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Lending to developers when others won't.

With traditional real estate lenders on the sidelines, and Wall Street financing options prohibitively expensive, many smaller developers and entrepreneurs are still struggling to find flexible, yet affordable, debt financing. Related Capital, a leader in the development, ownership, and finance of multi-family properties, is uniquely positioned to assist entrepreneurial developers, creating innovative programs that fill today's lending gaps while offering attractive terms.

Based in New York City, Related Capital Company is a real estate financial services firm and the nation's fourth largest multi-family owner, with over 90,000 units in its ownership portfolio. Since 1972, Related Capital has raised more than $2.2 billion from 97,000 institutional and retail investors, and acquired a real estate portfolio valued in excess of $5.7 billion.

As one of the nation's largest sponsors of public real estate investment funds, Related Capital has more than two decades experience in the development of and investment in multi-family properties. The company has historically been most active in the affordable housing sector, investing more than $1 billion in such properties.

Although the real estate industry experienced an incredible shakeout in the late-1980s, Related Capital remained extremely healthy. In fact, out of the top five companies involved in raising funds in 1986, Related Capital is the only company still active - and with great success. The company has always remained financially stable. It has never lost a property to a foreclosure (or deed in lieu), never made a capital call upon investors, and has never had a tax audit result in an out-of-pocket payment by an investor. The company's enviable track record has generated much goodwill and investor confidence, allowing Related Capital to have a continual flow of new investment funds raised.

Related Capital's unique and continuing access to institutional and retail capital, combined with strong management skills, allows the company to be one of the most creative and flexible lenders in business today. As such, the company seeks new, innovative ways to fill gaps in today's lending spectrum, thus providing developers and entrepreneurs debt financing in areas where it is frequently scarce.

The company's lending programs allow developers to maximize their loan proceeds and to lock the interest rate at commitment:

American Mortgage Investors Trust (AMIT)

AMIT is a series of real estate investment trusts (REITs) Related Capital is sponsoring, which will invest nationally up to $100 million per year in participating FHA loans to finance the construction and ownership of multi-family properties. AMIT is unique in that it offers additional loan proceeds of up to 10 percent more than the FHA loan amount. AMIT's underwriting is based on debt service coverage, which allows the developer to achieve additional proceeds otherwise unavailable under FHA cost-based underwriting. Loans can range from $4 million to $20 million.

Tax Credit Debt & Equity Financing

Related Capital will originate and underwrite on a nationwide basis forward commitment, rate-capped permanent first mortgages to finance qualified apartments that generate Federal Low-Income Housing Tax Credits. Related has been the largest provider of equity to developers of affordable housing tax credit properties, and as an industry leader, is committed to providing debt and equity financing to developers in this market. As a sponsor of publicly-registered programs and privately-offered corporate programs, Related Capital provides equity to developers of quality tax credit properties. With virtually no 15-year fixed rate financing for tax credit properties, Related Capital structured a debt program to provide competitive pricing and maximum loan proceeds to developers on a forward commitment basis. The program will make forward commitments of 12 to 24 months, offering loans from $2 million to $15 million. With debt service coverage at 1.15 to 1, 80 percent loan-to-value on unrestricted rents and a rate cap, this program will be a welcome addition to the affordable housing industry.

American Tax-Exempt Bond Trust (ATEBT)

ATEBT, a trust sponsored by Related Capital, will invest up to $200 million on a national basis in participating tax-exempt first mortgage bonds to finance or refinance quality multi-family properties and retirement community properties without the need for credit enhancement. ATEBT offers a 10 year non-amortizing loan, a competitive debt service coverage of 1.15 to 1.85 percent loan-to-value, and no requirement for credit enhancement, allowing developers to maximize their loan proceeds.

As these programs indicate, Related Capital is providing flexible debt financing in a market with a great capital void. Unlike most lenders, Related Capital's programs are not constrained by the very conservative underwriting standard of the rating agencies and thus are more attractive to developers. The company can do so because of its ability to raise capital, to maintain a strong balance sheet, as well as manage real estate assets proactively. With few options available, Related Capital remains a bright source of active - and innovative - funding.
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Title Annotation:Finance; Related Capital Company
Author:Fried, J. Michael
Publication:Real Estate Weekly
Article Type:Company Profile
Date:May 18, 1994
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