Fixed Interest Rate: 6.48 

Variable Interest Rate: 7.01

Cap Rate: 7.9% to 10.7%

Best Rates are associated with: Properties with >1.25 DSCR, <75% LTV, <8% vacancy, appropriate TI/LC, Cap Ex reserves; spreads are typically higher for unanchored retail

Issues:

High credit, national chains and build to suit properties have been very competitive in the marketplace

Tenant diversification continues to be scrutinized

Non-credit single-tenant properties are under close watch

Spreads are typically lower for properties exhibiting a stabilized Trailing 24-36 Month Net Cash Flow

Net Cash Flow calculations include Replacement Reserves

Lenders may reconcile property value using the Direct Capitalization Approach on NOI and NCF

General Required Calculations:

Rent Roll illustrating in-place occupancy and Potential Gross Income

Effective Gross Income - Potential Gross Income minus the greater of underwritten or market vacancy

Net Operating Income - EGI minus operating expenses

Net Cash Flow - NOI minus Tenant Improvements & Leasing Commissions and Capital Expenditures

Debt Service Coverage Ratio - NOI divided by Annual Debt Service

Cap Rate - should be applied to the stabilized income stream to estimate direct capitalized value to support loan request

Fixed Interest Rate: 6.48

Variable Interest Rate: 7.11

Cap Rate: 7.2% to 10.6%

Best Rates are associated with: Properties with >1.25 DSCR, <70% LTV, <7% vacancy, appropriate TI/LC, Cap Ex reserves

Issues:

Owner-occupied properties - leases are marked-to-market, using market rent

Flex/Multi-tenant - Staggered lease expirations should display no TILC deficiencies during loan term

Spreads are typically lower for properties exhibiting a stabilized Trailing 24-36 Month Net Cash Flow

Net Cash Flow calculations include Replacement Reserves

Lenders may reconcile property value using the Direct Capitalization Approach on NOI and NCF

General Required Calculations:

Rent Roll illustrating in-place occupancy and Potential Gross Income

Effective Gross Income - Potential Gross Income minus the greater of underwritten or market vacancy

Net Operating Income - EGI minus operating expenses

Net Cash Flow - NOI minus Tenant Improvements & Leasing Commissions and Capital Expenditures

Debt Service Coverage Ratio - NOI divided by Annual Debt Service

Cap Rate - should be applied to the stabilized income stream to estimate direct capitalized value to support loan request

Fixed Interest Rate: 6.45 

Variable Interest Rate: 6.86

Cap Rate: 6.9% to 9.5%

Best Rates are associated with: Properties with >1.20 DSCR, <80% LTV, <5% vacancy, appropriate Cap Ex reserves

Issues:

Spreads are typically lower for properties exhibiting a stabilized Trailing 12-24 Month Net Cash Flow

Net Cash Flow calculations include Replacement Reserves ($250-$300/unit)

Lenders may reconcile property value using the Direct Capitalization Approach on NOI and NCF

General Required Calculations:

Rent Roll illustrating in-place occupancy and Potential Gross Income

Effective Gross Income - Potential Gross Income minus the greater of underwritten or market vacancy

Net Operating Income - EGI minus operating expenses

Net Cash Flow - NOI minus Capital Expenditures

Debt Service Coverage Ratio - NOI divided by Annual Debt Service

Cap Rate - should be applied to the stabilized income stream to estimate direct capitalized value to support loan request

Fixed Interest Rate: 6.49 

Variable Interest Rate: 6.91

Cap Rate: 6.9% to 10.2%

Best Rates are associated with: Properties with >1.20 DSCR, <80% LTV, <5% vacancy, appropriate Cap Ex reserves

Issues:

Spreads are typically lower for properties exhibiting a stabilized Trailing 12-24 Month Net Cash Flow

Net Cash Flow calculations include Replacement Reserves ($50-$75/pad)

Lenders may reconcile property value using the Direct Capitalization Approach on NOI and NCF

General Required Calculations:

Rent Roll illustrating in-place occupancy and Potential Gross Income

Effective Gross Income - Potential Gross Income minus the greater of underwritten or market vacancy

Net Operating Income - EGI minus operating expenses

Net Cash Flow - NOI minus Capital Expenditures

Debt Service Coverage Ratio - NOI divided by Annual Debt Service

Cap Rate - should be applied to the stabilized income stream to estimate direct capitalized value to support loan request

Fixed Interest Rate: 6.49

Variable Interest Rate: 7.61

Cap Rate: 7.35% to 12.1%

Best Rates are associated with: Properties with >1.50 DSCR, <65% LTV, >60% occupancy, market ADR, appropriate reserves for FF&E, Franchise Fees, Advertising & Marketing, Repair & Maintenance

