MEZZANINE DEBT/EQUITY
We actively seek preferred equity, mezzanine debt and first mortgage opportunities in quality commercial properties in growth markets throughout the country. For many years we have specialized in providing customized solutions to properties being acquired, refinanced and recapitalized. As billions of dollars of commercial mortgage loans mature over the next five years the need for Rainier's sophisticated financing may be the solution you need. To learn more, please contact Tim Nichols at 214-234-8210 or tnichols@rainiercapital.com.
RECENT FUNDINGS
SELECTED FUNDING DESCRIPTIONS
Gap Financing
Owner of performing office property has a matured $14 million 70% LTV first mortgage under extension for 12 months while he shops replacement financing. Although the property has performed well, new lenders are quoting 60% LTV with substantial pre-funded TI/LC reserves. All other financing options available to the Owner require personal guarantees. Rainier provides $3 million of new capital to fund the gap and the required TI/LC reserves (escrowed) on a non-recourse basis, with a current interest only pay rate of 10%. The Owner solves his refinancing problem with only a minimal increase in his combined debt service constant from 6.7% to 7.1%.
DPO Financing
Owner of apartment complex with a decreased but stable NOI substantially overpaid for the property in 2005 and is currently subject to a maturity default. The current loan balance represents a 90 - 100% LTV based on today’s income and valuations. The Owner has the ability to acquire the loan at a substantial discount but must move quickly. Owner borrows 75% of the DPO price from Rainier, funds 25% himself and intends to refinance Rainier’s position within 1 year. Although Rainier’s rate is much higher than the original loan interest rate, the Owner’s annual debt service requirement actually declined due to the discount. Upon refinancing of Rainier’s loan, the Owner will enjoy a substantial cash yield improvement even on his increased capital investment. Rainier made its loan on a non-recourse basis and allowed the Owner not only to save, but to improve his investment results.
Distressed Note Purchase and Property Renovation
A real estate investment management company sought to purchase the note on a Class C multi-family development in Texas for $2.8MM, which represented a 55% discount from the face value of $6.2MM. Rainier provided an initial funding of $2.25MM and the investor contributed $800k to acquire the note, pay closing costs, and fund reserves. After the note acquisition, additional sponsor equity of $900k and an additional Rainier funding of $1.25MM was used to further capitalize the renovation budget and operational reserves. Rainier’s total investment amount was $3.5MM, which allowed the investor to secure the note, foreclose on the project, and then rehabilitate and reposition the asset for sale. In a time of tight lending, Rainier was able to provide capital for the investor to take advantage of the opportunity to purchase a distressed asset and realize very rapid gains upon repositioning and reversion.
Cash-out Refinance
An owner of two medical office buildings who was looking to improve his liquidity position closed on a $3MM preferred equity investment from Rainier. The property had two cross-collateralized first-lien mortgages senior to Rainier’s 5-year preferred equity investment. The term of the deal was interest only for the first two years, with a cash flow sweep beginning in year 3 that was used to reduce the outstanding equity amount. This cash out financing allowed the owner to retire an existing note that was unrelated to the medical office buildings, as well as distribute the remaining equity to his partners in the deal -- all while allowing the owner to market the properties for sale. The Class A buildings were fully leased and in an excellent sub-market. Rainier’s financing structure allowed the owner to unlock the value in his properties as he continued toward his ultimate goal of selling the assets.
Unlock Capital for Acquisition Opportunities
An experienced multifamily investor and asset manager with a current portfolio of 10 properties was looking to expand its holdings in Texas and California. The borrower owned and managed over 1,900 units, 75% of which were HUD/HAP; and was pursuing similar acquisitions in a highly competitive market. Rainier structured a $3.5MM preferred equity investment with a 5 year term collateralized with 49% limited partnership interests in the borrower's portfolio. Rainier provided an initial funding of $1.5MM to target a specific acquisition, with subsequent funding of $2MM available for similar acquisitions. Should the properties be performing at an agreed upon level, the borrower had the right to dispose of or refinance the assets without Rainier approval subject to minimum release prices. Rainier’s structure maximized the borrower’s flexibility and allowed it to quickly close on new opportunities.