Answers - Real Estate

Setting The Record Straight

There is a metaphorical place in any business when the seeker of inside secrets reaches that signpost that says something like: “Beew

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

air … Theyre bee Dragyns ahed.” Again, keep in mind I am being highly metaphorical, but I’ve been asked a number of times about a certain type of commercial real

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

Examples of combination products may in

state financing that makes me begin to suspect that someone is out there selling investment property “treasure maps” for $5.00 each! And you know just how much tr

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

easure you will find following such a map. So as a professional commercial real estate loan broker, I am here to set the record straight:

NO LENDER offers a 100%

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

Loan to Value commercial real estate loan.

And I define “lender” to mean a source of capital that provides debt financing, secured by real property.

So for all o

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

Combination pro

you seeking that 20% Seller Carry and the 80% purchase money loan on a property you think is worth three times the purchase price … please, join us back here in r

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

eality. If pigs had wings, they would fly. So, if a lender was willing to allow you to purchase a property on those terms, why would they need you? They would m

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

ke a whole lot more money doing the transaction themselves!

Here is the reality concerning commercial real estate from a lender’s perspective: Commercial real es

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

tate is considered an investment, not a basic need, such as a roof over your head. Because investment real estate is “secondary” to a borrower’s personal residenc

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

, it is usually considered a higher risk loan.

Why?

If the fit hits the shan in a borrower’s personal life and money becomes tight, lender’s conventional wisdom

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

ays that the borrower will shift his resources to protect his personal residence ahead of his commercial investments. This may not seem immediately apparent when

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

Following aspects would a

you look at the spread between home loan rates and Wall Street conduit rates (these commercial rates are actually lower than most residential ones). However, you

dd to the challenges in developing combination products:

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

eed to check the terms to see the difference.

You can still by a primary residence with no money down and good credit. You can not purchase a commercial property

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

without some form of equity investment. In most cases, the commercial lender wants to see a minimum of 15% equity in the deal, although you can find some that wi

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

l allow 10% provided the property meets minimum debt service requirements. But good luck finding that situation in most good markets. Oh, and very few commercial

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

loans go full term like residential loans (yes, I know that there are exceptions). Most are balloons at 10 years.

Yes, you can engage a mezzanine lender to fund

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

Professional from academic institutions, pharmaceutical industries, health care indust

almost all of the equity difference, but you are really going to pay for it either in points and rate or in some form of equity kicker … which takes us away from m

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

definition of lender. And mezzanine lenders don’t make loans on the property itself … which is a whole other story.

Thus, it bears repeating: There are no 100%

.

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

LTV commercial loan programs! Commercial real estate is for serious investors with equity to risk, a positive net worth, and an asset that a lender would feel co

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

Companies that provide selfless information through particip

fortable encumbering. So the next time someone approaches you with a map to a pot of commercial real estate loan “gold” … save your money for a latte at Starbucks

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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