High Yield Debt Fund Investor Return

What are high yield debt "funds" that take family and friends money returning these days? How is the leverage and the note-on-note financing like. Has it killed the 20% returns?

Comments (36)

9d
crecashflowz, what's your opinion? Comment below:

Borrowing costs obviously risen substantially, much harder to be competitive in the bridge space while still maintaining spreads.

Edit: So to answer your questions, to an extent, yes - at least in my personal experience.

8d
FreelancerCRE, what's your opinion? Comment below:

6% on low end, 10% on high end. After fees. I'm not really talking about the smaller buy-n-flip private money lenders that do single family residential. My 6-10% is more so for CRE loans.  

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7d
FreelancerCRE, what's your opinion? Comment below:

What are returns pre lever?

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  • Analyst 1 in RE - Comm
3d

Could you please explain what types of deals you are lending upon and how borrowers are able to afford SOFR + 600? In development, we are getting senior construction financing at SOFR + 275ish, while our untrended yield is high 5's. Essentially, we are underwater today. SOFR + 275 > untrended YOC. I couldn't imagine us taking a SOFR + 600 loan.

  • Analyst 1 in RE - Comm
2d

Wow, that's insane. Is this a full 50/60 percent LTC senior loan or is this a mezz piece ?

2d
mrcheese321, what's your opinion? Comment below:

We can go up to 65-70% LTC for deals.We will do back leverage, cut a senior/mezz, A/B, etc. on the back end, but when we sign a deal we speak for the whole deal. Our structure isn't borrowers problem (think of it like a CMBS execution where a bank is underwriting a deal and will fund with their balance sheet if they have to).That is how we get to our high teens returns.

  • Developer in RE - Comm
2d

Could you explain that a bit? Sounds like you would loan out 75% LTC, say, at 8%, and then sell off the portion that's above, say, 50% LTC? And still get a portion of that return or something? How's it work exactly?

  • Analyst 1 in RE - Comm
1d

Would you mind explaining here? Interested to understand the warehouse line math as well.

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1d
NYCRE_18, what's your opinion? Comment below:

It works like this (I'm completely making up numbers for effect): let's say lender ABC originates a whole loan that's $100M at S+500. A warehouse lender (Barclays, Morgan Stanley, Goldman Sachs) looks to provide leverage to lender ABC at a 75% advance rate or $75M of your $100M position, priced at S+200. Your remaining $25M slug that lender ABC retains is earning the difference of the two spreads: ($100M *5% MINUS $75M *2%) DIVIDED By $25M = 14%. To the borrower it's S+5% money but to the lender retaining a $25M slug, it's significantly higher. Same concepts for carving out a senior/mezz, A/B note, or Loan on Loan

  • Analyst 1 in RE - Comm
1d

For the hotels that are almost complete, have the borrowers used up the full term of their construction loan plus extensions and thus are distressed in the sense that they need bridge (temporary) debt before they can refi into perm debt?

  • Associate 1 in RE - Comm
1d

Yo who is your facility lender? We see lots of S+600 deals but our facility providers fuck us and try to make us pay s+475 or something crazy 

  • Associate 1 in RE - Comm
1d

Yeah I mean that's what I'm talking about. We get quotes from lenders who either provide a LOL or A-note. Also look at facility providers for multiple deals but the 475 quote I mentioned was a LOL

I feel like we can't get any juice because senior lenders have pulled back so massively 

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  • Analyst 1 in RE - Comm
1d

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  • Analyst 1 in RE - Comm
1d

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