Investing in real estate is a very capital-intensive undertaking. Oftentimes, multiple sources of financing (the “capital stack”) are used. Where there is new construction or substantial rehabilitation involved, construction loans are typically used to finance the development and construction.
Also, leasing for multifamily housing can be structured in a special way. Commercial properties typically lease their space to tenants on a net or partially net basis (the tenant pays some or all of its direct expenses associated with the space it occupies and some allocated portion of common area expenses). Multifamily leases are not typically structured that way. Having said that, multifamily properties sometimes collect RUBS.
Your Tasks:
1. Describe how the loan structure (both for construction loans and permanent loans) for a multifamily apartment might differ from that of a commercial office building or retail center. Think about the properties being compared, a single office building of 200,000 SF and then (i) a high-rise apartment building, and (ii) a multiple building low or mid-rise apartment complex. Note: Be sure you understand the question. Often the answer provided is unresponsive to the question. Know that there is a difference between “pricing” and “terms and conditions”. If you know any real estate lenders, it may be helpful for you to run this question by them.
2. What are “RUBS,” and what are the various ways to calculate it?
Your response should be no more than three pages.
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