CREJ

March 2021 — Office & Industrial Quarterly — Page 27 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 2.25%-3.25% • Up to 65% LTV • 1.35x Minimum DCR 5-30 Years 20-30 Years • Established industrial corridors or properties with superior access, last-mile product very popular • Vintage and new product, will compete aggressively for new construction • Single-tenant with long-term lease (credit preferred) or multi-tenant with staggered rollover • Major metro areas & secondary markets (being more selective on secondary markets) • Industrial is seen as one of the most attractive asset classes for insurance companies given the current risk environment associated with office, retail, and hospitality assets • Competing on value-light lease up deals with floating rate programs and hybrid bridge programs • Newly constructed or well-maintained product is in high demand with additional interest for construction financing from select life companies • Full-term interest only to be considered for 50% - 55% with strong sponsors • Sensitivity around loan basis on older product, especially at higher leverage • Lender sensitivity to deals with a large cash-out component, especially for newly constructed assets • Properties with CBD or marijuana tenants are still challenging, despite the continued changes in legislation CONDUIT (CMBS) • Sales of mortgage- backed securities through public markets • Non-Recourse • Longer-term fixed rate loan 2.75%-4.00% • Up to 70% LTV • 1.25x Minimum DCR • 8.0% Minimum Debt Yield 5, 7, & 10 Years 25-30 Years • Secondary/Tertiary Markets • Large transactions or portfolios that are tough for other lenders to pursue alone • Strong B-piece buyer demand for stabilized industrial • Leasing capital reserves or cash management incorporated for large rollover events • Will consider full-term I/O on select deals at LTVs less than 60% • Can be more competitive on larger one-off deals or portfolios that may be too large for other lending sources BANK • Corporate Debt • Deposits • Recourse (non-recourse becoming more available on case- by-case basis) • Shorter-term fixed and floating rate loans 3.00% - 4.00% • Up to 65% LTV • 1.30x Minimum DCR Up to 10 Years Fixed, Typical Max Term is 5-7 Years 25-30 Years • All industrial assets • Value-add with guaranties • Secondary/Tertiary Markets • Very strong appetite for construction or re-position on assets with strong sponsor and good location • 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 • Primarily recourse loans, with 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+275-450 bps spreads • Up to 75% LTC • Going-in 1.0x DCR 1-5 Years (3+1+1) Interest Only • Value-Add Transactions • Recapitalizations • New construction • Most lenders have a LIBOR floor of 25 or 50 bps • Competing on ground up construction at higher leverage than banks are considering • Pricing depends on leverage level, property quality, and Sponsor strength • Needs to have strong business plan and attractive location MEZZANINE/ PREFERRED EQUITY • Private Capital • Institutional Capital • Junior financing secured by a pledge of, or participation in ownership interest Mezzanine 8%-12% • Up to 85% LTC • 1.10x DCR 2-10 Years Interest Only (in most cases) • All industrial 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 someof the lendingoptions currentlyavailable.Otheroptionsmayexist.WhileEssex FinancialGroup strives topresent this informationasaccuratelyaspossible,noguarantee ismadeas to theaccuracyof thedatapresented,or theavailabilityof the termsat timeofapplication.Ratesand termsare subject to change.Please contactoneofourmortgagebankers forup todate rateand 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 Industrial Properties Quarterly - Financing Sources Matrix Essex Financial Group - Recent Industrial Transactions The Denver Shops Denver, CO $39,400,000 Permanent Loan Life Insurance Company 9575 E 40th Ave Denver, CO $20,068,000 Construction Loan Life Insurance Company Dry Creek Business Park Centennial, CO $24,000,000 Permanent Loan Life Insurance Company 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