CREJ

March 2021 — Office & Industrial Quarterly — Page 11 www.crej.com TYPE OF CAPITAL SOURCE OF CAPITAL EXPLANATION RATES/SPREADS LTV/COVERAGE TERM AMORTIZATION FOCUS TRENDS LIFE INSURANCE COMPANY • Insurance premiums • Annuity and GIC sales • Non-Recourse • Longer-term fixed rate loan 2.75%-3.75% • Up to 60% LTV • 1.50x Minimum DCR 5-30 Years 20-30 Years • Downtown, urban locations or popular suburban office parks • Multi-tenant, traditional floor plates • Top tier tenants with good credit • Major metros & secondary markets (being more selective on secondary markets) •Diversified rent rolls with evenly distributed rollover • Many of the life insurance companies have become more selective on office properties but that is starting to ease up • Lenders are digging further into the rent roll to understand each tenant business models and credit • Higher push for properties with credit tenants and term • Most competitive at lower to moderate leverage (50% - 55%) with strong sponsors • Typically targeting higher quality assets with better credit in the rent roll or assets with a staggered rent roll • Starting to target high-quality suburban office more due to impacts of COVID-19 on more urban areas • Interest reserves implemented on deal-by-deal basis CONDUIT (CMBS) • Sales of mortgage- backed securities through public markets • Non-Recourse • Longer-term fixed rate loan 3.25%-4.25% • Up to 65% LTV • 1.40x Minimum DCR • 9.0% Minimum Debt Yield 5, 7, & 10 Years 25-30 Years • Downtown office • Suburban office • Single-tenant with structure • Secondary/Tertiary Markets • Looking at office assets but being more selective with effects of COVID-19 •Higher emphasis on tenants' credit or loan structure around rollover • Interest reserve on a case-by-case basis; loans greater than 60% LTV will likely have a debt service reserve • Targeting acquisition or cash-neutral refinances in the current environment • Will consider full-term I/O on select office deals at LTVs of 55% or less BANK • Corporate Debt • Deposits • Recourse (non-recourse becoming more available) • Shorter-term fixed and floating rate loans 3.25% - 4.25% • Up to 65% LTV • 1.40x Minimum DCR • 9.5% Minimum Debt Yield Up to 10 Years Fixed, Typical Max Term is 5-7 Years 25-30 Years • All office assets • Value-add with guaranties • Secondary/Tertiary Markets • Being more selective on asset quality given the current environment • Many banks focusing primarily on existing client relationships • Most competitive for Sponsors with established banking relationships and strong borrower history that are willing to accept recourse • Establishing a deposit relationship is becoming a requirement • Typically recourse loans, but non-recourse becoming more available to strong sponsors at lower leverage • More flexible (open) prepayment terms DEBT FUND / BRIDGE LOAN • Private Capital • Institutional Capital • Non-Recourse • Shorter term bridge loans for acquisition and/or repositioning L+375-550 bps spreads • Up to 75% LTC • Going-in 1.0x DCR 1-5 Years (3+1+1) Interest Only • Value-Add Transactions • Recapitalizations • Most lenders have a LIBOR floor of 25 or 50 bps • Being more selective on asset quality given the current environment • Pricing depends on leverage level, property quality, and Sponsor strength • Needs to have strong value-add business plan and story in place • Limited interest for non-cash flowing assets MEZZANINE/ PREFERRED EQUITY • Private Capital • Institutional Capital • Junior financing secured by a pledge of, or participation in ownership interest Mezzanine 8%-12% • Up to 80% LTC • 1.10x DCR 2-10 Years Interest Only (in most cases) • All office assets • Value-Add Transactions • Recapitalizations • Preferred equity offers higher funding than mezzanine, but at a higher cost • Minimum investment is typically $5MM but can start as low as $1MM when paired with senior position LIBOR - London Interbank Offered Rate REIT - Real Estate Investment Trust This information is intended to illustrate some of the lending options currently available. Other options may exist. While Essex Financial Group strives to present this information as accurately as possible, no guarantee is made as to the accuracy of the data presented, or the availability of the terms at time of application. Rates and terms are subject to change. Please contact on of our mortgage bankers for up to date rate and term information. Essex Financial Group | 1401 17th Street, Suite 700 | Denver, CO 80202 | www.essexfg.com DCR - Debt Coverage Ratio DUS - Delegated Underwriter Servicer LTV - Loan to Value Ratio LTC - Loan to Cost Ratio Office Properties Quarterly - Financing Sources Matrix Essex Financial Group - Recent Office Transactions Canyon Point II Golden, CO $3,400,000 Permanent Loan Life Insurance Company Boulevard 25 Denver, CO $5,800,000 Permanent Loan Life Insurance Company Medici Office Portfolio Aurora, CO $18,500,000 Permanent Loan CMBS J EFF R IGGS F OUNDER AND C HAIRMAN (303) 843-0440 JRIGGS @ ESSEXFG . COM C OOPER W ILLIAMS P RESIDENT (303) 843-4581 CWILLIAMS @ ESSEXFG . COM P ETER K EEPPER M ANAGING P RINCIPAL (303) 843-6002 PETERK @ ESSEXFG . COM M IKE J EFFRIES P RINCIPAL (303) 843-9220 MJEFFRIES @ ESSEXFG . COM A LEX R IGGS VP OF L OAN P RODUCTION (303) 843-4027 ARIGGS @ ESSEXFG . COM P AUL D ONAHUE A SSISTANT VP (303) 843-4021 PDONAHUE @ ESSEXFG . COM J ARED W IEDMEYER A SSISTANT VP (303) 843-4022 JWIEDMEYER @ ESSEXFG . COM B LAIRE B UTLER A SSISTANT VP (303) 843-4024 BBUTLER @ ESSEXFG . COM