Who has purchased 10 million plus?

Question

I was curious about financing 10 million plus deals. Who are you using and what terms are you getting? What type of cash flow do your lenders look for? Are you using syndication or private money? Love to connect!

Greg Dickerson · Answer

When you get over $10 million and more particularly over $25 million rates get much more attractive. The financing however will vary depending on the property type, class and location, the borrowers experience and balance sheet and the type of loan ie. Agency vs Conduit vs CMBS, fixed, floating, amortized, interest only etc.

AJ Shepard · Answer

@Kurt Sprigler

We’re not quite at 10 million yet, but on million plus we are going through CBRE financing department for Freddie Mac loans.  Rates have been around 3.2-3.85 lately with 12 month reserve for covid released after 12 months of occupancy.

We typically buy with other lenders and not so great terms and then refinance through these guys once we have stabilized the property with generally a value add component.

Ronald Rohde · Answer

Greg, have you done much defeasance? I've been doing these for clients in a low interest rate environment, seems like a really good tool for borrowers.

I (with 2 partners) bought a $3.XX warehouse this summer. Conventional bank was the best rate @ 70% LTV 3.25%. one of our guarantors moved $1 million of deposits to help move it along.

Christopher Brown · Answer

I closed a $6m self storage deal this summer.  These were our financing options:

• Because our property wasn't stabilized, none of the CMBS/insurance debt (which had great terms 6 months ago - 10yrs/<4%) was interested. 
• I explored SBA and started a 504 application, because I believed our property would qualify and they are more welcoming of unstabilized deals.  I knew it was a long process with execution uncertainty and high fees so it wasn't my preference.  I shopped SBA lenders and got a commitment and started the process.
• I hoped to find a conventional loan from a local bank, which is often available for storage, and I had a deal in place (10yrs/4.5%, first year interest only with a reset at yr6) and then when COVID hit they bailed and offered to put us into their SBA program.  I had told them upfront that I was already working with another SBA lender as a backup option and so I declined that option from the local bank.
• At that time I explored bridge money options but they were way too expensive (2 or 3 yrs at ~7.5% IO with big fees and big reserve reqts).

We finally got our SBA approval.  It was a lot of hoops to jump through and there were lots of places the approval could have been declined (two bank underwritings plus the SBA approval).  Even AFTER we closed there were some hiccups in getting the SBA's final approval to take out the bank's interim debenture.  But at the end of the day it all came together, and we had a very patient seller (not surprising with COVID, I suppose - they didn't want our deal to fall through).

Final SBA terms are for two loans:

• First loan with a partner bank: 30yrs, 1st yr IO at 2.75%, next five years at 4.25%, then a rate reset every 6 yrs at prime + 100pts.  
• Second loan is with the SBA: 25 yrs, I think their final rate was 2% (I haven't seen the paperwork on the Sept SBA closing yet).  
• So my blended rate is a hair over 3% and I'm locked in for the long term.  
• Oh, and for COVID reasons the SBA is paying the first 6 months of debt service on their piece and both banks are deferring months 7-9 til the end of the loan, so my debt service for the first year is cut by half.

Really pleased and fortunate with how well it turned out.  I'm happy to share contacts at the different banks we worked with if anyone is interested - Bank Five Nine is the partner bank and Self Help is the CDC.

Who has purchased 10 million plus?

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