Quick question - when sizing a permanent loan what kind of spread do you typically look for between the perm loan and exit cap? 50-100 above current cap rate trades and then a prediction where they will go for the exit?
Thanks
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what kind of permanent loan are you looking for?
Why not just look at LTV, DSCR and sponsor/entity credit/track record? More details please
Ive never heard of a lender looking at it like this
LTV based on appraisal as long as it meets minimum DSCR and/or debt yield
This thought process makes no logical sense to me. Who would look at such a "metric"?
It depends on how far out you are forecasting. I am assuming you are doing a 10-year DCF because the loan sizing is tight and you need to support an exit strategy to repay the balloon at maturity? If this is the case, just back into the exit cap with year 11 NOI. Nobody really knows what cap rates will be in 10 years.
I have never heard of this spread either ...
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You all are criticizing his question but saying he should size it using LTV. You can't get the V in LTV without a cap rate. I think what he is asking is do cap rates that lenders use to determine their LTV caps for sizing a new loan differ from the cap rates used when a buyer values a property. The answer is yes, lenders are more conservative. I would call a bank.
We use minimum proceeds sized based on dscr, debt yield and LTV covenants for permanent loans
great thanks - sorry guys if my question was unclear as I wrote it in a rush
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