Debt & Equity Solutions
By utilizing our vast network of lenders and investors, our Finance & Capital Markets team is able to arrange innovative real estate debt and equity structures. Our debt placement covers a variety of financing and loan types, covering a broad range of asset types:
• Conventional Fixed Rate Loans
• Adjustable Rate Mortgages, floating rate loans
• Bridge loans
• Mezzanine financing
• Construction Financing
• Agency loans
• Condo conversion loans
• Underlying Co-op loans
• Land loans
• Specialty asset loans
Conventional Fixed Rate Loans
The most common loan in the market place is a conventional fixed interest rate loan. The loan is based on discount rate assumptions averaged over the fixed rate period. When the discount rate is low, fixed rates are higher than variable rates because interest rates are more likely to rise during the fixed rate period. Conversely, when interest rates are historically high, lenders normally offer a discount to borrowers to fix their interest rate over time, as rates are more likely to fall during the fixed rate period. The most common fixed rate loans are based on the five, seven, ten and fifteen year treasuries and usually are amortized over twenty five or thirty years payment schedules. Rates may vary greatly from one lender to the next based on different internal underwriting standards, matrixes, and comfort levels. We encourage our clients to contact Berko & Associates Capital Markets Group to arrange for the most competitive rates and terms in the marketplace.
Acquisition / Refinancing Loans
Depending on your circumstances and the property type you are looking acquire, our team will carefully assess your capitalization needs and arrange a variety of fixed-term adjustable rate and conventional fixed rate mortgages, or short term bridge loans uniquely tailored to your needs. We typically structure the loans on an amortizing basis, covering both acquisitions and property refinancing. Alternatively, in more cash flow challenging transactions, we are able to strurcture interest only financings for a short term period or the full term of a loan, and in shorter term situations, we can build in interest reserves.
Debt Structures will vary based on asset type, providing flexibility to meet your financing requirements. Our acquisition financings typically range from $5 million to $50 million or higher, with terms of 5 – 15 years, depending on the market we access for your financing and your anticipated holding period for the asset being considered. On existing debt refinancings, our team will assist you with loans ranging from $1 million and higher, with terms of 1 – 35 years.
Our team specializes in arranging short term bridge loans to enable you to access more favorable bank or agency take-out financing upon achieving specific milestones. Through our vast network of reputable and reliable funders, we provide short term financing solutions for property acquisitions, debt refinancing for properties that do not qualify for conventional bank financing, repairs or renovations, and to finance the process to stabilize your property. Where your property is not sufficiently cash flowing due to high vacancies, we provide bridge loans to be taken out by permanent bank financing upon stabilization. Similarly, if you need to refinance your debt because you are currently in default, or your loan is nearing maturity and you are unable to obtain conventional financing, we can arrange a bridge loan to provide you with sufficient time to remedy your financial challenges and to secure longer term permanent financing at more feasible rates.
Our lenders typically structure the bridge loans for a term of one year, with options to extend for additional 6-month periods. Most bridge loans are structured to include an interest reserve, in order to reduce your financial pressures during the term of the loan. In addition, we typically include an interest only requirement for repayment of the loans resulting in a balloon payment at the end of the term, which will then be taken out by permanent financing.
Our experience and expertise extends to supplementing conventional first mortgages by integrating them with highly structured forms of hybrid secondary financing instruments including mezzanine loans B-Notes and preferred equity. This is particularly applicable to circumstances where a borrower requires a higher level of leverage for an acquisition or a recapitalization than a conventional senior lender is comfortable to provide. In addition to securing the requisite financing structures, we also negotiate the terms of the inter-creditor agreement amongst the lenders on behalf of the client.
A construction loan is required when building any asset type, whether ground up for development or other improvements to land, a full conversion of one property type to another or simply a renovation of an existing property. In most instances, construction loan proceeds are phased, with disbursements advanced in successive draws that are staggered throughout the process of constructing the improvements. The lender monitors the project to ensure that the level of completion of the improvements is commensurate with the amount of construction funds disbursed. Facilities are typically structured as non-amortizing loans, with payments as interest only during the construction period, payable from an interest reserve to reduce the pressure of servicing the debt on the part of the project sponsor.
