Bridge Preferred Equity

Bridge Prefferred Equity

Bridge Preferred Equity

Basic Terms: NYMT’s investment must meet the general requirements as noted in its Investment Focus.
Investment Amount+$4.0 million
Investment Size+7.5% of property value
Accrued Return 12.0% - 15.0%
Required Distribution6.0%
Surplus Cash FlowStructured to ensure Maximum Exit Constraint is met
Maximum LTV Constraint75% - current, 65% - stabilized (Senior + Investment Amount)
Maximum Exit ConstraintSenior + Investment Amount must be less than 95% of estimated new Senior at exit
Investment Term6 - 24 months (with two 1-year extensions, typically co-terminus with the Senior Loan maturity)
Origination Fee1.0%
Minimum Return MultipleNone, lockout period for first 6-months
Senior Interest Rate Cap1.00x DSCR (using fixed rate Senior amortizing payment + 6.0% of Investment Amount)
Reserves & EscrowsRequired to cover any operating shortfalls, capital improvements and the Required Distribution
Exit Fee2% of the debt stack (Senior + Pref). Waived if refinanced with NYMT Program upon stabilization.

General Characteristics

NYMT’s ‘Bridge Preferred Equity’ investment structure has the following characteristics:

  • The goal of NYMT’s investment is to provide a structure that allows for a stabilized Senior loan recapitalization takeout
  • NYMT’s position in the capital stack is senior to the common equity and subordinate to the Senior loan
    • During the term of the investment, Surplus Cash Flow is distributed to NYMT with excess distributed to the sponsor
    • At a capital event, NYMT’s investment and any Accrued Return is distributed to NYMT with excess distributed to the sponsor
  • NYMT uses either a preferred equity investment or mezzanine financing depending on requirements of the sponsor and/or the Senior Lender
    • Preferred Equity – NYMT directly invests into an LLC as a member with governing terms provided in an operating agreement
    • Mezzanine Financing – NYMT secures a pledge of equity interests of an LLC with governing terms in a mezzanine loan agreement
  • NYMT’s investment is nonrecourse except for carve-out guarantees of a similar nature to Senior loan obligations
  • Failure of the sponsor to make the Required Distribution results in NYMT stepping into the management of the company