EB5 Investors Magazine - Page 30

Continued from page 27 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 28 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