High Leverage Participating Mortgage Program

AdobeStock_244094814

Deal Parameter Specifics

  • Loan Sizes
    • $40M Min
    • $250M Max
  • LTC: 90-95%
  • Interest Rate
    SOFR + 750 bps
  • Drops to SOFR + 550 bps I/O at CofO
  • Fees: 1% Origination, 1% Exit
    • Exit fee waived if same group provides takeout
  • Term: up to 5-years
  • Min Interest: 12 months
  • Equity Kicker: 10-25% with a return floor based on sponsor projections (no voting rights).
  • Property types: Multifamily preferred
    • Other major food groups considered at lower leverage
  • Non-recourse with bad-boy carveouts
  • Geographics: Nationwide

When you start developing massive projects, a couple of percentage points on leverage can make or break a deal. For example, developing a $50M multifamily property at 80% LTC (a solid, high-leverage loan) still means you need to come up with $10M of equity on your own!

Even if you’ve been a developer for many years, bringing $10M “cash to close” is a tall order.

Luckily, one of our best capital sources has told us they’re putting out terms for multifamily developments at 95% LTC. Now that same $50M example above quickly changes to you only needing to bring $2.5M cash to close!

Let that sink in. How many more projects could you develop if you only needed to raise $2.5M versus $10M per project?

This high leverage program is called a Participating Mortgage Program, which means that the group requires an equity kicker to max out the leverage. However, it’s important to note that the borrower retains 75-95% ownership of the property vs the typical 10-35% with a JV equity structure. They also do not have equity-like control or voting rights. The borrower must “buy them out” when the loan is paid off (or distribute proportionally upon sale).

As if all that weren’t incentive enough, this group is a “one-stop-shop” for your financing needs. You can go from a high-leverage ground-up development all the way through to CMBS perm takeout with little to no brain damage. We can’t sing this groups praises loudly enough.

If you have a deal that you want to discuss that’s at least $40M, click the button below to schedule a call.