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February 2018 — Retail Properties Quarterly — Page 11
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
JEFF RIGGS
P RESIDENT / PRINCIPAL
(303) 843-0440
COOPER WILLIAMS
PRINCIPAL
(303) 843-4581
PETER KEEPPER
MANAGING PRINCIPAL
(303) 843-6002
MIKE JEFFRIES
PRINCIPAL
(303) 843-9220
E D BOXER
PRINCIPAL
(303) 843-9256
MICHAEL SALZMAN
VP OF L OAN PRODUCTION
(303) 843-6015
ALEX RIGGS
VP OF LOAN PRODUCTION
(303) 843-4027