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Financing Strategies for Today’s Market. Tom DetienneDavid Woida Investors Community BankNorthMarq Capital 860 N. Rapids Road250 N. Sunny Slope Rd., # 300 Manitowoc, WIBrookfield, WI (920) 686-5626(262) 787-4997 [email protected] [email protected]. - PowerPoint PPT Presentation
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Financing Strategies for
Today’s Market
Tom Detienne David WoidaInvestors Community Bank NorthMarq Capital860 N. Rapids Road 250 N. Sunny Slope Rd., # 300Manitowoc, WI Brookfield, WI (920) 686-5626 (262) [email protected] [email protected]
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Agenda
• Industry Summary• Rates and Options• Key Differences between lenders• Underwriting 201• Examples• Q & A
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Industry Summary
• Expanded options for CRE finance– Conventional Banks / portfolio lenders– Conduit Lenders (CMBS)– Insurance Companies– Government-Sponsored Agencies (Fannie Mae
and Freddie Mac)– Mezzanine– Equity
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5
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Commercial Mortgages
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Holders of Commercial and Multifamily Mortgage Loans
1990 2006 Q1
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Yield Curve
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Capitalization Rates
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U.S. CMBS Issuance and Interest Rates
Source: Commercial Mortgage Alert and Federal Reserve
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CMBS Rates
Property Type Leverage DSCR Spread (1) Rate (2)
Grocery Anchored Retail 85% LTV 1.20X 110 5.85%
Strong Anchored Retail 80% LTV 1.15X 100 5.75%
Weak Anchored Retail 80% LTV 1.30X 125 6.00%
Un-Anchored Retail 80% LTV 1.30X 135 6.10%
High End Specialty Retail 80% LTV 1.30X 110 5.85%
Multi-Tenant Office (Class A) 75% LTV 1.45X 118 5.93%
Multi-Tenant Office (Class B) 75% LTV 1.50X 130 6.05%
Medical Office 78% LTV 1.55X 120 5.95%
Medical Office (Single Tenant) 75% LTV 1.35X 125 6.00%
Multi-Tenant Bulk Warehouse 80% LTV 1.45X 100 5.75%
Single Tenant Bulk Warehouse (non credit) 75% LTV 1.45X 125 6.00%
Multi-Family (Class A) 80% LTV 1.25X 105 5.80%
1. Insurance company rates are typically 10-20 basis points higher
2. Assumes a current US Treasury rate of 4.75%
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Percent of CMBS Loans that are Interest Only or Partial Interest Only
8% 6%11% 9%
13% 14% 11%17%
17%14%
12%23%
26% 27%29%
33%
0%
10%
20%
30%
40%
50%
60%
2003Q1 2003Q2 2003Q3 2003Q4 2004Q1 2004Q2 2004Q3 2004Q4
Issuance V
olu
me (
%)
.
Full IO Loans Partial IO Loans
24%
19%
23%
32%
39%41% 40%
50%
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Key Differences Between Lenders
Banks – Portfolio Lender, flexible terms, good $’s, shorter terms, typically recourse
Conduits – Securitized Lender, little flexibility, aggressive terms
GSE’s (Freddie & Fannie) – Could be either portfolio or securitized, flexible terms, attractive rates
Life Companies – Portfolio Lender, very flexible, conservative terms
Private Money – Portfolio Lender, flexible and attractive terms, very selective on deals
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Lender Comparison
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Underwriting 201
• Cash flow (Debt Service Coverage)• Leverage (Loan-to-value)• Lease analysis / Underlying asset• Interest only periods (or full term)• Reserves / Escrows• Costs of issuance• Personal guarantees• Prepayment penalties (Defeasance)• Assumptions
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EXAMPLES
• New Construction• Stabilized retail, office, industrial & hotel• Multi-family