WASHINGTON, DC-Life companies are stepping up the levels of leverage they are willing to tolerate--at least for office buildings in the DC area, reports Phil Mudd of Cassidy Turley. The company is currently working on a handful of office finance transactions involving life companies that he expects to see close by the end of the year. The debt leverage ratios for these deals range from the very low end of 40% to a bordering-on-aggressive 70%.
While the willingness of some firms to accept 70% LTVs is telling, so is the fact that the majority of firms still favor deals that are of moderate leverage, or 60% to 65%, Mudd tells GlobeSt.com. “I would say moderate leverage still rules the day but it is interesting that some firms are edging higher.”
Mudd points to the recent financing of 2033 K St., which he, along with colleagues Christian Miles and Jon Goldstein, helped secure with a life company that he declines to name. They arranged a 10-year, $20-million fixed-rate loan for the property, which is owned by affiliates of Quadrangle Development Corp. and American Realty Advisors. Mudd says its leverage could be considered moderate.
But the lender liked other attributes of the property as well, making it difficult to tease out just how much leverage on a standalone basis matters to a life company. The asset is an eight-story, 170,825-square-foot office building located in the heart of DC’s Central Business District. Fully leased, Mudd says, “It is a solid property by any measure.”
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