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Financing Strategies for

Today’s Market

Tom Detienne David WoidaInvestors Community Bank NorthMarq Capital860 N. Rapids Road 250 N. Sunny Slope Rd., # 300Manitowoc, WI Brookfield, WI (920) 686-5626 (262) 787-4997tdetienne@investorscommunitybank.com dwoida@northmarq.com

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Agenda

• Industry Summary• Rates and Options• Key Differences between lenders• Underwriting 201• Examples• Q & A

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Industry Summary

• Expanded options for CRE finance– Conventional Banks / portfolio lenders– Conduit Lenders (CMBS)– Insurance Companies– Government-Sponsored Agencies (Fannie Mae

and Freddie Mac)– Mezzanine– Equity

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Commercial Mortgages

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Holders of Commercial and Multifamily Mortgage Loans

1990 2006 Q1

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Yield Curve

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Capitalization Rates

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U.S. CMBS Issuance and Interest Rates

Source: Commercial Mortgage Alert and Federal Reserve

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CMBS Rates

Property Type Leverage DSCR Spread (1) Rate (2)

Grocery Anchored Retail 85% LTV 1.20X 110 5.85%

Strong Anchored Retail 80% LTV 1.15X 100 5.75%

Weak Anchored Retail 80% LTV 1.30X 125 6.00%

Un-Anchored Retail 80% LTV 1.30X 135 6.10%

High End Specialty Retail 80% LTV 1.30X 110 5.85%

Multi-Tenant Office (Class A) 75% LTV 1.45X 118 5.93%

Multi-Tenant Office (Class B) 75% LTV 1.50X 130 6.05%

Medical Office 78% LTV 1.55X 120 5.95%

Medical Office (Single Tenant) 75% LTV 1.35X 125 6.00%

Multi-Tenant Bulk Warehouse 80% LTV 1.45X 100 5.75%

Single Tenant Bulk Warehouse (non credit) 75% LTV 1.45X 125 6.00%

Multi-Family (Class A) 80% LTV 1.25X 105 5.80%

1. Insurance company rates are typically 10-20 basis points higher

2. Assumes a current US Treasury rate of 4.75%

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Percent of CMBS Loans that are Interest Only or Partial Interest Only

8% 6%11% 9%

13% 14% 11%17%

17%14%

12%23%

26% 27%29%

33%

0%

10%

20%

30%

40%

50%

60%

2003Q1 2003Q2 2003Q3 2003Q4 2004Q1 2004Q2 2004Q3 2004Q4

Issuance V

olu

me (

%)

.

Full IO Loans Partial IO Loans

24%

19%

23%

32%

39%41% 40%

50%

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Key Differences Between Lenders

Banks – Portfolio Lender, flexible terms, good $’s, shorter terms, typically recourse

Conduits – Securitized Lender, little flexibility, aggressive terms

GSE’s (Freddie & Fannie) – Could be either portfolio or securitized, flexible terms, attractive rates

Life Companies – Portfolio Lender, very flexible, conservative terms

Private Money – Portfolio Lender, flexible and attractive terms, very selective on deals

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Lender Comparison

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Underwriting 201

• Cash flow (Debt Service Coverage)• Leverage (Loan-to-value)• Lease analysis / Underlying asset• Interest only periods (or full term)• Reserves / Escrows• Costs of issuance• Personal guarantees• Prepayment penalties (Defeasance)• Assumptions

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EXAMPLES

• New Construction• Stabilized retail, office, industrial & hotel• Multi-family