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Agency lenders
Residential owners exploring refinancing options should consider agency alternatives. Properties that contain a residential
component may qualify for agency lending programs offered
through Freddie Mac, Fannie Mae, and Ginnie Mae lenders
that are authorized to underwrite agency loans. Program options vary in term, rate, leverage, and fixed/floating designation,
and are too numerous to detail here.
Debt funds, bridge lenders, and other
non-traditional alternatives
This catch-all category of lenders is populated by yield-driven
investors seeking higher returns than those offered by investing
in low-leverage, stabilized mortgages. These lenders often face
significantly lighter regulation than other lending markets,
enabling ultimate structural flexibility and creativity. Nontraditional lenders are more comfortable employing “loan-toown” strategies than their traditional lending counterparts,
and borrowers must be especially mindful of default provisions
when negotiating with high-yield lenders.
Developments with EB-5 capital structured as mezzanine
debt or preferred equity are more likely to require high-yield
capital to successfully refinance. This may come in the form
of short-term bridge financing, longer-term subordinate
capital, or a single high-leverage mortgage. Loans tend to be
shorter term and include relatively high yields and fees. Many
non-traditional lenders take an absolute-dollar perspective and
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are willing to trade off structural flexibility, interest rate, and
fees (origination fees, extension fees, exit fees) so long as the
expected dollar return is constant.
Conclusion
Developer-owners can mitigate risks and protect their property equity by applying the same diligence to refinancing as
they do to the development process. This is particularly relevant
for EB-5 developers, as they must address capital staging challenges and frequently have high-leverage projects to refinance.
Fortunately, there are unprecedented levels of liquidity in the
CRE debt and equity markets right now. EB-5 developers that
get an early start on the financing process and are thoughtful
about their loan structure ha