Capital Spotlight – Highlighting featured capital investors. We regularly publish the detailed criteria of our most unique real estate capital sources.
VRC recently interviewed a prominent CRE lender that stands out as a game-changer for investors and developers. This lender, operating through a 9-figure joint venture with a nationally recognized credit fund, offers a diverse range of financing options and provides unique value through specialized products. Originally focused on the East Coast, they now originate loans nationwide, specializing in multifamily financing. With the ability to utilize a warehouse line on the back-end while also capable of funding deals on their own balance sheet, this lender combines financial strength with flexibility. Their comprehensive suite of products, including innovative bridge, bridge-to-perm, and stretch floating rate options, caters to various stages of property lifecycles and addresses crucial gaps in the current financing landscape. This lender’s nationwide reach, coupled with their willingness to work with a variety of deal types and conditions, positions them as a versatile and valuable partner in the commercial real estate financing arena.
Loan Products
- Typical Bridge Loan
This product is tailored for short-term financing needs, offering loan sizes ranging from $5MM to $50MM with a loan-to-cost ratio of up to 80%. The terms typically span 2-3 years, with pricing set at SOFR plus 375-525 basis points. Interest payments are interest-only, with the potential to convert to amortizing if the loan is extended. The lender requires a minimum interest period of 12-15 months for 2-year terms or 15-24 months for 3-year terms, and there is no lockout period. Fees include a 1-2% origination fee and a 0-1% exit fee. In terms of underwriting criteria, the lender looks for a minimum stabilized debt yield of 8.0%, increasing to 9.0% or higher for intensive value-add projects. The maximum stabilized loan-to-value ratio is generally 65%, with the possibility of up to 70% for select repeat clients. A notable feature of this lender is their willingness to work with distressed assets and their ability to capitalize interest reserves for properties with low or no cash flow, demonstrating flexibility in challenging scenarios.
- Bridge-to-Perm
This innovative product combines bridge and permanent financing, offering a seamless transition for borrowers. The bridge component mirrors the typical bridge loan terms, while the permanent component is priced at US Treasuries plus 250-350 basis points, with a maximum LTV of 60-70%, subject to DSCR restrictions. The combined term can extend up to 5-7 years, with loan sizes ranging from $5MM to $50MM. Fees include a 1-1.5% origination fee and a 0-1% exit fee, which is waived if the sponsor opts for the firm’s permanent debt. The product offers flexible prepayment options, catering to diverse borrower needs. Notably, the lender originates on behalf of HUD, LifeCos, and CMBS, with LifeCos typically being the most conservative, offering a maximum LTV of 60-65%. This structure provides borrowers with a comprehensive financing solution that adapts to their evolving needs throughout the property’s lifecycle.
- Stretch Floating Rate
This product bridges the gap between bridge and permanent financing, offering a flexible solution for borrowers in transition. With loan sizes ranging from $5MM to $50MM, it provides substantial funding capacity. The loan-to-value ratio can reach up to 75% based on as-is appraisal (subject to a 1.10x DSCR requirement), with a maximum stabilized LTV of 65-70%. Terms extend from 3 to 5 years, allowing ample time for property stabilization. Pricing is competitive at SOFR plus 225-300 basis points, with full-term interest-only payments to maximize cash flow. The loans are typically non-recourse with standard carve-outs, offering borrowers additional protection. Fee structure is borrower-friendly, with up to 1% origination fee and no exit fees. Required deposits are notably lower than competitors at $20-25k, enhancing the product’s appeal. This stretch floating rate product is designed to accommodate properties that have progressed beyond traditional bridge financing but are not yet ready for permanent financing options
Where They Add Unique Value: The Stretch Floating Rate Product
The stretch floating rate product addresses a crucial gap in the current commercial real estate financing landscape, providing significant value to sponsors.
