National Public Safety Group on LinkedIn: Ares Leads $1.2 Billion Refinancing Deal for CentralSquare

In the same vein as last weeks post about the complexities of modeling #equityreturns for a #CRE development project, Id like to talk about the particulars of what happens at and after the #permanentloan #refinancing. Todays interest rate environment has made this untenable in many cases due to tighter lending standards at refinancing than when the project was initially financed for construction. For an example, suppose we have one traunch of equity that commits $10M at 10% (simple interest pref) for 2 years, and our refinancing produces $6M in refi proceeds. Some GPs offer operations prefs that continue to pay their LPs on their original capital basis, eg. If the interest is simple, this $100K simply gets accrued--but not added to the LPs basis--and it is expected to be paid in future years when cash is available.