Our team specializes in construction financing for all asset classes, including multi-family residential properties, condos, mixed use properties, office buildings, retail facilities, hotels and other specialty assets. We have arranged construction financing for ground-up projects, stalled construction projects, gut renovations and property conversions. For post-construction phases, we have also put in place long-term fixed-rate permanent take out financings and mini-perms to enable developers from construction completion to income stabilization.
In order to more effectively serve the needs of multifamily owners, we have developed strong relationships with most of the top ten Delegated Underwriter and Servicer lenders (DUS Lenders) across the nation. As such, we are able to access very competitive financing structures provided by Fannie Mae, Freddie Mac and FHA-insured mortgages through HUD. These loans are highly beneficial and competitive to finance the acquisition, refinancing and rehabilitation of multifamily properties, providing exceptionally attractive terms for longer maturities up to 35 years.
Our team is highly specialized to identify the risks and rewards of these financing alternatives, and will help you navigate through the process of evaluating each avenue from decision making and analysis through to closing.
Condo & Co-op Loans
Underlying co-op are highly specialized debt transactions that may not suit the lending criteria of most lenders. Our Finance & Capital Markets team will navigate through your particular needs to assist you with your financing or refinancing endeavors. The challenges with both co-op buildings pertains to the complex ownership structure of the buildings and the particular units in a condo building. In a co-op building, the residents of the complex own shares in a corporation that owns the asset. As such, the residents do not own the particular unit they live in, nor do they technically own real estate. Rather, they are shareholders of the cooperative corporation that have the right to one or more units depending on their ownership share. In addition, the residents enjoy the tax benefits emanating from any underlying loans on the building, providing them the ability to deduct their proportional share of interest and maintenance payments.
In condo ownership transactions, the residents actually own the units they hold and share the costs of operating the entire condominium. Both co-ops and condos have decision making boards, which ultimately impact how a lender perceives their risk from the perspective of decision-making, which particularly in the case of co-ops, becomes more challenging.
Given these nuances, our team will expertly work with you to carefully approach the appropriate lenders to put in place the right structure and at advantageous terms.
Developers often find the need to arrange for debt during the initial stage when a parcel is acquired with no approved municipal plans to construct their desired development. Purchasing an empty lot is undoubtedly a risky proposition for the lender, who might require personal guarantees and often higher interest rates. Berko & Associates team has provided sophisticated debt solutions for developers both in the form of a bridge loan and mini-permanent financing with competitive rates. Getting the right lenders for debt placement of these challenging and time sensitive transactions is key.
Equity & JV
Many investors and developers often require multiple layers of capitalization in order to complete their acquisition or development projects. Some situations, particularly where non-US citizens are involved in these transactions require the participation of local institutional or private investors, developers or even reputable general contractors to complete the financing criteria of most US-based conventional lenders to complete a financing transaction. Other situations merely may apply to lack of equity or experience on the part of a project sponsor to pull off the deal.
As a firm, Berko & Associates is readily able to leverage from deep-rooted relationships with institutional and private equity investors, REITS, development companies and highly experience and well capitalized general contractors. In addition, we are often called upon by our foreign and domestic clients to bring together clients and contacts to particular projects as joint venture or equity partners. We have a track record of successfully introducing foreign investors into partnerships with clients with limited capital.
We specialize in structuring the actual partnerships and in completing the financing package to successfully bring the transaction to closing. We are adept in structuring and syndicating both full equity joint ventures and preferred equity transactions, often having to compliment the equity capital with the appropriate level of debt capital, taking into account not just the resulting leverage, but the respective returns for all parties involved, in addition to tackling the more complex issues involving the positioning of each level in the capital stack.
We look forward to advising you on your next project’s financing requirements, and to become an integral and valuable part of your team.