CREJ

March 2022 — Office & Industrial Quarterly — Page 21 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 135-210 bps over corresponding treasury • Up to 70% 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) • Older industrial product with good operating history and good occupancy • Flex industrial product, subject to location and quality • Industrial is seen as one of the most attractive asset classes for insurance companies given the perceived risk associated with other asset types • Competing on value-add 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 55%-60% with strong sponsors • 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 150-225 bps spread over corresponding SWAP • Up to 70% LTV • 1.25x Minimum DCR • 7.0% Minimum Debt Yield 5, 7, & 10 Years Typically full-term I/O, 25- 30 Years • Secondary/Tertiary Markets • Large transactions or portfolios that are tough for other lenders to pursue alone • Staggered rollover or small individual tenant exposure that will reduce CMBS required reserves • Strong B-piece buyer demand for stabilized industrial • Leasing capital reserves or cash management incorporated for large rollover events • Can be more competitive on larger one-off deals or portfolios that may be too large for other lending sources • Will compete on flex product as well, if metrics make sense for securitization BANK • Corporate Debt • Deposits • Recourse (non-recourse becoming more available on case-by-case basis) • Shorter-term fixed and floating rate loans 150-225 bps spread over corresponding benchmark • Up to 70% 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 • Clients with relationship potential • Secondary/Tertiary Markets • Very strong appetite for construction or re-position on assets with strong sponsor and good location • Floating rate programs range from L+150-L+250 • 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 available to strong sponsors at lower leverage • More flexible (open) prepayment terms • Full-term IO available sub 60% LTV and full-recourse DEBT FUND / BRIDGE LOAN • Private Capital • Institutional Capital • Non-Recourse • Shorter term bridge loans for acquisition and/or repositioning L+300-425 bps spreads • Up to 85% LTC • Going-in 1.0x DCR 1-5 Years (3+1+1) Interest Only • Value-Add Transactions • Transactions with major rollover within the next 3 years • Recapitalizations • New construction • Most lenders have a SOFR floor of 15 or 25 bps • Competing on ground up construction at higher leverage than banks are considering • Pricing depends on leverage level, property quality, Sponsor strength , and loan size • 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 90% 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 SOFR - Secured Overnight Financing Rate REIT - Real Estate Investment Trust This information is intended to illustrate someof the lendingoptions currentlyavailable.Otheroptionsmayexist.WhileEssex Financial Group strives topresent this information asaccuratelyaspossible,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 Confidential Portfolio Undisclosed $13,000,000 Bridge Loan Debt Fund 1850 Dogwood Louisville, CO $7,860,000 Permanent Loan Life Insurance Company Autumn Grove Lindon, UT $18,400,000 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 / p RinCipal (303) 843-4581 CWilliams @ essexfg . Com p eteR K eeppeR p RinCipal (303) 843-6002 peteRK @ essexfg . Com a lex R iggs p RinCipal (303) 843-4027 aRiggs @ essexfg . Com p aul d onahue V iCe p Resident (303) 843-4021 pdonahue @ essexfg . Com B laiRe B utleR V iCe p Resident (303) 843-4024 BButleR @ essexfg . Com C hRis W hite a ssistant Vp (303) 843-4583 CWhite @ essexfg . Com