CommercialCapital Solutions

Provides clients with commercial lending strategies including structured debt and equity solutions.

Tauro Capital Advisors offers structured debt and equity solutions for commercial real estate by making a market comprised of a diverse yet focused pool of capital providers, tailored to the client’s needs. Our commercial real estate advisors use an extensive database of lenders and investors, allowing them to find the best capital funding source nationwide.

Tauro’s team of experienced advisors are devoted and will use all available resources to solve for client’s capital needs. We carefully consider a sponsor’s background, financial capability and analyze property economics to determine feasible loan amounts and terms. Since we value our capital relationships as much as that of our clients, mitigating lender/investor risks is also one of our top priorities. We thoroughly search for financing options until the best structure is determined.

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Debt vs. Equity: Which Is Which?

The terms “debt” and “equity” are often misunderstood in commercial real estate, which is why Tauro strives to help and eliminate the confusion between these two very different types of capital.

Debt is financing in which borrowers repay with monthly interest payments, fixed or variable, and usually amortized most commonly over a 30 or 25 year schedule, although some lenders offer interest only options. Rarely will debt financing include a “participation” interest in the net income or profit at the sale of the property financed.

Equity, on the other hand, is money invested in a project for an ownership stake and a negotiated return on the investment. The most common forms of equity are “common equity,” or “preferred Equity” which can be participating or non-participating.

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Classifications of Debt

There are two main classifications of debt: senior debt and junior debt.

Senior Debt
Senior debt is first in priority, other than property taxes and assessments, and has the first claim on the property financed in the event of foreclosure. Senior debt is typically less expensive than junior debt because it is considered less risky due to its first lien position.

Junior Debt
Junior debt is lower in priority and has a subordinate claim which can be wiped out in the event of a foreclosure. Junior debt is typically more expensive than senior debt because there is a greater risk associated with the loan.

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There are several different types of senior debt, each with its own unique features (Click through to learn more):

Permanent Loan

Permanent debt is usually a term of 5 years or more. Typically it is used to purchase or refinance a property, take-out the construction debt once construction is completed and the property starts to produce income which is commonly referred to as stabilized.

Refinance: Rate and Term

A rate-and-term refinance is used to replace an existing loan with a new term loan, allowing the borrower to usually improve the terms of the loan such as a lower interest rate, and reduce monthly payments.

Refinance: Cash Out

A cash-out allows the borrower (sponsor) to access some of the built-up equity in their property. A refinance with cash-out is a new loan that pays off the existing loan and gives the sponsor cash at funding, provided the appraised value is sufficient to support the requested refinance loan amount and meets the new lender’s loan constraints.

Construction Loan

Construction loans are used to finance the construction of a new project or redevelopment of an existing property. The loan term generally ranges from 12 to 36 months, with possible extensions and are repaid with a take-out loan when the project is completed and stabilized.

Construction loans are interest-only loans, with the borrower paying only interest on the loan during the construction period and only on funds as they are drawn.

Stretch Senior Loan

Stretch senior debt is a type of financing that provides debt in excess of the normal loan-to-cost (LTC) constraint.  This type of loan is carried with one lender although the stretch portion is priced higher than the “normal” portion.  For example, the first part of the loan, up to 60% LTC, might be priced at 5.5% and the stretch portion that takes the LTC to 85%, will be priced at 12% giving a blended rate of 7.41%.

Bridge Loan

Bridge loans are short-term loans are used to finance commercial real estate that will not otherwise qualify for a traditional loan.  Generally, these properties are termed “added value” meaning the borrower has a vision for the property that will increase the value once their business plan is complete and qualifies for permanent financing. Bridge loans are often a higher loan-to-value (LTV), interest only but at high-interest rates due to the implied risk factor and have a loan terms between 12 to 36 months.

Bridge to Perm Loan

Bridge to perm loans are used when a property does not qualify for a traditional loan and provides financing for a borrower to implement a business plan. Once the plan has been obtained, the same lender will transition the loan from bridge to permanent.

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The Most Common Type of Junior Debt

Mezzanine Loan

Mezzanine loans are a type of junior debt typically used increase the LTC or LTV. They are used in conjunction with senior debt and opposed to a stretch senior, the mezzanine portion is usually carried by a different lender than the senior lender. The two lenders will execute an “intercreditor agreement” which spells out how the two lenders will work together in the event of foreclosure and protects the junior lender from being wiped out.

Different Types of Equity

Penn Street Refinance

Common Equity

Common equity is the most basic type of equity and gives the equity investor a share of the property’s profits, as well as voting rights. It is typically used by investors who want to be actively involved in the property and have a say in its direction.

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Preferred Equity

Preferred equity is a type of investment that gives the equity investor certain privileges, such as participation in profits at sale, preference in terms of distributions and assets in the event of liquidation. It is typically used by investors who want to minimize their risk.

Hiring Tauro Capital Advisors For Your Capital Solutions

When it comes to securing debt or equity for your real estate projects, Tauro Capital Advisors, Inc. has the experience, expertise and relationships with capital providers to obtain the most competitive rates and terms. We have a deep understanding of the real estate market and the various types of capital available. We work with you hand-in-hand to structure debt or equity that meets your specific needs and objectives.

Tauro Capital Advisors is a leading provider of commercial real estate capital solutions. We have a long track record of successful transactions and satisfied clients. We offer a wide range of financing and equity options and are committed to providing competitive rates and flexible terms.

Contact us today to learn more about our services and how we can help you secure the capital you need for your real estate project.

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Let's discuss your commercial loan options...
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