The year 2017 may be the year of “Cash-In Refinancing”, with many properties not generating sufficient cash flow to attract new senior loans sufficient to pay off maturing loans. The “cash in” is the combination of fresh borrower equity (either with their own funds or a new partner’s) or with a new senior debt in combination with “gap” financing either through mezzanine, bridge, hard money, or preferred equity capital. Often the gap financing is covering a construction element to re-position the asset.
As I mentioned in my last blog, the concern about what is left in the wall of maturities is centered on a few asset types, and we are frequently being asked to do work on these sites in support of re-positioning. Some examples:
So on top of the challenge in weighing market risks and making an asset more desirable, there are some physical risks to consider that come along with rehab projects.