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Real Estate Bridge Lending Market
3. Lending Market Segments
There are various real estate lending market segments in the U.S that are distinct based on the mortgage size, yield and industry participants. Some market segments have higher transaction volumes and a greater number of competitors which can reduce pricing inefficiencies and investment opportunities. Private lending opportunities over USD $20 million tend to attract many larger Wall Street participants and the competition for these mortgages can be fierce reducing inefficiencies. Larger private lending firms gravitate to larger deal size since the amount of time and effort involved in underwriting a USD $30 million mortgage is similar to the efforts required to underwrite a USD $ 10 million mortgage. This market segment of USD $20+ million mortgage size is generally widely syndicated with non-levered yields in the 6-7% range.
USHIF is focused in the Lower Middle-Market segment which is fragmented and often inefficient, resulting in an attractive risk return profile. Similar to Canada, there does not appear to be a dominant national private lender in the U.S. lower middle-market segment defined as mortgages in the USD $3-15 million range. Unlevered yields generated in this range are approximately 8-10% with loan to values below 75%. Yields on risker mortgages for assets such as land, development and ground up construction are higher but are not part of the USHIF investment mandate.
The lower market comprising of loans of less than USD $3 million tend to have more competitors such as hard money lenders and high net worth individuals. Mortgages in this space are dominated by risker land, construction and home flipper type transactions that can produce higher yields but with commensurate risks.
Needs for Capital
Why do borrowers use more expensive private lenders?
Commercial mortgage bridge loans provide the capital that a real estate investor needs in order to close on opportunities quickly, complete necessary renovations (if needed), and either sell or refinance into permanent financing.
A bridge loan differs from conventional construction loans as banks typically source construction loans and bridge loan usually comes from private money investment funds and private lenders.
Reasons a borrower might want to consider a private commercial bridge loan:
The property has unsatisfactory occupancy rates. The borrower intends to increase occupancy and stabilize the building’s income in order to meet the more stringent lending requirements provided by long term conventional bank lenders.
Timing issues - The borrower needs to act quickly and often large conventional lenders struggle to provide fast execution.
The borrower has poor credit, insufficient equity or collateral, does not have an acceptable debt coverage ratio, is new to the real estate business, (or all of the above), and either way not an acceptable risk to a conventional lender. Borrowers in this category often require a bridge loan from a “hard money lender” who tend to be more focused on the asset.
Commercial bridge loans can be used for the purchase or refinance of office buildings, hotels, retail property, multifamily housing including apartment complexes, and even for raw land that will be developed for commercial purposes.
Real Estate Bridge Lending Market
1. Market Overview
Commercial bridge loans (also known as commercial mortgage bridge loans) are short-term commercial real estate loans that are used when traditional bank long term financing is not an option. They typically feature quick closings and flexible terms that will accommodate special situations and these features are not easily found within the conventional bank lending environment. Bridge loans typically have repayment terms of between 6 months and 2 years.
In the U.S. conventional lenders such as Bank of America, Wells Fargo, Fannie Mae and HUD often provide higher loan proceeds at lower interest rates than bridge loans, but do not offer flexible pre-payment terms, can take several months to obtain, and often do not accommodate unique situations. Conventional lenders can impose significant financial penalties for borrowers looking to exit a mortgage early and are therefore willing to pay more for a bridge to ensure avoiding a costly penalty.
Needs for CapitalExamples of CurrentBridge Loans
Please request a copy of the USHIF Trust or USHIF LP offering memorandums for example of existing investments.
UltraShort High Income Fund
Market Overview
USHIF is diversified across core real estate sectors, with primary focus on multi-family and office properties.
Borrowers at different stages of ownership cycle (dispositions, acquisition, and special situations) add additionallevels of diversification.
