Post Covid19, commercial capital markets are drying out or lowering their senior debt exposure significantly. Many developers and management companies are suffering already. Many new projects and adaptive reuse projects will suffer even more the next year or two. Adaptive reuse projects refers to the process of reusing an existing building for a purpose other than which it was originally built or designed for. It is also known as recycling and conversion. Adaptive reuse of buildings can be an attractive alternative to new construction in terms of sustainability and a circular economy.
However, there is always a solution when it comes to credit driven economy, like US's. Money can only put to good use if it is borrowed. Many equity partners and private funds will be creative in this. Commercial Debt, Equity and Mezzanine are going to replace Conduit or CMBS loan.
Example of Pref Equity Structure.
If a total project cost is $ 10M, senior debt can be $6M, which is 60%, a $2.5M ( 25%) can come as soft or hard preferred equity and 1.5M which is 15% coming from sponsor ( borrower ). Senior debt rate being around 4.25%, with about 8% rate of preferred equity or Mezzanine, which is a total combined rate of around 6.25%. Once the equity part is exited, borrower will the long tern senior debt rate.
Please call us for any Pref Equity/Mezz structure loan. We can help. Please go to https://blog.feedspot.com/texas_blogs/ and read our other blogs.