some properties a 120% coverage

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

is required. On purchases this determines the amount of down payment required and the terms of the proposed loan and for refinancing, the loan-to-value allo

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

wed and how much “cash-out” may be received, if any.

Commercial lending is not regulated or overseen by HUD so RESPA does not apply. Don’t expect to see you

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

r typical forms such as a standard residential loan application, Good Faith Estimate or Truth in Lending disclosures. Also be aware that closing costs may be

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

much higher than residential loans because of specialized appraisals, environmental reports, attorney’s fees and other costs for special services rendered.

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

There are also loans for borrowers or properties that may fall outside of the traditional commercial lending guidelines. They typically require 30% down (sel

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

ler carry backs are allowed up to a 95% combined loan-to-value or a 70% loan-to-value if refinancing. Some lenders even offer commercial “Stated Income-State

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

d Asset” programs. These usually have loan limits of $600,000. With a reduced loan-to-value, credit scores as low as 550 may even be allowed. No IRS 4506 for

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

m is required to be signed. You can close in the name of a corporation, trust or LLC and “cash-out” is allowed on refinancing. Fixed rates and ARM’s are avai

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

lable.

Commercial real estate may be worth exploring and it just may be one more way to expand your investment and real estate portfolio.

Adrian Skiles, GM

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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