1) 30/360 method: 1-years interest is computed by dividing by 360 days to the daily charge. Payments are then based on a twelve, 30-day month cycle. There is no regard to months with 28, 29 or 31 days.
2) Actual/360 method: Annual interest is still calculated by dividing by 360 to get the daily charge. However, payments are made over the typical 365-day year.
The extra 5 days of interest per year increases the effective interest rate by about 12 basis points.
How does this affect you? Be cautious to the quote being conveyed. If one Lender is quoting 210 over the 10-year Treasury at Actual/360 and another Lender quotes the deal at 222 over the 10-year Treasury at 30/360 then you have effectively the same quote! Of course, the feel good quote may be the 210 spread, but at the end of the day youre basically paying the same as the 222 spread.
Underwriting Guidelines & Terms LTV: Loan-to-value. This is the ratio relationship between the amount borrowed to the total value of the asset. LTVs in commercial real estate lending is can reflect lower cost, very low leverage loans of 50% or below to expensive, very high leverage loans of 95% . Oftentimes the higher leverage deals reflect structured financing that involves two or more pieces such as a 1st mortgage of 80% plus a mezzanine piece of up to 15% (total debt 95%).
DSCR: Debt Service Coverage Ratio. This is the ratio relationship of the underwritten net cashflow to the annual debt service. Usually expressed as 1.??x. The 1 reflects the ADS (annual debt service) and the ?? reflects the net cashflow buffer that is required over the ADS. Typically, a DSCR is 1.20x to 1.35x; however, the DSCR can be lower in special structured finance facilities or significantly higher in deals perceived by the Lender (and/or the Rating Agencies and/or the A, B and C piece buyers) to be very high risk.
CONDUIT LOAN ADVANTAGES
Very competitive pricing and loan terms/structures.
Aggressively funded.
Most commercial properties are acceptable. Types include: Multifamily, office, retail, hospitality, self-storage, industrial, mobile home, credit single tenant, and senior care facilities.
Quality of property can range from A+ to C- (below in some instances).
Loan Size: $750,000 and up.
Rates vary daily however spreads generally range from 200 basis points (bps) to 375 bps over applicable treasury yield (dependent on property type). Lower spreads can be obtained on lower leverage deals.
Loan Term: Generlly 10 years; however 5, 7, 15 and 20 years terms can be sometimes arranged.
Amortization: Generally 25 to 30 years.
LTV: Typically 75% to 80% (lower maximum leverage on certain property types).
DSCR: Typically 1.20x to 1.40x (dependent upon property type).
Prepayment: Typically a 3 to 5 year lock-out period. Yield maintenance/Defeasance applies to remaining loan term.
Non-Recourse Loan except for standard carve-outs (i.e. fraud, environmental etc..)
Fees: Vary widely and include deposits for third party reports, legal and application. Generally, a 1% commitment deposit and an application fee of $5,000 is due at application (app fee is generally nonrefundable).
Early Rate Lock: Typically, 60 days with a 2 to 3% refundable deposit.
SUBMISSION CHECKLIST
Capital Intermediaries International will prepare a preliminary underwriting analysis at no cost. For faster processing please provide all of the following items in your submission package. For certain transactions, additional information may be required.
Loan Request: A Completed Loan Request Form (e-mail carl.raia@capitalintermediaries.com for the form)
Credit Authorization: A credit authorization form must be completed for all Borrowers and Key Principals (e-mail carl.raia@capitalintermediaries.com for the form)
Property Information: (i) Last two-to-three years (plus year to date) property financial statements or tax returns.*(ii) Detailed Rent Roll(iii) Copies of leases(iv) Color pictures of property
Third Party Reports: Include copies of any existing appraisal, environmental engineering, title and survey reports as available
Contracts/Agreements: Include any purchase, sale or option contracts/agreements relative to loan as available
Payoff Letters: Include all payoff letters stating mortgage balances owed and/or real estate tax bills substantiating back taxes owed
Borrower Information:(i) Personal Financial Statement for Borrower & Key Principals(ii) Past two years tax return(iii) Tax returns and financial statements for business entities which will act as Borrower (if applicable)(iv) Resume or personal history description for Borrower and Key Principals
*For Hotel/Motel properties, last three years historic financials including actual occupancy and ADR. For Multi-Family, Mobile Home Parks and Self-Storage Properties include the actual occupancy (monthly) for the prior twelve months.