Permanent Loans:

For properties that are stabilized or nearing stabilization, permanent loans provide an excellent financing option. These loans can be structured with fixed periods ranging from 3 to 15 years and offer amortization schedules ranging from 15 to 30 years. Fixed rate loans are typically priced based on the Treasury bill or Swap index, while floating rate loans are priced based on the Wall Street Journal prime rate or LIBOR index. Loan-to-value ratios vary depending on the product type and capital source, with senior loans typically capped at 75-85% of the appraised value. The application process is streamlined, with closings typically taking place within 30 to 60 days.

Bridge Financing:

When properties are not quite ready for permanent financing, bridge financing, also known as interim loans, provides short-term funding solutions. Bridge loans are commonly used to seize short-term opportunities or fund property rehabilitation. These loans have terms that usually range from 12 to 36 months and can provide leverage of up to 90% of the property cost. In many cases, bridge loans offer interest-only repayment options and are priced based on the Wall Street Journal prime rate or LIBOR index. Past closings have been completed in as little as 30 days from the application date.

Construction Financing:

Construction financing plays a crucial role in adding significant value to collateral. These loans are often utilized to refinance or acquire land, as well as to finance ground-up developments. Leverage for construction projects can reach up to 80% of the total project cost, with pricing typically tied to the Wall Street Journal prime rate or LIBOR index. Loan terms typically span from 12 to 36 months. Smaller projects usually require a personal guarantee, while larger requests can sometimes be arranged without a personal guarantee, subject to a completion guaranty. Closings for construction financing vary from 30 to 90 days from the application date.

Mezzanine Financing:

Mezzanine financing is a versatile structured finance solution that bridges the gap between senior debt and equity. It provides additional capital to fund real estate projects, acquisitions, or refinancing, allowing borrowers to enhance their leverage and optimize their capital structure. Mezzanine financing is typically structured as a subordinate loan secured by a pledge of ownership interests in the property-owning entity. This form of financing offers flexible terms and can be customized to meet specific project requirements. Mezzanine financing can be an attractive option for developers and investors seeking higher leverage or additional capital to maximize their real estate opportunities.

Preferred Equity:

Preferred equity is a type of structured finance instrument that combines elements of both equity and debt. It represents an ownership interest in a real estate project, providing investors with a priority claim on cash flows and distributions. Preferred equity holders receive preferential treatment over common equity holders, often in the form of a fixed or floating dividend, before any distributions are made to common equity holders. This structure allows investors to participate in the project’s upside potential while enjoying a level of downside protection. Preferred equity is an attractive financing option for real estate projects seeking additional capital or for investors looking to diversify their investment portfolios with a more stable income stream.

Note On Note:

Note on note financing, also known as second lien financing, is a structured finance arrangement where a new loan is issued to secure an existing loan. This financing structure is often used in situations where a property has an existing mortgage but requires additional capital. The note on note lender provides a second lien loan that is subordinate to the existing loan, allowing the borrower to access the desired funds. Note on note financing can provide borrowers with flexibility in terms of loan size, interest rates, and repayment terms, making it an attractive option for those seeking to leverage existing debt while obtaining additional financing for various real estate projects.

A & B Notes:

A & B notes, also referred to as senior and subordinate notes, are a common structure used in structured finance transactions. In this arrangement, the loan is split into two separate notes, each with its own characteristics. The A note represents the senior position and typically carries a lower interest rate and a higher priority of repayment. The B note, on the other hand, represents the subordinate position and often carries a higher interest rate and a lower priority of repayment. A & B notes allow lenders to offer different terms and risks to investors based on their risk appetite and return expectations. This structure can be beneficial for borrowers seeking flexible financing solutions or for lenders looking to attract a diverse range of investors.

PACE:

Property Assessed Clean Energy (PACE) financing is a unique form of structured finance that enables property owners to finance energy-efficient improvements, renewable energy installations, or resilience upgrades through a special assessment on their property. PACE financing is repaid through property tax assessments over a long-term period, typically 10 to 20 years, and is attached to the property rather than the individual. This innovative financing mechanism allows property owners to fund environmentally friendly upgrades with no upfront costs and to benefit from the energy savings or increased property value over time.

Joint Venture Equity:

In situations where leverage is a key factor, mezzanine financing, also known as “mezz,” offers an ideal solution. Equity financing bridges the gap between available debt and the financial requirements of developing, acquiring, rehabilitating, or recapitalizing a project. Securing equity capital can be the most challenging aspect of a real estate transaction. Our expertise lies in understanding the unique circumstances of each client, enabling us to match the right equity structure with the appropriate equity partner. We have proprietary relationships with various equity investors, including institutional investors, opportunity funds, hedge funds, family offices, and high-net-worth individuals. Our equity sources focus on investment opportunities requiring between $5-20 million of equity capital. Typically, joint ventures are proposed with a 90/10 co-investment structure, where our relationships can provide up to 90% of the required equity. The joint ventures are structured with a preferred return paid to the total capital invested, while promotes/waterfalls are distributed to the Sponsor(s) after the allocation of the preferred return.

GP Equity:

GP Equity refers to General Partner Equity, which represents the capital contribution made by the general partner or sponsors in a real estate project. It demonstrates their commitment to the project’s success and aligns their interests with those of the limited partners or investors. GP Equity serves as a form of investment in the project and can help attract additional funding from limited partners.

Co-GP:

Co-GP, short for Co-General Partner, involves forming a partnership between two or more general partners who collaborate and share responsibilities in a real estate venture. Co-GP arrangements allow for the pooling of expertise, resources, and networks, enabling partners to leverage their combined strengths. This collaborative approach can provide access to additional capital and create synergies that enhance the overall success of the project.

Credit Enhancement:

Credit Enhancement refers to measures taken to improve the creditworthiness or risk profile of a real estate investment. It involves implementing strategies to strengthen the financial position, increase the collateral value, or improve the credit rating of the project. Credit enhancement measures can include obtaining insurance or guarantees, securing additional collateral, or implementing financial restructuring to enhance the project’s creditworthiness and attract favorable financing terms.

Equity Recaps:

Equity Recaps, short for Equity Recapitalizations, involve restructuring the equity structure of a real estate project to provide liquidity or financial flexibility. This process typically involves refinancing or obtaining additional equity to buy out existing partners or investors, allowing them to realize their investment gains while continuing the project’s operations. Equity recaps can help unlock value, redistribute ownership stakes, and create opportunities for new investors to participate in the project’s future growth.