DMBS Portfolio Product
The most attractively priced floating-rate financing in the market for existing leased multifamily properties.
The DMBS product provides borrowers with perhaps the most attractively priced floating-rate financing in the market for existing leased multifamily properties. The product is targeted for large individual loans and medium to large portfolio transactions.
This commercial loan product incorporates many attractive features including a fixed-rate conversion option and the ability for the borrower to increase the leverage on the property via a second mortgage.
The DMBS ("Discounted Mortgage-backed Security") is a short-term security that is structured like U.S. Treasury Bills. The DMBS bears no stated interest rate, is sold at a discount and is repaid at par at maturity (i.e. the discount represents the interest that is paid over the short term of the security).
| Loan Size: | Targeted for individual loans or portfolios $50 million or greater. Smaller, quality transactions will be considered on a case-by-case basis. | ||||||||||||
| Borrowing Entities: | Carries the ability to make multiple loans to multiple single-asset borrowing entities provided the borrowing entities have the same Key Prinicipal(s). | ||||||||||||
| Pricing: | Quality, full-leveraged transactions can be priced at a floating-rate equivalent to LIBOR plus 80 to 90. | ||||||||||||
| Interest Rate Adjustement Periods: | The interest rate adjusts upon the maturity of the underlying short-term DMBS (i.e. every 90 days). | ||||||||||||
| Pool Diversity: | Geographic diversity for portfolio transactions is not required. | ||||||||||||
| Cross Collateral: | Cross-collateralization for portfolio transactions is not required. | ||||||||||||
| Location: | Anywhere in the United States including secondary markets. | ||||||||||||
| Property Quality: | A wide range is permitted. Underwriting will be adjusted for perceived risk due to age or obsolescence. Steelhead Capital believes that virtually all transactions can be quoted with proper risk adjustments. | ||||||||||||
| Loan Term: | 5, 7 or 10 year terms. | ||||||||||||
| Fixed Rate Conversion Option: | Borrower has the option to convert to a fixed-rate loan throughout the term of the loan at no additional cost, provided the loan meets the minimum fixed-rate DSCR associated with the Risk Tier and all legal documentation requirements.
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| Incremental Loan Dollars: | Incremental loan dollars are available in the form of a Supplemental loan (second mortgage) for qualifying properties. | ||||||||||||
| Amortization: | 30 year amortization is possible on most properties (25 year otherwise). An interest-only option is available for certain lower-leverage transactions (Tier 3 and 4). | ||||||||||||
| Interest Rate Cap: | An interest rate cap must be purchased from an approved counterparty. | ||||||||||||
| Monthly Payments: | The monthly payments will include the following components:
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| Risk-Based Pricing: | This product also utilizes a three-tier risk-based pricing model incorporating the following loan-to-value and debt service coverage limitations. A Variable Underwriting Rate is used in determining the qualifying loan amount pursuant to the debt service coverage test.
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| Loan Underwriting: | Maximum loan amount is based upon the lesser of a) 75% LTV, b) the Minimum DSC at the Variable Underwriting Rate (e.g. 1.0 for Tier 2 loans), or c) 103% of the proceeds produced by a fixed rate loan with the same term at Tier Plus/plus pricing. | ||||||||||||
| Origination Fees: | A loan origination fee is charged subject to the established schedule of Minimum Origination Fees. | ||||||||||||
| Prepayment: | Loans may be prepaid on any DMBS rollover date subject to payment of a Fee Maintenance payment. The Fee Maintenance Period is through the end of the 5th year for a 5 or 7 year term or through the end of the 7th year for a 10 year term. No Fee Maintenance is due for a conversion or for prepayments that occur 3 months prior to the end of the loan term. | ||||||||||||
| Assumability: | DUS loans are assumable repeatedly based upon a satisfactory review of the new Borrower and payment of a one percent fee. | ||||||||||||
| Liability: | The loans are non-recourse to the Borrower and its Key Principals subject to certain exceptions, which are industry standard. | ||||||||||||
| Occupancy Requirements: | The property must be at least 85% physically occupied at closing and for the 90 days prior to closing. | ||||||||||||
| Repair Escrow: | The Borrower will be required to escrow 125% of the estimated cost of all repairs identified by the Engineering Report unless the repairs are completed prior to closing. | ||||||||||||
| Replacement Reserves: | The loan will be underwritten with replacement reserves as an expense line item (usually $150 to $250 per unit per year depending on property condition). These reserves are typically funded and drawn by the Borrower for property replacement items. | ||||||||||||
| Environmental Report: | An environmental engineer must inspect the property to determine that no unacceptable hazardous substances are present. | ||||||||||||
| Supplemental Loans: | The Borrower is permitted to request 2 secondary financings from the DUS Lender over the life of the loan. One additional supplemental loan may be available to a new Borrower in connection with an assumption. |
Our success is measured by our clients' success, and our mission is to be your source for the most appropriate - and advantageous - financing solution that helps you achieve your goals.