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%.
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