CREJ

March 2022 — Office & Industrial Quarterly — Page 5 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 165 - 225 bps spreads over corresponding UST (3.50% - 4.10%) • Up to 65% LTV (most lenders topping out at 55% - 60%) • 1.50x Minimum DCR 5-30 Years 20-30 Years • Downtown, urban locations or popular suburban office parks •Diversified rent rolls with evenly distributed rollover • Top tier tenants with good credit • Major metros & secondary markets (being more selective on secondary markets) • Office is currently the most challenging asset type to finance, lenders are underwriting higher vacancy factors • Lenders requiring higher reserves for TI/LC due to the challenging office leasing environment • 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 175 - 235 bps spread over corresponding US Swap Rate (3.65% - 4.30%) • Up to 65% LTV • 1.40x Minimum DCR • 9.0% Minimum Debt Yield 10 Years 25-30 Years (Full-term I/O available at moderate leverage) • 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 BANK • Corporate Debt • Deposits • Recourse (non-recourse becoming more available) • Shorter-term fixed and floating rate loans 3.50% - 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 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 • Some banks are actively lending in value-add office at moderate leverages • 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 30-Day SOFR + 350- 500 bps spreads • Up to 75% LTC • Going-in 1.0x DCR 1-5 Years (3+1+1) Interest Only • Value-Add Transactions • Recapitalizations • Lenders transitioning to SOFR index, generally pricing over 30- day SOFR • 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 someof the lendingoptions currentlyavailable.Otheroptionsmayexist.WhileEssexFinancialGroupstrives topresent this informationasaccuratelyaspossible,noguarantee ismadeas to theaccuracyof thedatapresented,or theavailabilityof the termsat timeofapplication.Ratesand termsare subject tochange.Please contactoneofourmortgage bankers forup todate rateand 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 Walnut Offices Portfolio Boulder, CO $5,000,000 Permanent Loan Life Insurance Company 511 Building Portland, OR $17,000,000 Permanent Loan Life Insurance Company Aurora Marketplace Aurora, CO $32,500,000 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 a lex R iggs p RinCipal (303) 843-4027 aRiggs @ essexfg . Com p aul d onahue V iCe p Resident (303) 843-4021 pdonahue @ essexfg . Com B laiRe B utleR V iCe p Resident (303) 843-4024 BButleR @ essexfg . Com C hRis W hite a ssistant Vp (303) 843-4583 CWhite @ essexfg . Com