See below for definitions. Aug-11
RATES/ Stabilized TERM AMORT
OPTION TYPE EXPLANATION REQUIREMENTS USUAL SOURCES AVAILABILITY POINTS COMMENTS/ EXCEPTIONS
SPREADS LTV/DSC* (YRS) (YRS)
Interest Some lenders fix rate for entire term. Earnouts
P+1 to P+2 or
Creditworthy borrower and Mostly banks and some insurance only yrs 1 possible. Swaps may be required by some
CONSTRUCTION/ Floating rate construction LIBOR + 250- 70%-75%
Debt well located property, companies depending on deal size Limited 1/4 to 1 2 to 10 and 2, lenders. Co-tenancy clauses and tenant
MINI PERM convertible to fixed mini perm. 350bps 1.25-1.30
significant pre-leasing. and creditworthiness in pre-leasing. then creditworthiness are critically important. Longer
(with floors)
25-30 terms are not common.
P to P+2 or LIBOR Takeout may be a presale. Quality of takeout
Strong sponsorship with
CONSTRUCTION Floating rate financing on an + 65%-75% Interest may limit recourse. Co-tenancy clauses are non-
Debt guarantee and some equity Banks, some life companies Limited 1/4 to 1 1 to 3
WITH TAKEOUT immediate funding basis 175-275bps 1.25 only starters and tenant creditworthiness is critically
required.
(with floors) important.
Allows most flexibility for sale or refinance later,
P+1 to P+2 or
Combination of pre-leasing, but carries rate risk. Co-tenancy clauses and
CONSTRUCTION Shorter term LIBOR + 250- 60%-70% Interest
Debt equity, and strong Banks, some life companies Very limited 1/2 to 1 2 to 5 tenant creditworthiness are critically important.
WITHOUT TAKEOUT floating rate loan 350bps 1.30+ only
sponsor/guarantor. Grocery anchored or investment grade credit is
(with floors)
preferred property type.
P+1 or LIBOR + Initial interest only period available occasionally.
MINI PERM Shorter term loan for Cash flow to support debt and 65-75% Best execution with banks. Swaps also available.
Debt Banks and life companies Adequate 250-350bps 0 to 1/2 3 to 5 25 to 30
FLOATING RATE stabilized properties. exit strategy for lender. 1.25 Term extension is possible. TI/LC money can be
(with floors)
built in.
Pricing highly dependent on leverage level and
175bps to 300 bps
tenancy. Can reach 70% using A/B note
Stabilized property with good over comparable
PERMANENT LOAN - Life companies and banks. Conduit 50%-75% structure, w/ incremental pricing. Limited interest
Debt Longer term fixed rate debt. occupancy, history, and Good term Treasury or 0 to 1/2 5 to 20 25-30
FIXED RATE lenders have returned to the market. 1.25 only period available. Co-tenancy clauses and
limited near-term rollover. 200bps to 250bps
tenant credit worthiness are critically important.
over FHLB.
Swaps also available from banks.
Single tenant pays all expenses 50-100bps over LTV not Lenders running up against concentration levels
CREDIT LEASE BOND Insurance companies and private
Debt including structural. Rent paid Investment grade tenancy Adequate comparable relevant/ 0 10 to 30 10 to 30 for national drugstore chains. Credit ratings are
TYPE placements.
"come hell or high water." corporate bond. 1.01 DSC heavily scrutinized.
Single tenant lease where only 100-200bps over Up to 100%
Usually investment grade Insurance companies and private
CREDIT LEASE NNN Debt "outs" are casualty and Limited comparable 1.01-1.05 0 10 to 30 10 to 25 Same as above.
tenancy. placements.
condemnation. corporate bond DSC
Limited. Lack of
Same as above, but landlord 125-225bps over
Usually investment grade Insurance companies and private control on expenses 80%
CREDIT LEASE NN Debt responsible for structural comparable 0 to 1/2 10 to 30 10 to 20 Same as above.
tenancy. placements. makes financing more 1.05-1.15
repairs. corporate bond
difficult.
Shorter term loan for
PROPERTY Strong sponsor with a proven P+1 to P+3 Pricing depends on leverage level, leasing, cash
acquisition/ Banks, credit companies, opportunity 50%-60% Interest
RE-POSITIONING Debt track record in development Limited LIBOR + 1/2 to 1 1/2 2 to 3 equity and strength of guarantees. Preferred
renovation/ funds and some insurance companies. 1.25-1.3 DSC only
LOAN and leasing. 250-350 bps equity may be available. (See below)
retenanting.
P+1 to P+4
Banks, credit companies, some
Shorter term loan for LIBOR + 70% Interest Pricing depends on leverage level and strength of
BRIDGE LOAN Debt 1.15 DSC at closing. insurance companies, and Adequate 1/2 to 1 1 to 3
acquisition 250-400 bps 1.25-1.30 only guarantees.
opportunity funds.
