Overview Edition

Master Money Matrix©

2nd Quarter 2023

OPTION	EXPLANATION	REQUIREMENTS	SOURCES	ACTIVITY LEVEL	CURRENT TERMS					COMMENTS
OPTION	EXPLANATION	REQUIREMENTS	SOURCES	ACTIVITY LEVEL	RATES	SIZING	POINTS	TERM (YRS)	AMORT	COMMENTS
CONSTRUCTION LOAN AGAINST TAKE-OUT	Finance project until a permanent loan or pre-sale is funded.	Borrower track record and completion guarantee.	Mostly banks	Very Limited	Mostly LIBOR + 175-250bps.	Loan level tied to takeout.	1/4 to 1/2	Tied to completion	Interest only	- Forward commitments are extremely hard to obtain except for build-to-suit projects with near-term delivery dates. - Some forwards available for affordable apartment projects
CONSTRUCTION WITH PERMANENT	Single source construction and permanent loan.	Borrower track record, financial strength, and viable project.	Mostly banks, but also some insurance companies	Adequate	Mostly LIBOR + 200-300 bps during construction. Perm is fixed rate at benchmark	1.25 DCR on projected NOI.	1/4 to 1	Construction period + 5-10 years	Interest only during construction, 20-30yrs for permanent.	- Typically 20%-30% equity depending on recourse level and pre-leasing. - Most loans are for apartment projects.
OPEN-ENDED CONSTRUCTION LOAN	Finance project without take-out or other repayment source in place.	Experienced sponsor, and project with strong market support.	Mostly banks	Limited	LIBOR + 200-350bps.	Loan level depends on recourse / pre-leasing.	1/2 to 1	Tied to stabilized lease up + 6-12 months	Interest only.	- Significant pre-leasing required, unless apartments.20%-30% equity depending on recourse level and pre-leasing. - Mainly build for sale projects.
INSURANCE COMPANY PERMANENT LOAN	Fixed rate medium to long term financing on stabilized properties.	Typically A & B quality assets in primary markets.	Insurance companies	Good	Typically 130-250bps over comparable term or average life Treasuries.	1.25 DCR or 8%-10% debt yield. 65%-75% LTV.	Typically 0	3 to 30	10 to 30 yrs.	- Selective in evaluating asset quality, location and sponsorship, but some insurance co's target smaller loans in secondary markets at a higher rate. - Non recourse, no operating covenants.
BANK PERMANENT LOAN	Fixed rate up to 10 year financing on leased properties.	Creditworthy sponsor and property of A, B or C quality.	Banks	Fair / Good	FHLB or swap + 200-250bps.	Typically 1.25 DCR, 75%-80% LTV.	0 to 1/2	5 to 10	20-30 yrs.	- Recourse likely required, especially over 65% LTV, unless apartments or credit leased. - Ongoing loan covenants usually required.
CONDUIT/CMBS LOAN	Fixed rate on leased properties.	Creditworthy borrower and well maintained property of "B" or better quality.	Investment banks, a few banks and insurance companies.	Limited	Swaps + 250-325bps.	1.20-1.25 DCR. 75%-80% LTV.	Typically 0	7 to 10	25-30	- Attractive pricing focuses on lower LTV/larger assets - Interest-only readily available.
FANNIE & FREDDIE (GSEs)	Medium to long term financing for apartment properties & senior housing.	Creditworthy borrower. Apartment property of B quality or better.	DUS Lenders for Fannie and Program Plus for Freddie, also "small balance" lenders.	Good	175-255 bps over like term Treasury.	1.25-1.30 DCR. 75%-80% LTV.	0 to 1	5 to 30	Typically 30 yrs.	- More competitive underwriting / pricing for workforce / affordable housing and for "green" projects. - Some debt service reserves have been instituted due to the pandemic
FHA	Construction and permanent financing for apartments, skilled nursing, and assisted living.	Feasible property economics. Borrower with clean credit and cash to close.	HUD-approved MAP and/ or LEAN Lenders.	Good	10 yr Treasury + 80 +/- for 35 year perms + 60bps MIP. 10 yr Treasury + 140 +/- for 40 yr construction perms + 65bps MIP.	Perms: 1.17 DCR, 85% LTV (80% with cash out.)	1 to 2	35yr for permanent, 40yr for construction	35-40 yrs.	- Non-recourse, no operating covenants. - Lower MIP for affordable projects and for "green" properties. - Attractive prepay provisions. - No affordability requirement. - Davis Bacon wages on construction.
