Mixed Use, Multifamily and Retail/Office:

Construction loan, take-out loans to purchase and/or refinance any type of mixed use hi-rise properties consisting of multifamily and retail components.  These properties can also have an office or hospitality mix in with the retail.

In mixed-use underwriting each component must be analyzed separately.

Smith-Craine will broker mixed-use loans nationwide. Lenders will consider repositioning or new construction opportunities in a strong markets most often utilizing available mass transit. Most lenders seek market areas with a stable current occupancy. Multifamily rent concessions will be underwritten cautiously requiring market norm coverage and reserves. For new construction, lenders prefer pre-leasing commitments over 75%. If mixed use property is established, lenders prefer that retail portion have occupancy stabilized at around 85% and should be an established sales generator in the market.  Lenders like to see direct access to major roadways and high visibility. They prefer infill locations in developed neighborhoods in high traffic areas. Where direct competition exists, it is helpful if the property exhibits a stronger market appeal than the competition or has a history of retaining its tenancy, sales volume and competitiveness.

Loan Size:

$2 Million and up

Debt Service Coverage:

1.15x minimum for multifamily component and 1.20x for the retail/office portion.

Loan-to-Value Ratio:

Up to 80% for Fannie Mae DUS, Conduit and Life Company Programs, Up to 90% on FHA insured loan program.

Loan Term:

Permanent Financing Terms: 5, 7, 10, 15, 20, 30, and 35 years.
Construction Loan Terms: 12 – 36 months with extensions available for larger projects.

Amortization:

25 to 40 years or less depending on age, quality of construction and market location.

Interest Rates:

Multi-family Tenancy:

Pricing is based upon the quality of the real estate, retail tenant mix and multifamily lease terms.  The multifamily portion will command the most competitive rates because it represents the lesser of the mix's risk. For the retail portion, lenders typically offer LIBOR and Treasury based pricing. Treasury spreads can run between 90-200 basis points over the corresponding US Treasury for permanent financing. Construction loans can run 115-300 over the one month LIBOR. Depending upon the mix, the best combined rate will be determined.

Leases should be at least 6 months at initial occupancy of a tenant.

NOI Calculation:

For the multifamily portion, most lenders will require two full years of operating history and a trailing 12-month history with adjustments where appropriate. Generally, lenders will underwrite expenses based on last full fiscal year, plus a +/- 3% inflation factor.  Smith-Craine can assist in these calculations.

For the retail portion, lenders like to receive at least two full years of operating history or for new construction a corporate or national chain backed lease commitment with base lease terms exceeding beyond the final loan term.
Retail Expenses - Lenders underwrite expenses using the greater of actual 12 months trailing, last two years historical, along with the market/industry average. Expense recovery must reflect the stabilized operating history of the project.
Retail Vacancy - Will be the higher of actual or market with a minimum of 5%. A vacancy factor will be taken on all credit/anchor tenants if the lease term is less than the loan term.
Retail 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. However, many lenders will consider properties with rollover risk on a case-by-case basis.

Multifamily vacancy factor - Actual or the greater of 5%, local market average or the actual property for the most recent 12-month period (including all forms of economic rent loss, also known as "loss-to-lease")

Multi-family management fee - The greater of 5% effective gross income, the actual management contract fee rate, or the industry average.

Multi-family capital reserves - Generally ranging from $150 to $250 per unit, based on the final engineering report, physical inspection, tenancy and age of property.

Retail/ Office capital reserves - $.10 to $.25 per square foot for structural reserves depending on the property age and condition and adjusted in accord with the engineering report. Determine Tenant Improvement and Leasing Commission reserves from the rollover schedule and market averages.

Time Frames:

Letter of Interest within one week, commitments within 10 days of submitting full documentation, closing typically 60 days of commitment.

Fees:

1.5-2% of the loan amount
third party legal, environmental, appraisal and other lender fees will be separate.