See below for definitions. Feb-12
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+1/2 to P+1 1/2 or
Creditworthy borrower and Mostly banks and some insurance only yrs 1 possible. Swaps may be required by some
CONSTRUCTION/ Floating rate construction LIBOR + 200- 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. 300bps 1.25-1.30
significant pre-leasing. and creditworthiness in pre-leasing. then creditworthiness are critically important. Longer
(Some with floors)
25-30 terms are not common.
P to P+1 1/2 or Takeout may be a presale. Quality of takeout
Strong sponsorship with
CONSTRUCTION Floating rate financing on an LIBOR + 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
(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
preferred property type.
Initial interest only period available occasionally.
P+1 or LIBOR +
MINI PERM Shorter term loan for Cash flow to support debt 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. and exit strategy for lender. 1.25 Term extension is possible. TI/LC money can be
built in up front.
Pricing highly dependent on leverage level and
75bps to 275 bps tenancy. Life companies can reach 70% using
Stabilized property with good over comparable A/B note structure, w/ incremental pricing.
PERMANENT LOAN - Life companies and banks. Conduit 50%-75%
Debt Longer term fixed rate debt. occupancy, history, and Good term Treasury or 0 to 1/2 3 to 25 25-30 Limited interest only period available. Co-
FIXED RATE lenders have returned to the market. 1.25
limited near-term rollover. 185bps to 250bps tenancy clauses and tenant credit worthiness are
over FHLB. critically important. Swaps also available from
Single tenant pays all expenses 100-200bps 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
"come hell or high water." corporate bond. 1.01 DSC heavily scrutinized as is lease languarge.
Single tenant lease where only 125-200bps 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. Driver is DSC or debt yield.
condemnation. corporate bond DSC
Limited. Lack of
Same as above, but landlord 150-225bps 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 1.05-1.15
repairs. corporate bond
Shorter term loan for Pricing depends on leverage level, leasing, cash
PROPERTY Strong sponsor with a proven Banks, credit companies, opportunity P+1 to P+3
acquisition/ 50%-60% 1/2 to 1 Interest equity and strength of guarantees. Preferred
RE-POSITIONING Debt track record in development funds and some insurance Limited LIBOR + 2 to 3
renovation/ 1.25-1.3 DSC 1/2 only equity may be available. (See below) Floors may
LOAN and leasing. companies. 250-350 bps
P+1 to P+4
Banks, credit companies, some Pricing depends on leverage level and strength of
Shorter term loan for LIBOR + 70% Interest
BRIDGE LOAN Debt 1.10 DSC at closing. insurance companies, and Adequate 1/2 to 1 1 to 3 guarantees. Some break-even loans are
acquisition 250-400 bps 1.25-1.30 only
opportunity funds. selectively available.
*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 clear funds, private capital, REITS and Adequate 1 to 3 2 to 15 interest *Proceeds can reach 85% of cost on better
PREFERRED EQUITY 10%-18% 1.15
ownership interest. upside. some insurance companies. only quality 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 qualitythe shifts
Substantially preleased or
Sale prior to the start of build-to-suit properties. credit tenant, and income stream. Credit rating
Pension funds, insurance companies, Not
PRESALE Equity construction at a predetermined Better pricing for stronger Limited Cap rate of 6.25%+ Not Applicable of tenant is key. Cap rates are compressed for
and private capital. Applicable
price. credits and longer lease quality deals due to lack of supply and strong
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