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February 2018 — Retail Properties Quarterly —

Page 11

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

150-210 bps over the

comparable US

Treasuries

• Up to 65% LTV

• 1.25x Minimum DCR

5-30

Years

25-30 Years

• Grocery-anchored centers

• Power Centers

• Top tier credit tenants

• Major metro areas

• 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

200-275 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

• 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

Essex Financial Group - Recent Retail Transactions

Tamarac Shopping Center

Denver, CO

$12,300,000 Permanent Loan

Life Insurance Company

Lake Mary Village

Lake Mary, FL

$19,975,000 Permanent Loan

Debt Fund

Eastbridge Plaza

Denver, CO

$7,800,000 Permanent Loan

Life Insurance Company

J

EFF

R

IGGS

P

RESIDENT

/ P

RINCIPAL

(303) 843-0440

JRIGGS @ ESSEXFG . COM

C

OOPER

W

ILLIAMS

P

RINCIPAL

(303) 843-4581

CWILLIAMS @ ESSEXFG . COM

P

ETER

K

EEPPER

M

ANAGING

P

RINCIPAL

(303) 843-6002

PETERK @ ESSEXFG . COM

M

IKE

J

EFFRIES

P

RINCIPAL

(303) 843-9220

MJEFFRIES @ ESSEXFG . COM

E

D

B

OXER

P

RINCIPAL

(303) 843-9256

EBOXER @ ESSEXFG . COM

M

ICHAEL

S

ALZMAN

VP

OF

L

OAN

P

RODUCTION

(303) 843-6015

MSALZMAN @ ESSEXFG . COM

A

LEX

R

IGGS

VP

OF

L

OAN

P

RODUCTION

(303) 843-4027

ARIGGS @ ESSEXFG . COM