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CRE Finance World Autumn 2015
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to predetermined criteria, tenant improvement thresholds, and
lender acceptance.
Some construction loan administrators have experience in providing
special credit management and resolution services in the event of
default. These services include assisting the lender in developing
and implementing an asset management plan to address the
workout, restructuring and disposition of under-performing and
defaulted construction loans, with the specific focus on resolving
the unique issues inherent in distressed construction projects. The
asset management plan is a detailed assessment of the project
construction status, market, valuation and financial analysis of
alternative resolution strategies. A critical part of this analysis is
whether the borrower is the problem or can be part of the solution.
Qualified third-party construction loan administrators can provide
an invaluable resource to lenders who do not have the internal
expertise and capabilities to manage construction loans. The loan
administrator’s experience related to financial risk management is
a critical, value-added expertise. Construction loans are inherently
risky, and a professional construction loan administrator can provide
a wealth of experience to manage and mitigate these risks. The
use of a third-party service provider also is economically efficient,
allowing the lender to have the resources available only when
needed and paying variable expenses as their construction lending
volume increases and decreases over time. This business model
is expected to gain further market acceptance as the commercial
construction lending business revives.
Risk Management and Loan Administration for the Next Generation of Commercial Construction Lenders