Bridging the Gap for “In-Between” Assets
Many sponsors today find themselves in a challenging position with properties that are not quite stabilized according to agency (Fannie Mae, Freddie Mac, HUD) requirements or bank standards. These assets often have the following characteristics:
- Cash flows haven’t seasoned enough to reach the required Debt Service Coverage Ratio (DSCR)
- Unable to maximize refinance proceeds due to not meeting agency or bank criteria
- Too stable for typical high-cost bridge loans, but not stable enough for permanent financing
This lender’s stretch floating rate product is specifically designed for these “in-between” assets, offering a unique solution that bridges the gap between expensive bridge loans and more restrictive permanent financing options.
Benefits for Sponsors
- Cost-Effective Financing: With pricing at SOFR + 225-300 bps, this product offers a more affordable option compared to typical bridge loans, which often price at SOFR + 375-525 bps or higher.
- Flexibility: The 3-5 year term provides sponsors ample time to stabilize their properties and season cash flows to meet agency or bank requirements.
- Higher Leverage: With LTV up to 75% as-is appraised, sponsors can access more capital than they might through traditional permanent financing options.
- Interest-Only Payments: Full-term interest-only payments allow for improved cash flow during the stabilization period.
- Non-Recourse Option: The typically non-recourse structure (with standard carve-outs) offers sponsors additional protection.
Flexibility and Nationwide Reach
This lender stands out for its flexibility and broad geographic focus:
- Recent deals closed in Indiana, Ohio, San Diego, LA, Florida, and other MSAs
- Willing to work with assets that have stable cash flows (1.00x-1.10x coverage) but aren’t quite ready for permanent financing
- Demonstrates flexibility with distressed assets, helping sponsors reset basis and revive deals
Conclusion
This CRE lender offers a comprehensive suite of financing solutions tailored to meet diverse needs in the commercial real estate market. Their ability to fund deals on their own balance sheet, combined with their nationwide reach and flexible approach, positions them as a valuable partner for investors and developers across the country.
What sets this lender apart is their innovative stretch floating rate product, which provides a valuable solution for sponsors navigating the challenging middle ground between bridge and permanent financing. This product allows them to refinance out of higher-cost bridge loans earlier, optimize their capital stack, and position their assets for long-term success.
By offering a range of products from typical bridge loans to specialized bridge-to-perm and stretch floating rate options, this lender demonstrates a deep understanding of the market’s needs and a commitment to providing tailored financing solutions for various stages of a property’s lifecycle.
| Capital Structures Offered | Senior Bridge Debt; Bridge-to-Perm; Stretch Floating Rate |
| Geography | Nationwide |
| Property Types | Multifamily |
| Construction | Light value-add, Heavy value-add; Construction-completion (75%+ complete, or substantially complete with just lease-up risk remaining);NO ground-up construction |
| Sponsorship | They are looking for sponsors who have “similar prior experience” for the deals they are actively pursuing. |
| Recourse | Most loans across all three buckets of capital are non-recourse. There are carry guarantees and capex completion guarantees required, on a case-by-case basis. |
| Check Size | Typically non-recourse with standard “bad-boy” carve outs; Typically will lean on the Senior guarantee requirements. |
| Check Size | $5MM to $45MM |
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| Sponsorship Equity Contribution | Sponsor must have skin in the game. Ability to write a 10-20% (of total cost) check (flexibility on a deal-by-deal basis) |
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| Term | Typically looking to match the term of the senior lender |
| Prepayment Structure | 1.3x – 1.7x minimum multiple |
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| Collateral Requirements | First Mortgage Lien |
| Intercreditor Requirements / Recognition Agreements | Negotiated on a deal-by-deal basis. |
| Deposits | Market standard deposit required upon signing of term sheet to fund appraisal, environmental, title, legal. Deposits are subject to deal size. (typical range: $35k-$50k). For Stretch Floating Rate product specifically, only $25,000 in total deposits required. |
| Closing Time Frame | Can close In 3-5 weeks, typically 4 week close. |
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If this capital source may be of interest, book a call to discuss a potential capital arrangement. Read our last Capital Spotlight: Private Fund Offers Attractive Senior Perm Facilities as a Bank Alternative.