TAX- EXEMPT FINANCING	Tax exempt financing on a long term basis.	Project must be deemed to have public purpose.	State HFA's, bond funds and some banks.	Limited	Varies widely depending on term and credit enhancement.	1.15-1.25 DCR. 85% LTV.	1 to 2	10 to 40	25 to 40 yrs.	- Most activity is housing or health care related. - Can be structured with or w/o credit enhancement.
MEZZANINE LOAN	Subordinate loan designed to substitute for a portion of required equity.	Experienced sponsor, intercreditor agreement with senior lender.	Mostly investment funds and a few insurance companies.	Limited	Rates range from 6% up to low teens.	Typically minimum 1.10 DCR.	Varies	Matched to senior debt term.	Varies, but usually interest only.	- Selectively avalable for stabilized, value-add, and new construction. - Most activity in the space caps off at 85% loan to cost, with exit at 75% LTV.
PREFERRED EQUITY	Equity investment with preferred return and participation in cash flows and residual.	Experienced sponsor, property with good development or value-add potential.	Private investment pools and some insurance companies.	Limited	6% to 8% preferred return plus share of cash flow and residual.	N/A	N/A	Investment horizon typically 3-5 years.	N/A	- Focus on institutional grade properties. - Target IRR in the 10%-12% range, higher with significant development/tenancy risk. - Capital stack can reach 95% + of cost.
EQUITY JOINT VENTURE	Investor and sponsor co-invest pari passu.	Usually reserved for top sponsors and premier projects.	Private investment pools and few insurance companies.	Very limited	N/A	N/A	N/A	Investment horizon typically 5-10 years.	N/A	- Target IRR on equity is in the 8%-11% range, depending upon level of leverage used.
CREDIT TENANT LEASE (CTL) FINANCING	Fixed rate loan terms tied to credit lease.	Long term lease with investment grade tenant.	Privately placed bonds.	Adequate	Varies with tenant credit and lease term.	As low as 1.01 DCR.	0-1	Tied to lease term; typically 15-25 years.	Matches term.	- Activity today is mostly at higher end of investment grade credits. - Non recourse, no carve outs.
SALE LEASEBACK AND BUILD TO SUIT	Financing technique that allows property user to control property for an extended term through a lease.	Lease of sufficient term providing appropriate return relative to the underlying credit of the lessee.	Investment funds, insurance companies, and REITs.	Minimal	Initial yields of 6%-9%.	N/A	N/A	N/A	N/A	- Pricing depends on lease term and credit strength of tenant. - Rents may be flat or have stepped increases.
OUTRIGHT SALE	A sale of property for cash to a third party investor.	Willing buyer and willing seller.	REITs, institutional and private investors.	Good	Value typically is a function of capitalizing net operating income (N.O.I.) at 4% to 9% + depending upon the property's type and quality.	N/A	N/A	N/A	N/A	- Sales velocity continues to increase. - Investors' focus is on cash flowing properties. - Overall IRR targets in the 7% to 10% range.
PRIVATE INVESTOR VEHICLES	Single asset equity investments through LLC, limited partnership, or Delaware Statutory Trust.	A property that has investment appeal based on reliable cash flow and/or tax benefits.	Sponsors who sell partial interests to multiple investors.	Adequate	5%-8% preferred return plus share of cash flow and residual.	N/A	N/A	N/A	N/A	- Typically seeking returns over 5+ years, primarily from cash flow.
	bps - DCR - DUS -	basis points Debt Coverage Ratio Delegated Underwriter Servicer	FHA - FHLB - IRR -	Federal Housing Administration Federal Home Loan Bank advance rate Internal Rate of Return		LIBOR - LTV - MIP -	London Interbank Offered Rate Loan to Value Ratio Mortgage Insurance Premium		SWAP -	LIBOR Interest rate swap
ALTHOUGH THE INFORMATION IN THIS MATRIX HAS BEEN PREPARED CAREFULLY BY FANTINI & GORGA'S STAFF OF MORTGAGE BANKER PROFESSIONALS, ITS ACCURACY CANNOT BE GUARANTEED. COPYRIGHT FANTINI & GORGA 2023.