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November 2016 — Retail 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
175-210 bps over the
comparable US
Treasuries
• Up to 70% LTV
• 1.25x Minimum DCR
5-30
Years
25-30 Years
• Grocery-anchored centers
• Power Centers
• Top tier credit tenants
• Major metro areas
• Many life insurance companies are ahead of plan for
commercial real estate allocations and look to become
more selective in 2nd half of 2016
• Most competitive at lower to moderate leverage with
strong sponsor
• Flexible prepayment penalties available for small
pricing premium
• At right leverage (~60%) lenders can do Interest Only
• Co-tenancy clauses and tenant credit worthiness are
critically important
CONDUIT (CMBS)
• Sales of mortgage-
backed securities
through public markets
• Non-Recourse
• Longer-term fixed
rate loan
225-275 bps over the
greater of swaps or
treasuries
• Up to 75% LTV
• 1.25x Minimum DCR
• 8.0% Minimum Debt Yield
5, 7 & 10
Years
30 Years
• Neighborhood Centers
• Strip Centers
• Second tier credit tenants
• Local credit tenants
• Secondary/Tertiary Markets
• Spreads have narrowed 25-75 bps since 4Q 2015
• Most competitive at higher leverage in secondary and
tertiary markets
• 10 years interest-only under 65% LTV
• 5 years interest-only under 70% 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
• Single-Tenant (NNN)
• Freestanding Retail
• Neighborhood Centers
• Local credit tenants
• 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 + 300-600 bps
(some w/ floors)
• Up to 85% LTC
• Going-in 1.0x DCR
1 - 5
(3+1+1) Interest Only
• Grocery-anchored centers
• Power Centers
• Credit tenants
• 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)
• Neighborhood Centers
• Strip Centers
• Second tier credit tenants
• Secondary/Tertiary Markets
• 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
Retail 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 Retail Transactions
Vista Ridge Marketplace
Lewisville, TX
$11,100,000 Permanent Loan
Credit Union
Sierra Vista Plaza
Dallas, TX
$23,500,000 Permanent Loan
Life Insurance Company
Essex Financial Group | 1401 17th Street, Suite 700 | Denver, CO 80202 |
Orchards Shopping Center
Loveland, CO
$15,000,000 Permanent Loan
Life Insurance Company