OIQ_091521

Page 20 — Office & Industrial Quarterly — September 2021 www.crej.com 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 2.75%-4.00% • Up to 65% LTV • 1.50x Minimum DCR 5-30 Years 20-30 Years • Downtown, urban locations or popular suburban office parks • Multi-tenant, traditional floor plates • Top tier tenants with good credit • Major metros & secondary markets (being more selective on secondary markets) •Diversified rent rolls with evenly distributed rollover • Office is currently the most challenging asset type to finance • Lenders are digging further into the rent roll to understand each tenant business models and credit • Higher push for properties with (1) credit tenants and term or (2) multi tenant properties with smaller independent business tenants and diversified rollover • Most competitive at 50% - 60% leverage with strong sponsors • Starting to target high-quality suburban office more due to impacts of COVID-19 on more urban areas CONDUIT (CMBS) • Sales of mortgage- backed securities through public markets • Non-Recourse • Longer-term fixed rate loan 3.00%-4.00% • Up to 70% LTV • 1.40x Minimum DCR • 9.0% Minimum Debt Yield 5, 7, & 10 Years 25-30 Years • Downtown office • Suburban office • Single-tenant with structure • Secondary/Tertiary Markets • Looking at office assets but being more selective with effects of COVID-19 •Higher emphasis on tenants' credit or loan structure around rollover •Longer down-times assumed and higher leasing reserves required • Targeting acquisition or cash-neutral refinances in the current environment • Offering full-term interest only on lower leverage deals BANK • Corporate Debt • Deposits • Recourse (non-recourse becoming more available) • Shorter-term fixed and floating rate loans 3.25% - 4.25% • Up to 65% LTV • 1.40x Minimum DCR • 9.5% Minimum Debt Yield Up to 10 Years Fixed, Typical Max Term is 5-7 Years 25-30 Years • All office assets • Value-add with guaranties • Secondary/Tertiary Markets • Being more selective on asset quality given the current environment • Most competitive for Sponsors with established banking relationships and strong borrower history that are willing to accept recourse • Hard to find non-recourse office financing from banks currently • More flexible (open) prepayment terms DEBT FUND / BRIDGE LOAN • Private Capital • Institutional Capital • Non-Recourse • Shorter term bridge loans for acquisition and/or repositioning L+ 300-500 bps spreads • Up to 75% LTC • Going-in 1.0x DCR 1-5 Years (3+1+1) Interest Only • Value-Add Transactions • Recapitalizations • Most lenders have a LIBOR floor of 15 or 25 bps • Being more selective on asset quality given the current environment • Pricing depends on leverage level, property quality, and Sponsor strength • Needs to have strong value-add business plan and story in place • Limited interest for non-cash flowing assets MEZZANINE/ PREFERRED EQUITY • Private Capital • Institutional Capital • Junior financing secured by a pledge of, or participation in ownership interest Mezzanine 8%-12% • Up to 80% LTC • 1.10x DCR 2-10 Years 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 LIBOR - London Interbank Offered Rate REIT - Real Estate Investment Trust 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 | 1401 17th Street, Suite 700 | Denver, CO 80202 | www.essexfg.com DCR - Debt Coverage Ratio DUS - Delegated Underwriter Servicer LTV - Loan to Value Ratio LTC - Loan to Cost Ratio Office Properties Quarterly - Financing Sources Matrix Essex Financial Group - Recent Office Transactions Highland Place II Centennial, CO $17,155,000 Bridge Loan Bridge Lender Church Ranch Office Center Westminster, CO $18,400,000 Bridge Loan Life Insurance Company Medical Dental Building Seattle, WA $75,000,000 Permanent Loan Life Insurance Company J EFF R IGGS F OUNDER AND C HAIRMAN (303) 843-0440 JRIGGS @ ESSEXFG . COM C OOPER W ILLIAMS P RESIDENT / P RINCIPAL (303) 843-4581 CWILLIAMS @ ESSEXFG . COM P ETER K EEPPER P RINCIPAL (303) 843-6002 PETERK @ ESSEXFG . COM M IKE J EFFRIES P RINCIPAL (303) 843-9220 MJEFFRIES @ ESSEXFG . COM A LEX R IGGS P RINCIPAL (303) 843-4027 ARIGGS @ ESSEXFG . COM P AUL D ONAHUE A SSISTANT VP (303) 843-4021 PDONAHUE @ ESSEXFG . COM B LAIRE B UTLER A SSISTANT VP (303) 843-4024 BBUTLER @ ESSEXFG . COM C HRIS W HITE A SSISTANT VP (303) 843-4583 CWHITE @ ESSEXFG . COM