(some w/floors)
*Target IRR 12% to 22% +. Preferred equity
Junior financing secured by Experienced borrower and a Banks, credit companies, opportunity Usually usually requires participation in CF/ residual.
MEZZANINE/ Preferred return 75%-80%
D&E pledge of or participation in property or project with funds, private capital, REITS and Adequate 1 to 3 2 to 15 interest *Proceeds can reach 85% of cost on better quality
PREFERRED EQUITY 10%-20% 1.15
ownership interest. upside. some insurance companies. only deals. May be combined with a bridge loan for a
refinance.
Equity source provides up to Experienced borrower and a
EQUITY/JOINT Pension funds, insurance companies, Preferred return Not *Target IRR 12% to 22% + Capital source
D&E 95% of capital stack. May property or project with Limited 0 to 1 2 to 7 N/A
VENTURE private capital and REITS. 10%-18% Applicable controls major project decisions.
bring in 3d party debt. upside.
Cap rate depends on on of property and
The terms shown herein approximate market conditions at the time of publication and are subject to frequent changes based quality the shifts
Substantially preleased or
Sale prior to the start of credit tenant, and income stream. Credit rating of
build-to-suit properties. Pension funds, insurance companies, Not
PRESALE Equity construction at a predetermined Limited Cap rate of 6.75%+ Not Applicable
tenant is key. Cap rates are compressed for
Better pricing for stronger and private capital. Applicable
price. quality deals due to lack of supply and strong
credits and longer lease terms.
demand.
The terms shown herein approximate market conditions at the time of publication and are subject to frequent changes based on the shifts within capital markets. The format of this presentation is simplified to aid the reader in a global understanding of the
complex financing options available for retail properties.
*Stabilized LTV/DSC. For construction, repositioning and value-added situations this refers to underwriting target at stabilization.
Definitions: IRR = Internal Rate of Return P = Prime LIBOR = 30 day London Interbank Offered Rate LTV = Loan to Value Ratio REIT = Real Estate Investment Trust
Fantini Gorga 265 Franklin Street, Boston, MA 02110-3113 Ph: 617.951.2600 Fax: 617.951.9944 Visit us at www.fantinigorga.com
See below for definitions. Aug-11
Rates/ Stabilized TERM AMORT
OPTION TYPE EXPLANATION REQUIREMENTS USUAL SOURCES AVAILABILITY POINTS COMMENTS/ EXCEPTIONS
Spreads LTV/DSC* (YRS) (YRS)
Mostly banks
Creditworthy and some Some lenders fix rate for entire term.
Interest
Floating rate borrower and insurance P+1 to P+2 or Earnouts possible. Swaps may be
CONSTRUCTION only yrs
construction well located companies LIBOR + 250- 70%-75% 1/4 to required by some lenders. Co-tenancy
/ Debt Limited 2 to 10 1 and 2,
MINI PERM
convertible to property, depending on 350bps 1.25-1.30 1 clauses and tenant creditworthiness are
then
fixed mini perm. significant pre- deal size and (with floors) critically important. Longer terms are
25-30
leasing. creditworthines not common.
s in pre-leasing.
Floating rate Strong sponsorship P to P+2 or Takeout may be a presale. Quality of
CONSTRUCTION financing on an with guarantee and Banks, some LIBOR + 65%-75% 1/4 to Interest takeout may limit recourse. Co-tenancy
Debt Limited 1 to 3
WITH TAKEOUT immediate some equity life companies 175-275bps 1.25 1 only clauses are non-starters and tenant
funding basis required. (with floors) creditworthiness is critically important.
Allows most flexibility for sale or
Combination of P+1 to P+2 or refinance later, but carries rate risk. Co-
CONSTRUCTION
Shorter term pre-leasing, equity, Banks, some LIBOR + 250- 60%-70% 1/2 to Interest tenancy clauses and tenant
WITHOUT Debt Very limited 2 to 5
TAKEOUT
floating rate loan and strong life companies 350bps 1.30+ 1 only creditworthiness are critically
sponsor/guarantor. (with floors) important.
Grocery anchored or investment grade
Cash flow to P+1 or LIBOR
credit is preferred propertyavailable
Initial interest only period type.
MINI PERM Shorter term loan occasionally.
support debt and Banks and life + 65-75% 0 to
FLOATING Debt for stabilized Adequate 3 to 5 25 to 30 Best execution with banks. Swaps also
RATE
exit strategy for companies 250-350bps 1.25 1/2
properties. available. Term extension is possible.
lender. (with floors)
TI/LC money can be built in.