Balance of Investment Assets
Average Investment Asset Size
Weighted Average Portfolio Yield (Non-REO)
Number of Active Mortgage Assets
Number of Real Estate Owned (REO) Assets
Mortgage Asset Duration - Months
Average Remaining Term
Average Actual Months Held
Weighted Average LTV (Non-REO)
% Of Principal Below 51% LTV
% Of Principal Between 51%-60% LTV
% Of Principal Between 61%-70% LTV
% Of Principal Between 71%-75% LTV
% Of Principal Greater Than 75% LTV
Total
Current Portfolio Characteristics
on
Multi-Family $204,999,384 49%
$89.534,081 21%
Retail $43,566,799 11%
Industrial $40,097,593 10%
Other $24,097,593 6%
Single Family Residential $14,150,740 3%
$ 416,818,702
$ 5,413,230
8.36%
73
4
7
13
66%
4%
19%
40%
31%
6%
100%
UltraShort High Income Fund
UltraShort High Income Fund
% Of Mortgage Assets By State
CA: 25% WA: 3%
OR: 12% MN: 3%
FL: 12% GA: 2%
UT: 9% CO: 2%
TX: 8% MS: 1% NV: 6% KS: 1%
VA: 6% TN: 1% AZ: 3% CT: 1%
NC: 3% MA: 1% OTHER: 1%
USHIF LP INVESTMENT PLAN
CANADIAN INVESTORSREGISTERED PENSION PLANS
$CAD - $USD
Diamond Head Asset Management Ltd.(General Partner)
Co-Investments on U.S. Properties with U.S. Private
REIT Fund
UltraShort High Income Fund (USHIF LP)(Limited Partnership)
CanadaU.S Distributions
Monthly Distributions
InterestPayments
USD $400+ MillionPrivate Mortgage Real Estate
Investment Trust
Senior Secured FirstMortgages
USHIF TRUST INVESTMENT PLAN
CANADIAN INVESTORS$CAD - $USD
Steepe & Co. Ltd. (Investment Fund Manager)
USD $400+ MillionPrivate Mortgage Real Estate
Investment Trust
Senior Secured FirstMortgages
Co-Investments on U.S. Properties with U.S. Private
REIT Fund
UltraShort High Income Fund (USHIF Trust)
CanadaU.S Distributions
Monthly Distributions
InterestPayments
Real Estate Bridge Lending Market
3. Lending Market Segments
There are various real estate lending market segments in the U.S that are distinct based on the mortgage size, yield and industry participants. Some market segments have higher transaction volumes and a greater number of competitors which can reduce pricing inefficiencies and investment opportunities. Private lending opportunities over USD $20 million tend to attract many larger Wall Street participants and the competition for these mortgages can be fierce reducing inefficiencies. Larger private lending firms gravitate to larger deal size since the amount of time and effort involved in underwriting a USD $30 million mortgage is similar to the efforts required to underwrite a USD $ 10 million mortgage. This market segment of USD $20+ million mortgage size is generally widely syndicated with non-levered yields in the 6-7% range.
USHIF is focused in the Lower Middle-Market segment which is fragmented and often inefficient, resulting in an attractive risk return profile. Similar to Canada, there does not appear to be a dominant national private lender in the U.S. lower middle-market segment defined as mortgages in the USD $3-15 million range. Unlevered yields generated in this range are approximately 8-10% with loan to values below 75%. Yields on risker mortgages for assets such as land, development and ground up construction are higher but are not part of the USHIF investment mandate.
The lower market comprising of loans of less than USD $3 million tend to have more competitors such as hard money lenders and high net worth individuals. Mortgages in this space are dominated by risker land, construction and home flipper type transactions that can produce higher yields but with commensurate risks.
Needs for Capital
Commercial mortgage bridge loans provide the capital that a real estate investor needs in order to close on opportunities quickly, complete necessary renovations (if needed), and either sell or refinance into permanent financing.
A bridge loan differs from conventional construction loans as banks typically source construction loans and bridge loan usually comes from private money investment funds and private lenders.
Reasons a borrower might want to consider a private commercial bridge loan:
The property has unsatisfactory occupancy rates. The borrower intends to increase occupancy and stabilize the building’s income in order to meet the more stringent lending requirements provided by long term conventional bank lenders.
Timing issues - The borrower needs to act quickly and often large conventional lenders struggle to provide fast execution.
