March 2017 — Office Properties Quarterly —
Page 9
TYPE OF CAPITAL SOURCE OF CAPITAL EXPLANATION RATES/SPREADS
LTV/COVERAGE
TERM AMORTIZATION
FOCUS
TRENDS
LIFE INSURANCE
COMPANY
• Insurance premiums
• Annuity and GIC sales
• Non-Recourse
• Longer-term fixed
rate loan
160-200 bps over the
comparable US
Treasuries
• Up to 65% LTV
• 1.35x Minimum DCR
5-30
Years
25-30 Years
• Downtown, urban locations
• Multi-tenant, traditional floor
plates
• Top tier tenants (local, regional
& national)
• Major metro areas
• Many of the life insurance companies will be more
selective on office properties in 2017
• Most competitive at lower to moderate leverage with
strong sponsors
• Flexible prepayment penalties available for small
pricing premium (5-10 bps)
• At right leverage (~55%) lenders can do Interest Only
• Staying away from single-tenant exposure
CONDUIT (CMBS)
• Sales of mortgage-
backed securities
through public markets
• Non-Recourse
• Longer-term fixed
rate loan
250-300 bps over the
greater of US
Treasuries or SWAPS
• Up to 75% LTV
• 1.25x Minimum DCR
• 8.25% Minimum Debt Yield
5, 7 & 10
Years
30 Years
• Downtown office
• Class B suburban office
• Single-tenant with structure
• Secondary/Tertiary Markets
• Spreads have widened ~50 bps since 2Q 2016
• Most competitive at higher leverage in secondary and
tertiary markets
• 10 years interest-only under 60% LTV
• 5 years interest-only under 65% LTV
BANK
• Corporate Debt
• Deposits
• Recourse (some non-
recourse available)
• Shorter-term fixed
and floating rate loans
200-300 bps over
bank cost of funds
• Up to 75% LTV
Up to 7
Years
Fixed
Interest Only to
25 Years
• All office assets
• Value-add with repayment
gauranty
• Secondary/Tertiary Markets
• Standards are tightening for Sponsors with no deposit
relationship
• Most competitive for Sponsors with established banking
relationships and strong borrower history that are willing
to accept recourse
• Establishing a deposit relationship is becoming a
requirement
• Primarily recourse loans, with non-recourse available to
strong sponsors at low leverage
• More flexible (open) prepayment terms
DEBT FUND / BRIDGE
LOAN
• Private Capital
• Institutional Capital
• Non-Recourse
• Shorter term bridge
loans for acquisition
and/or repositioning
LIBOR + 350-600 bps
(some w/ floors)
• Up to 85% LTC
• Going-in 1.0x DCR
1 - 5
(3+1+1)
Interest Only
• Value-Add Transactions
• Recapitalizations
• Pricing depends on leverage level, property quality, and
Sponsor strength
MEZZANINE/
PREFERRED EQUITY
• Private Capital
• Institutional Capital
• Junior financing
secured by a pledge of,
or participation in
ownership interest
Mezzanine
8%-12%
• Up to 85% LTC
• 1.10x DCR
2 - 10
Interest Only
(in most cases)
• All office assets
• Value-Add Transactions
• Recapitalizations
• Preferred equity offers higher funding than mezzanine,
but at a higher cost
• Minimum investment is typically $5MM but can start as
low as $1MM when paired with senior position
Office Properties Quarterly - Financing Sources Matrix
This information is intended to illustrate some of the lending options currently available. Other options may exist. While Essex Financial Group strives to present this information as accurately as possible, no guarantee is made
as to the accuracy of the data presented, or the availability of the terms at time of application. Rates and terms are subject to change. Please contact one of our mortgage bankers for up to date rate and term information.
Essex Financial Group - Recent Office Transactions
100 St. Paul
Denver, CO
$52,000,000 Permanent Loan
Life Insurance Company
200 Fillmore
Denver, CO
$10,700,000 Permanent Loan
Life Insurance Company
Lyric Centre
Houston, TX
$48,000,000 Permanent Loan
CMBS
Essex Financial Group | 1401 17th Street, Suite 700 | Denver, CO 80202
| www.essexfg.comJ
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