Pricing highly dependent on leverage
175bps to 300
Stabilized property level and tenancy. Can reach 70%
Life companies bps over
with good using A/B note structure, w/
PERMANENT and banks. comparable
Longer term fixed occupancy, 50%-75% 0 to incremental pricing. Limited interest
LOAN -FIXED Debt Conduit lenders Good term Treasury 5 to 20 25-30
RATE
rate debt. history, and 1.25 1/2 only period available. Co-tenancy
have returned or 200bps to
limited near-term clauses and tenant credit worthiness
to the market. 250bps over
rollover. are critically important. Swaps also
FHLB.
available from banks.
Single tenant pays
50-100bps
all expenses Insurance Lenders running up against
over LTV not
CREDIT LEASE including Investment grade companies and 10 to concentration levels for national
Debt Adequate comparable relevant/ 0 10 to 30
BOND TYPE structural. Rent tenancy private 30 drugstore chains. Credit ratings are
corporate 1.01 DSC
paid "come hell or placements. heavily scrutinized.
bond.
high water."
Single tenant lease Insurance 100-200bps Up to
CREDIT LEASE where only "outs" Usually investment companies and over 100% 10 to
Debt Limited 0 10 to 25 Same as above.
NNN are casualty and grade tenancy. private comparable 1.01-1.05 30
condemnation. placements. corporate bond DSC
Limited.
Lack of
Same as above, Insurance control on 125-225bps
CREDIT LEASE but landlord Usually investment companies and expenses over 80% 0 to 10 to
Debt 10 to 20 Same as above.
NN responsible for grade tenancy. private makes comparable 1.05-1.15 1/2 30
structural repairs. placements. financing corporate bond
more
difficult.
Banks, credit
Strong sponsor
PROPERTY Shorter term loan companies, Pricing depends on leverage level,
with a proven P+1 to P+3 50%-60%
RE- for acquisition/ opportunity 1/2 to Interest leasing, cash equity and strength of
Debt track record in Limited LIBOR + 1.25-1.3 2 to 3
POSITIONING renovation/ funds and some 1 1/2 only guarantees. Preferred equity may be
LOAN development and 250-350 bps DSC
retenanting. insurance available. (See below)
leasing.
companies.
Banks, credit
P+1 to P+4
companies,
LIBOR +
Shorter term loan 1.15 DSC at some insurance 70% 1/2 to Interest Pricing depends on leverage level and
BRIDGE LOAN Debt Adequate 250-400 bps 1 to 3
for acquisition closing. companies, and 1.25-1.30 1 only strength of guarantees.
(some
opportunity
w/floors)
funds.
Banks, credit
companies, *Target IRR 12% to 22% +. Preferred
Junior financing
Experienced opportunity equity usually requires participation in
MEZZANINE/ secured by pledge Preferred Usually
borrower and a funds, private 75%-80% CF/ residual.
PREFERRED D&E of or participation Adequate return 1 to 3 2 to 15 interest
EQUITY
property or project capital, REITS 1.15 *Proceeds can reach 85% of cost on
in ownership 10%-20% only
with upside. and some better quality deals. May be combined
interest.
insurance with a bridge loan for a refinance.
companies.
Equity source Pension funds,
Experienced
provides up to insurance Preferred *Target IRR 12% to 22% + Capital
EQUITY/JOINT borrower and a Not
D&E 95% of capital companies, Limited return 0 to 1 2 to 7 N/A source controls major project
VENTURE property or project Applicable
stack. May bring private capital 10%-18% decisions.
with upside.
in 3d party debt. and REITS.
The terms shown herein approximate market conditions
Substantially at the time of publication and are subject to frequent
Sale prior to the preleased or build- Cap rate depends on quality of property
Pension funds,
start of to-suit properties. and credit tenant, and income stream.
insurance Cap rate of Not
PRESALE Equity construction at a Better pricing for Limited Not Applicable Credit rating of tenant is key. Cap rates
companies, and 6.75%+ Applicable
predetermined stronger credits are compressed for quality deals due to
private capital.
price. and longer lease lack of supply and strong demand.
terms.
The terms shown herein approximate market conditions at the time of publication and are subject to frequent changes based on the shifts within capital markets. The format of this presentation is simplified to aid the reader in a global understanding of
the complex financing options available for retail properties.
*Stabilized LTV/DSC. For construction, repositioning and value-added situations this refers to underwriting target at stabilization.
Definitions: IRR = Internal Rate of Return P = Prime LIBOR = 30 day London Interbank Offered Rate LTV = Loan to Value Ratio REIT = Real Estate Investment Trust
Fantini Gorga 265 Franklin Street, Boston, MA 02110-3113 Ph: 617.951.2600 Fax: 617.951.9944 Visit us at www.fantinigorga.com 2 of 2