The borrower has poor credit, insufficient equity or collateral, does not have an acceptable debt coverage ratio, is new to the real estate business, (or all of the above), and either way not an acceptable risk to a conventional lender. Borrowers in this category often require a bridge loan from a “hard money lender” who tend to be more focused on the asset.
Commercial bridge loans can be used for the purchase or refinance of office buildings, hotels, retail property, multifamily housing including apartment complexes, and even for raw land that will be developed for commercial purposes.
Why do borrowers use more expensive private lenders?
Real Estate Bridge Lending Market
1. Market Overview
Commercial bridge loans (also known as commercial mortgage bridge loans) are short-term commercial real estate loans that are used when traditional bank long term financing is not an option. They typically feature quick closings and flexible terms that will accommodate special situations and these features are not easily found within the conventional bank lending environment. Bridge loans typically have repayment terms of between 6 months and 2 years.
In the U.S. conventional lenders such as Bank of America, Wells Fargo, Fannie Mae and HUD often provide higher loan proceeds at lower interest rates than bridge loans, but do not offer flexible pre-payment terms, can take several months to obtain, and often do not accommodate unique situations. Conventional lenders can impose significant financial penalties for borrowers looking to exit a mortgage early and are therefore willing to pay more for a bridge to ensure avoiding a costly penalty.
Needs for CapitalExamples of CurrentBridge Loans
Please request a copy of the USHIF Trust or USHIF LP offering memorandums for example of existing investments.
UltraShort High Income Fund
Market Overview
USHIF is diversified across core real estate sectors, with primary focus on multi-family and office properties.
Borrowers at different stages of ownership cycle (dispositions, acquisition, and special situations) add additionallevels of diversification.
Balance of Investment Assets
Average Investment Asset Size
Weighted Average Portfolio Yield (Non-REO)
Number of Active Mortgage Assets
Number of Real Estate Owned (REO) Assets
Mortgage Asset Duration - Months
Average Remaining Term
Average Actual Months Held
Weighted Average LTV (Non-REO)
% Of Principal Below 51% LTV
% Of Principal Between 51%-60% LTV
% Of Principal Between 61%-70% LTV
% Of Principal Between 71%-75% LTV
% Of Principal Greater Than 75% LTV
Total
Current Portfolio Characteristics
on
Multi-Family $204,999,384 49%
$89.534,081 21%
Retail $43,566,799 11%
Industrial $40,097,593 10%
Other $24,097,593 6%
Single Family Residential $14,150,740 3%
$ 416,818,702
$ 5,413,230
8.36%
73
4
7
13
66%
4%
19%
40%
31%
6%
100%
UltraShort High Income Fund
UltraShort High Income Fund
% Of Mortgage Assets By State
CA: 25% WA: 3%
OR: 12% MN: 3%
FL: 12% GA: 2%
UT: 9% CO: 2%
TX: 8% MS: 1% NV: 6% KS: 1%
VA: 6% TN: 1% AZ: 3% CT: 1%
NC: 3% MA: 1% OTHER: 1%
USHIF LP INVESTMENT PLAN
CANADIAN INVESTORSREGISTERED PENSION PLANS
$CAD - $USD
Diamond Head Asset Management Ltd.(General Partner)
Co-Investments on U.S. Properties with U.S. Private
REIT Fund
UltraShort High Income Fund (USHIF LP)(Limited Partnership)
CanadaU.S Distributions
Monthly Distributions
InterestPayments
USD $400+ MillionPrivate Mortgage Real Estate
Investment Trust
Senior Secured FirstMortgages
USHIF TRUST INVESTMENT PLAN
CANADIAN INVESTORS$CAD - $USD
Steepe & Co. Ltd. (Investment Fund Manager)
USD $400+ MillionPrivate Mortgage Real Estate
Investment Trust
Senior Secured FirstMortgages
Co-Investments on U.S. Properties with U.S. Private
REIT Fund
UltraShort High Income Fund (USHIF Trust)
CanadaU.S Distributions
Monthly Distributions
InterestPayments
