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TECHNOLOGY EDGE (COLUMN): A digital dealmaker

A number of finance sites have come and gone in the past couple of years. But ever since it went online in November 1999, Atlanta-based has watched its business steadily grow. The site closed more than $150 million in commercial loans from fourth quarter 2000 to September 2001. About 70% of those transactions involved retail real estate — everything from unanchored strips to outlet centers to regional malls.

NetFunding's ultimate goal is to maintain a constant volume of around $500 million, says managing director Allen O'Brien. “With more than $240 million in activity on the site today, I think the future looks bright,” he says. “All the people who have used NetFunding have come back to use it again. That's a good sign.”

Real-time information

O'Brien describes the site as a place where borrowers, lenders and brokers can exchange deal information and see real-time data on current market conditions. For borrowers and brokers in particular, the site offers some nice features. The “Borrower Marketplace,” for example, lets borrowers take advantage of secure home pages to view and manage multiple transactions.

“When a lender makes a quote, he makes it right on the site in real time,” explains client relations manager Tim Radomski. “The data then goes right into the borrower marketplace and comes up in a grid where all the quotes are together.”

This enables borrowers to compare quotes from a variety of lenders by rate, dollar amount and other criteria. Brokers can access similar pages.

Loads of lenders

Approximately 400 pre-qualified lenders now use NetFunding. These include life companies, pension advisors, investment banks, credit companies and national and regional banks. NetFunding's online dealmaking process (see sidebar above) is designed to help lenders do more deals, and to help borrowers and brokers “see the market more quickly and on a larger scale,” O'Brien says. “Rather than getting an initial response from four or five lenders, they're getting responses from a large number of lenders.”

O'Brien cites a recent deal involving a Publix-anchored center in Atlanta. Initially, 47 lenders expressed interest. “But only about five of the lenders were willing to do a 20-year fixed-rate deal below 7%,” he says. “Nonetheless, the borrower was able to use NetFunding to find the five lenders that would do a very aggressive deal and the one lender willing to lock in at six and three quarters.”

Some dot.coms boasted they would “revolutionize” commercial real estate finance. But NetFunding makes no grandiose claims, only that it helps users take advantage of time-honored market forces more efficiently.

“The key to making this work for borrowers and lenders is our real estate expertise,” says O'Brien, a real estate finance veteran. “We're a real estate company using available technology, not a technology company trying to get into the real estate business.”

Anatomy of an online deal

In a nutshell, doing a deal on works like this:

  • Potential borrowers provide information such as property type, loan request, loan type, location and income and expense information.

  • Transactions are reviewed and, if deemed appropriate, underwritten by NetFunding.

  • NetFunding randomly selects 5 of the more than 400 registered lenders to view the loan package and submit initial “soft” quotes.

  • Borrowers receive the initial quotes within 48 hours and if interested submit operating statements, rent rolls, property photos, demographic data and other information. This information is used to create a comprehensive, fully underwritten package for lenders to review.

  • Lenders can then submit more detailed or more competitive hard quotes. “Our active server pages allow lenders to monitor market conditions for particular deals,” explains Netfunding's managing director, Allen O'Brien. “When the lender puts in a quote with, he gets an immediate response telling him where his quote lies relative to the rest of the market and allowing lenders to re-quote the deal.”

  • Borrowers see each quote in real-time. This gives them a market reporting system for each specific transaction.
    Joel Groover

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