Nonrecourse financing for commercial
Are there lenders out there who provide nonrecourse financing for value-add Class B/C product, excluding multifamily, so no GSE's. Most deals I've been a part of we secured full or partial recourse bank debt at 70-80% LTC/LTV. I believe lifecos and the like are providing nonrecourse debt but more class A stabilized product with credit tenants. Are firms getting loans from debt funds or just using much less leverage on traditional bank loans to get nonrecourse?
Debt funds are the answer, but I don’t know many that are hitting 80% LTC in this market. My firm used to be 70-75% LTC and have now gone down to 60-70% because of all the repricing that is going on
Interesting - how do the terms compare to a similar full recourse bank loan? Do these funds do typical amortizing term loans (3/5/7/10 yr)? Are amortization periods similar (20/25 yr)? I'm assuming there's some sort of premium on the interest rate and origination fees? Similar covenants? Appreciate the insight.
I'm at a bank and we wouldn't even consider non-recourse Class B/C non-MF value add unless it was really strong existing client/sponsor. If we did, it would be max 55%, maybe 60% LTC. For multifamily value-add, we could do 60-65% LTC non-recourse. Recourse would be highly preferred, though. If maxing proceeds on a NR basis is your focus, then debt funds would be the way to go, as mentioned above (I can't speak on debt fund terms but pricing would for sure be higher).
Bigger picture, not all, but many banks these days are trying to reduce office/retail exposure, if anything. Furthermore, a lot of banks are on the sidelines for CRE lending right now; maybe not totally shut down, but being extremely limited/selective. Each day rates go up it makes deals harder to pencil....sizing a deal assuming 7%/25-yr for debt service makes it really hard to push leverage.
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