Industrial Properties:

Single and multi-tenant properties including warehouses used for storage, assembly and packaging, as well as research and development facilities. Lenders like to see dock high loading and tilt wall construction, located in industrial park developments. Properties should have adequate ceiling heights, column spacing and truck turnaround areas. Interior fire protection is a plus.

Industrial properties should have good access to primary thoroughfares in areas with strong demand generators for industrial properties. Properties should have easy access to major interstate roads as well as key local roads that provide access to local, industrial, and commercial centers. Rail access indicates a stronger property.

Loan Size:

$2 Million and up

Debt Service Coverage:

1.20 x minimum

Term:

Terms from 12 to 36 months. Extension options available, early termination requirements negotiable.

Loan-to-Value Ratio:

Up to 80%

Loan Term:

5, 7 or 10 years

Amortization:

30 years or less, depending on major lease terms and expiration, and property age.

Factors for determining tenant quality include the stability of the specific business and the quality of the tenant's financial condition. The rent roll should be diversified with staggered expirations. For multi-tenant properties, require staggered leases to avoid adverse re-leasing risk. Leases should be representative of the market. Single tenant properties typically will require higher debt coverage and reserves.

NOI Calculation:

Lenders prefer to receive two to three full years of operating history. Better terms can be negotiated if leases are trip net (NNN). R&D leases are typically written on a modified gross basis whereby the tenant and owner share costs. Lease rollovers should be less than 30% GLA in early years of the loan term.

Rent Roll - Lenders like to see a smooth lease expiration schedule so that the debt coverage ratio in any given year does not fall below break-even. Lenders will consider properties with significant rollover risk on a case-by-case basis. Tenants not occupying space and paying full rent for at least 3-months usually require a reserve equal to 3-months rent.

Management Fee - Can be 4% if consistent with market. Single tenant buildings that are fully maintained and managed by occupant can be underwritten at a 3% management fee.

Reserves - $.10 to $.25 per square foot for structural reserves depending on the property age, condition and percentage of office build-out subject to an engineering report. Determine Tenant Improvement and Leasing Commission reserves from the rollover schedule and market averages.

Fees - 1.5 - 2% of loan amount