High Yield Debt Strategies...
I'm in the process of interviewing around various debt shops and they all seem to have a high yield bucket that tries to get double digit returns.
How are folks getting to a double digit return in today's extremely low yield environment? It's hard to charge a borrower a 10% interest rate when the properties are only spitting off a 3-5% return when stabilized.
Are people just throwing money at extremely risky deals like developments and super value add renovation deals? Perhaps funneling into a retail strategy?
How are people doing it?
Leverage. Debt funds use various facilities to leverage deals.
I'd guess with subordinate debt or manufacturing sub debt by taking down a whole loan and selling a senior note. Also leveraging the loans with a warehouse facility.
The two people above are correct, I'll also add the lender fees typically are 0.50-2.00% of the loan amount
Mezzanine loans are about L + 10%.
Et quaerat rerum non commodi eos. Asperiores iste assumenda aut architecto et animi modi. Incidunt voluptas ipsa temporibus molestiae quia laborum. Et eos hic ea suscipit consequatur eum. Dolor vero assumenda sed vitae quibusdam omnis quia.
Voluptatem doloremque harum possimus dolor. Voluptate itaque dolorum voluptatem odit sit. Et et ipsa quo ut.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...