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December 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
110-200 bps over the
comparable US
Treasuries
(depends on LTV)
• Up to 65% LTV
• 1.35x Minimum DCR
5-30
Years
25-30 Years
• Downtown, urban locations or
popular suburban office parks
• Multi-tenant, traditional floor
plates
• Top tier tenants (local, regional
& national)
• Major metro areas &
secondary markets
• Many of the life insurance companies are becoming more
selective on office properties, given the rise in rents and the
new high watermarks in Denver
• 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 Full-Term 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
180-250 bps over the
greater of US
Treasuries or SWAPS
• Up to 75% LTV
• 1.25x Minimum DCR
• 8.25% Minimum Debt Yield
5 & 10
Years
30 Years
• Downtown office
• Class B suburban office
• Single-tenant with structure
• Secondary/Tertiary Markets
• Spreads have compressed by ~70 bps since Q1 2017
• Most competitive at higher leverage in secondary and
tertiary markets
• Have recently become more competitive with life
companies in primary markets
• 10 years interest-only under 63% LTV
BANK
• Corporate Debt
• Deposits
• Recourse (some non-
recourse available at
65% LTC)
• Shorter-term fixed
and floating rate loans
300-400 bps over bank
cost of funds
• Up to 75% LTV
Up to 7
Years
Fixed,
Typical
Max Term
is 5 Years
Interest Only to
25 Years
• All office assets
• Value-add with repayment
guaranty
• Secondary/Tertiary Markets
• Standards are tightening for Sponsors with no deposit
relationship or out of state borrowers
• 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
• Increased regulation has made banks less competitive on
construction loans
• Losing construction loan market share to debt funds
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
• Up to 95% LTC construction take-out loans
• Ground-up construction loans available
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
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Denver, CO
$14,000,000 Permanent Loan
Bank
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Denver, CO
$4,500,000 Permanent Loan
Life Insurance Company
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Boulder, CO
$14,250,000 Bridge Loan
Life Insurance Company
JEFF RIGGS
PRESIDENT / PRINCIPAL
(303) 843-0440
COOPER WILLIAMS
PRINCIPAL
(303) 843-4581
PETER KEEPPER
MANAGING PRINCIPAL
(303) 843-6002
MIKE JEFFRIES
PRINCIPAL
(303) 843-9220
ED BOXER
PRINCIPAL
(303) 843-9256
MICHAEL SALZMAN
VP OFL OAN PRODUCTION
(303) 843-6015
ALEX RIGGS
VP OF LOAN PRODUCTION
(303) 843-4027