The Mezzanine Finance Program provides capital to NorthMarq clients for commercial and multifamily real estate projects.
The program was launched in the summer of 2006 and is managed by Jim Knutson and Steve Hufendick from NorthMarq’s office in Bloomington, MN. NorthMarq’s network of professionals in its 28 offices offers this program to their various clients.
NorthMarq has built its solid reputation and business by arranging loans for commercial real estate and multifamily assets on behalf of its clients with its correspondent lenders. NorthMarq views the Mezzanine Finance Program as a way to provide a value-added service to its clients.
Q: On what types of assets will NorthMarq offer mezzanine financing?
A: NorthMarq is an asset-based lender. Its target class is income producing, investment real estate, more specifically, office and industrial buildings, apartments, retail and self storage facilities.
Q: Are there geographic restrictions?
A: NorthMarq will consider placing equity-mezzanine capital on assets in virtually areas of the US served by its 28 offices.
Q: Does NorthMarq use its own funds?
A: Yes. NorthMarq uses its own resources to fund the Mezzanine Finance Program. NorthMarq may also sell part or all of an investment it makes to a participant.
Q: Why use mezzanine financing?
A: NorthMarq’s Mezzanine Finance Program generally provides additional capital at the time of transition in the life-cycle of an asset. A few examples would include property acquisition expenses not covered by owner equity or first mortgage debt, or to fund the expenses associated with a repositioning or turn-around of a property (leasehold improvements, leasing commissions, common area improvements), the restructuring of ownership via the repurchase of partnership interests, or the re-mixing of assets in a portfolio by providing funds for acquisition of 1031 / reverse exchange properties. These are but a few examples. More Q & A on next page
Q: What are the typical financial terms of a mezzanine loan?
A: NorthMarq will generally fund up to a 3-year term, with a floating interest rate based upon a spread over 1-Month LIBOR. The spread will depend upon many factors including but not limited to the asset type, location, condition and financial performance. Debt service can be determined on an amortizing or interest only basis.
Q: What about other economic parameters?
A: NorthMarq mezzanine loan amounts generally will span a range of $1Million to $10Million (sometimes greater). NorthMarq will generally fund a mezzanine loan such that the combined first mortgage and mezzanine debt does not exceed 85% of the value of the underlying asset (or 90% of the cost to acquire the asset in such an instance).
Q: What about collateral, reserves, guaranties, and other loan covenants?
A: Since most assets already have senior debt in place (which may prohibit a second mortgage lien), a mezzanine loan can be secured by a pledge of interest in the entity which owns the underlying asset. Reserves are generally required if the property will have insufficient cash flow to service debt until the asset is stabilized or the mezzanine loan is repaid. Guaranties of the principals are sometimes required as a backstop to ensure that the mezzanine loan will be repaid.
Q: Does NorthMarq charge fees to provide a mezzanine loan?
A: Yes. Industry standard expenses are associated with NorthMarq mezzanine loans. NorthMarq’s fee to originate a loan is typically 1% of the loan amount. Additional underwriting expenses associated with the loan are paid by the borrower and can include surveys, appraisals, property condition and environmental reports, site inspection expenses and legal fees.
Q: Does NorthMarq charge an exit fee or prepayment premium upon repayment of a mezzanine loan?
A: Yes, but NorthMarq may waive the exit fee if take-out financing is arranged by NorthMarq through one of its correspondent lenders. Prepayment premiums are generally not charged on mezzanine loans.
Q: Does NorthMarq service its loans?
A: Yes. NorthMarq is a servicer of loans for its own account and other U.S. lenders, collecting tax and insurance escrows, providing follow-up inspections, and distributing payments to appropriate parties.
NorthMarq Mezzanine Finance Program
| Structure: |
| |
Mezzanine Loan |
| Typical Range: |
| |
$1Million to $10Million |
| LTC / LTV: |
| |
Up to 90% of cost / up to 85% LTV |
| Rate: |
| |
Floating over 1-Month LIBOR |
| Debt Service: |
| |
Amortizing or Interest Only |
| Term: |
| |
Up to three (3) years |
| Collateral: |
| |
2nd mortgage / deed of trust, or pledge of ownership interest |
| Security: |
| |
Non recourse potential with standard carve-outs. Personal guaranties required in certain circumstances |
| Reserves: |
| |
Required when cash flow is insufficient to service debt |
Contact:
Jim Knutson
Senior Vice President - Director
NorthMarq Capital, Inc.
3500 American Boulevard West
Suite 500
Bloomington, MN 55431
(952) 356-0104
jknutson@northmarq.com
Steve Hufendick
Vice President – Equity Finance
NorthMarq Capital, Inc.
3500 American Boulevard West
Suite 500
Bloomington, MN 55431
(952) 837-8740
shufendick@northmarq.com |
