Identifying new opportunities to serve the market.

During the worst of the real estate downturn, when money was tight and opportunities were limited, most real estate developers, investors and lenders waited patiently for brighter days. Yet, during the darkest days of the recession, a few financial institutions toughed it out by identifying new opportunities and developing new financing programs to continue to serve the marketplace. Heller Financial, a diversified commercial financing company, was one such institution.

Today, the real estate market is on the road to recovery, competition among lenders has intensified, and the market is once again turning up projects and the sources to finance them. Heller's Real Estate financing group fought its way through the recession with innovation and expertise, and still remains at the center of some of the most creative real estate transactions around.

By carefully listening to customers' needs and anticipating changing market conditions, Heller identifies niches that have attractive risk/reward dynamics and offers creative financing solutions. As an opportunistic, niche lender, Heller Real Estate's ultimate goal is to provide real estate financing products and services which enable, but don't constrain, value creation for themselves and their customers.

With regional offices in New York, Atlanta, Chicago and Los Angeles, Heller's real estate division expects to generate approximately $950 million in new business this year and has an existing $2.5 billion loan portfolio.

Included in this portfolio are anchored retail centers, apartment complexes, condominium developments, hotels, industrial properties, office complexes, senior housing, manufactured housing communities, self-storage facilities and single-tenant commercial properties.

Heller's success within all of these property types can be attributed to its regional teams. To this end, the Northeast region recently appointed Dittany Schlegman to the position of Eastern Region Manager, responsible for all East Coast transactions.

A 10-year veteran of Heller's real estate group, Schlegman successfully developed Heller's Southeast Region commercial real estate portfolio and will now focus her energies on identifying underserved niche real estate opportunities for the Northeast Region office.

"Dittany's extensive market and financial product Lowledge and creativity have always given her the edge in evaluating financing opportunities and originating new transactions," said Michael Goldsmith, Group President, Heller Financial's real estate division. "In re-evaluating our strategic goals for the coming year, we recognized the value Dittany could contribute to Heller by working within both Eastern region markets."

As with most smart companies, its the team effort that leads to success at Heller. Schlegman will work with the Northeast Region's team of experienced loan officers, Christopher Kelly and Fran D'Loren, and the team's underwriter, Jennifer Bahrami, to seek out new opportunities in underserved markets and develop targeted financing programs.

Kelly, a six-year veteran of Heller's real estate group, joined the Northeast Region this past year as a Senior Investment Officer, relocating from the company's Midwest Region. A driving force in the Midwest, Kelly now lends his creative structuring expertise to the Northeast Region.

D'Loren, a 12-year veteran of real estate finance and a former Vice President with Dime Savings Bank, shares the Northeast Region with Kelly.

"Competition has sharply increased among financial institutions and newer, non-traditional lenders are entering the market, yet we believe we have assembled the best team to meet the challenges that lie ahead," said Schlegman. "We will remain focused as a value-added niche lender who brings more to the table than just money by providing quick closings, flexibility in loan structures and credibility by delivering what we promised."

Heller Financial's real estate group maintains a traditional emphasis on interim financing products for the acquisition or refinancing of existing income-producing properties. Recently, Heller staked its claim in specific niches that most lenders shy away from.

One of these niches is the hotel market.

"Financing of a hotel property requires knowledge of both the hotel business as well as the real estate involved, so many lenders avoid this property type," said Schlegman. "The hotel properties are enjoying the most favorable supply-and-demand dynamics in years. The streamlining of hotel services is a trend that has had a substantial effect on the Northeast hotel market and has opened the door to tremendous opportunities for lenders."

Heller's Northeast team recently helped a major hotel flag introduce its limited-service line of hotels (no food or beverage service). In this case, the firm provided a $4 million participating first mortgage to facilitate the acquisition and conversion of a 168-room exterior-corridor Travelodge motel to a Holiday Inn Express in Lexington, MA.

All parties to the transaction benefitted from the financing program. The borrower purchased the property at an attractive price from a motivated seller, completed all necessary upgrades and obtained the Holiday Inn Express Flag. The benefits to Heller, for providing a quick turnaround, include attractive returns via a share in the excess cash-flow and residual value.

"Since closing, the property, operating as a Holiday Inn Express, has exceeded the buyer's business plan and has outperformed our underwriting assumptions," Schlegman added.

Another hot property type for Heller are industrial properties.

Traditionally, industrial properties have been an investor favorite because they offer attractive risk-adjusted returns. But, recently, environmental issues, and higher operating costs, among other factors, have limited urban opportunities. Competition for financing has consequently increased, except in the Northeast, which has some of the highest industrial vacancy rates in the nation. But the picture is getting brighter and the next few years should bring about an abundance of activity, according to Heller executives.

"Strong absorption in 1994, combined with limited speculative construction, delays in developing build-to-suit facilities and increased economic activity should accelerate the demand for space," said D'Loren. "We've had very favorable experiences with industrial properties so far and the tremendous demand for large-block industrial space along the Interstate-95 corridor that connects New York to Baltimore and Washington is particularly encouraging for Heller."

Case in point: Heller recently provided a first mortgage for the acquisition of a 466,000 square-foot institutional-quality warehouse located in Bucks County, Pennsylvania. Industrial space in this county is tight, especially for large users, those requiring at least 100,000 square feet of space. The borrower, the Shidler Group, purchased the property's fee and leasehold interest for approximately $7.5 million.

Heller's desire to create value through innovative real estate finance has opened other niche lending markets: manufactured housing communities, otherwise known as mobile home parks; senior housing; and self storage facilities. Additionally, a major initiative over the past several years has been participating loans for both existing and proposed properties, filling the gap between conventional lending and borrowers' equity. Other new initiatives include participating forward commitments; enhancements for tax-exempt bonds; financing for discounted loan portfolios; secured consumer receivables financing; and first mortgage conduits for mobile home communities and self-storage facilities.

"Heller is involved in both the debt and equity sides of transactions, so we are more knowledgeable of what is taking place within the markets," said Schlegman. "Our primary responsibility is to meet client's needs and to continue to serve markets currently underserved by the industry."