Sierra Capital offers a High-Leverage option for conventional, fixed-rate first mortgages. Borrowers who select this option will be able to obtain financing for up to 85% loan to value and/or acquisition price. This option is intended to streamline the process and reduce the cost of obtaining higher leverage financing by eliminating the need to pursue additional proceeds or mezzanine financing from third-party sources. Sierra Capital underwrites the loan, taking into account it will be originated with two notes and two mortgages.
Guidelines during Fixed-Rate Period
Eligible Loans:
Conventional
Eligible Properties
Acquisition, refinance or moderate rehabilitation financing of garden, mid-rise and high-rise apartment buildings
Eligible Borrowers
Single asset entity
Net worth and liquidity commensurate with the requested financing amount as determined by Sierra Capital
Combined Loan Amount:
$5 million minimum
Maximum LTV:
85% combined loan to value:
75% for first mortgage
10% for second mortgage
Minimum Combined DCR:
1.10x; will consider below 1.10x based on the exit scenario and strength of the borrower, property, and market
Interest Rate:
Interest rates for both mortgages are competitively priced utilizing risk based pricing and are locked simultaneously.
Term:
7 to 10 years (may add 1-year extension period with fixed-to-float option)
Each first and second mortgage will have equal terms running concurrently
Amortization:
Up to 30-year amortization schedule on each first and second mortgage. (Interest Only considered on a case-by-case basis)
Prepayment Provisions:
Each mortgage subject to applicable yield maintenance premium. Two options for length of yield maintenance on the second mortgage:
Coterminous with the first mortgage
5-year yield maintenance period, 1% thereafter
Subordinate Financing/Supplemental Mortgages:
No additional debt allowed while second mortgage is outstanding
Recourse Requirements:
Nonrecourse except for standard carve-out provisions
Minimum Occupancy:
90% for 90 days prior to loan closing
Third-Party Reports:
Appraisal, Environmental Report and Engineering Reports are required.
In addition, radon testing is required for all properties. Wood destroying organism/termite reports shall be required for all wood-frame properties that are not currently the subject of an infestation warranty. A Probable Maximum Loss “PML” report is required for pre-1997 properties located in earthquake zones 3 or 4.
Replacement Reserves:
Required
Real Estate Tax Escrow:
Required
Property Insurance Escrow:
Required
Transfers/Assumptions:
Permitted. Subject to Investor approval.
Application Fee:
Greater of $2,000 or 0.1% of the first mortgage amount payable.
Additional $5,000 second mortgage transaction fee.
