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Preferred Equity | Mezzanine Debt for Real Estate | Mezzanine Debt for Operating Businesses | Is Mezzanine Capital Right For You?

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-Investment Criteria
-Financial Terms
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-Investment Process

-Portfolio Manager
-Porfolio Companies
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Mezzanine Debt For Real Estate:

Investment Criteria

• Leased rental properties (multi-family, office or industrial)

• Properties in good physical condition (or money escrowed for improvements)

• Good for properties with first mortgages with a low loan-to-value ratio that does not permit refinancing

• Good as a bridge loan for partially leased properties until lease-up is completed (reduces the amount of equity needed prior to lease-up and first mortgage refinancing)

• Loans of $1 to $10 million

• Experienced developers, asset managers and property managers with an economic incentive and investment in the property

• Loan amounts up to 90% loan-to-value

• Debt service coverage requirement of 1.1 to 1.25 depending on the property

• Sum of the first mortgage and Prudent Capital debt to be no greater than 75% loan-to-value at the time the first mortgage matures


Financial Terms

• Loans collateralized by a second mortgage, second deed of trust or all of the ownership interests

• Non-participating mezzanine loans or preferred equity

• Current and deferred interest rate of 12% to 16% per annum

• Origination fees
 
• Out-of-pocket costs incurred in connection with the loan (legal, due diligence, appraisal, etc.) will be reimbursed by borrower


Items Required for Evaluation for a Request for Capital

• 2 years’ historical financial statements preferably prepared by an accountant

• As current as possible year-to-date operating statements

• 3 – 5 year projections with assumptions articulated

• Current rent roll with lease terms and square footage included

• Copy of most recent appraisal and environmental report

• Copy of most recent real estate tax assessment

• Copy of loan documents for existing loans secured by the property


Investment Process

1. Prudent Capital welcomes requests for mezzanine debt for leased rental properties directly from developers and owners as well as from mortgage brokers.

2. Within 24 hours of the receipt of all of the items needed for evaluation, we will provide you with a written proposal.

3. After the execution of a mutually agreeable term sheet and the payment of the required expense deposit, we will schedule a site visit.

4. After a satisfactory site visit, we will order any required appraisal, environmental report and physical inspection report (often we will be able to use existing reports prepared within the last 6 months).

5. After we are reasonably confident that the results of the due diligence will be satisfactory, we will initiate the legal documentation.

6. Funding of the loan will occur at closing when all of the documentation is complete and executed.

7. Depending on the timing required for an appraisal, the entire process usually takes between 2 and 4 weeks.


Portfolio Manager

Prudent Capital’s Portfolio Manager is Steven J. Schwartz. Mr. Schwartz is a CPA and an attorney with over 25 years of experience working with, investing in, running and evaluating various companies in various industries

For the past 24 years, Mr. Schwartz has been Chief Financial Officer and General Counsel to a diversified group of companies in which Howard and Stanley Bender had an ownership interest. These companies included general contracting, real estate leasing, property management and development, radio broadcasting, telecommunications, software development, wholesale distributorship and a golf course.

Prior to these activities, Mr. Schwartz practiced law for 3 years with the firm of Tucker Flyer (now merged into Venable) and practiced public accounting for 5 years with the firm Aronson and Company. He received a Bachelor of Arts degree in economics from the University of Maryland and a law degree with honors from the University of Maryland School of Law.

Mr. Schwartz currently serves on the board of Capital Bank, N.A.

Steven Schwartz  


Portfolio Companies

Landover Pennsy, LLC

• 265,000 square foot property in Landover, MD fully leased to the federal government with a low loan-to-value first deed of trust and significant excess cash flow after debt service

• $1.75 million of mezzanine debt to distribute to the Partners of the project

10th Street, LLC

• 200,000 + square foot warehouse in Brooklyn, NY fully leased to Citipostal, Inc.

• $500,000 as part of a $2.8 million second behind a CMBS first to recapitalize the real estate entity and distribute money to its owners

GPX International Tire Corporation

• a sale – leaseback of warehouse and office space in Boston, MA

• $2.35 million utilized by the Company for working capital for its business

Gainesville Hotel Group, LLC

• 132 room, 3 story Fairfield Inn by Marriott hotel containing 52,700 square feet on 2.5 acres of land in Gainesville, FL (4 miles from the University of Florida)

• $1 million of mezzanine debt to assist with the acquisition