Issues:

"Mom & pop" operators are being scrutinized

Non-flagged hotels have an adverse view

Spreads are impacted by variance from market ARD and Occupancy

Many lenders are underwriting to a Max. Occupancy of 75%

Net Cash Flow calculations include FF&E, Franchise Fees, Advertising & Marketing, Repair & Maintenance

Lenders may reconcile property value using the Direct Capitalization Approach on NOI and NCF

General Required Calculations:

Historical ADR & Occupancy

Departmental Revenue, Departmental Income, Total General Expenses, Operating Expense Ratio

Net Operating Income - Departmental Income minus Total Expenses

Net Cash Flow - NOI minus FF&E and extraordinary cap ex

Debt Service Coverage Ratio - NOI divided by Annual Debt Service

Cap Rate - should be applied to the stabilized income stream to estimate direct capitalized value to support loan request

Fixed Interest Rate: 6.48

Variable Interest Rate: 7.61

Cap Rate: 8% to 12%

Best Rates are associated with: Properties with >1.50 DSCR, <70% LTV, <5% vacancy, appropriate Cap Ex reserves

Issues:

This sector has the highest delinquency rate of all property types

Net Cash Flow calculations include Replacement Reserves ($250-$275/bed)

Scrutinize Private Pay vs. Medicare/Medicaid and property management experience

Lenders may reconcile property value using the Direct Capitalization Approach on NOI and NCF

General Required Calculations:

Rent Roll illustrating in-place occupancy and Potential Gross Income

Effective Gross Income - Potential Gross Income minus the greater of underwritten or market vacancy

Net Operating Income - EGI minus operating expenses

Net Cash Flow - NOI minus Capital Expenditures

Debt Service Coverage Ratio - NOI divided by Annual Debt Service

Cap Rate - should be applied to the stabilized income stream to estimate direct capitalized value to support loan request

Fixed Interest Rate: 6.37

Variable Interest Rate: 6.86

Cap Rate: 7.9% to 10.2%

Best Rates are associated with: Properties with >1.30 DSCR, <75% LTV, <7% vacancy, appropriate Cap Ex reserves

Issues:

Certain markets have been over built

Higher vacancies are being tied to the overall sluggish economy

Lenders may reconcile property value using the Direct Capitalization Approach on NOI and NCF

General Required Calculations:

Rent Roll illustrating in-place occupancy and Potential Gross Income

Effective Gross Income - Potential Gross Income minus the greater of underwritten or market vacancy

Net Operating Income - EGI minus operating expenses

Net Cash Flow - NOI minus Capital Expenditures

Debt Service Coverage Ratio - NOI divided by Annual Debt Service

Cap Rate - should be applied to the stabilized income stream to estimate direct capitalized value to support loan request

Fixed Interest Rate: 6.43

Variable Interest Rate: 7.36

Cap Rate: 7.25% to 13%

Best Rates are associated with: based on property components; properties with >1.30 DSCR, <70% LTV, <5% vacancy, appropriate Cap Ex reserves

Issues:

Analyze economic value of each property component income stream independently

Tenant diversification continues to be scrutinized

Net Cash Flow calculations include Replacement Reserves and TILC where applicable

Lenders may reconcile property value using the Direct Capitalization Approach on NOI and NCF

General Required Calculations:

Rent Roll illustrating in-place occupancy and Potential Gross Income

Effective Gross Income - Potential Gross Income minus the greater of underwritten or market vacancy

Net Operating Income - EGI minus operating expenses

Net Cash Flow - NOI minus Tenant Improvements & Leasing Commissions and Capital Expenditures

Debt Service Coverage Ratio - NOI divided by Annual Debt Service

Cap Rate - should be applied to the stabilized income stream to estimate direct capitalized value to support loan request

Interest-only: 9.75

Cap Rate: Use market cap based on property type

Best Rates are associated with: pre-leased buildings, under-built markets, but with sufficient market and similar property-type data to warrant development.

Issues:

Many development deals fail not because of a lack of funding, but because of a lack of preparation on the borrower/developer.  Lenders look for experienced principals, developers, builders, contractors as it relates to the proposed project.  Project costs should not exceed project as stabilized, and should reflect entrepreneurial profit of 1-3 percent.

General Requirements:

Zoning and Permit approvals

Bios on all parties involved: principals, developer, builder, contractor, etc.

Detailed project plan presenting each phase of construction and the costs associated with each phase.

A representation of the operating performance of the property, as stabilized (at end of ramp up period based on market-occupancy, rental rates, and operating expenses).

A profit margin of 1-3 percent is preferred.