Real Estate Loans Criteria

The Detroit Investment Fund provides Real Estate loans for the development of commercial residential real estate and neighborhood retail centers by experienced developers. These loans are intended to assist developers in meeting the equity requirements of traditional lenders. These loans are typically subordinate to the senior lender and cannot exceed 50% of the equity required for the project.

All Real Estate Loans

  • The borrower (developer) must provide financial projections for the project being financed which demonstrate the viability of the project with detailed budgets and demonstrated repayment capacity.
  • The developer/developers must provide three years of financial statements and sufficient information to evaluate the developers cash flow and debt service capacity.
  • Real estate loans require an equity contribution by the borrower/developer.
  • Equity may consist of cash-in or investment in the underlying property as indicated by the appraised value. Other assets may substitute for specific equity when properly valued and restricted to the loan under consideration provided they can be liquidated if necessary.
  • If the borrower/developer does not have a demonstrated cash flow, a sufficient interest reserve commensurate with the term of the loan must be included in the project budget.
  • All loans shall be made on a recourse basis with full or partial guarantees.
  • All municipal approvals must be in place for the intended final use of the property prior to the investment/loan.
  • Lease maturities should exceed the senior loan maturities.
  • All loans will be monitored by reviewing project performance, occupancy levels, operating statements, taxes and insurance on a quarterly and annual basis.
  • Senior liens against the collateral are to be included in the computation of total advance and debt service coverage.

Real Estate Land Development Loans

  • Maximum maturity of five years.
  • Amortization – interest only for up to 36 months with amortization based on up to 20 years for the remaining term of the note.
  • Maximum LTV (loan to value) of 90.0%
  • Commitment for a properly structured development loan from a bank or other traditional lender.

Real Estate Construction Loans

  • Borrower will provide a budget of total cost of the project including all direct and indirect costs related to the project.
  • All budgets and plans will be satisfactorily reviewed by an independent architect and/or appraiser prior to funding.
  • Equity of the borrower must be provided prior to funding of the Detroit Investment Fund loan.
  • A construction loan commitment from a bank or similar institution must be in place (closed but not funded) prior to the funding of the Detroit Investment Fund loan.
  • Draw requests including the detail of work completed and an owner’s sworn statement covering all direct and indirect costs along with confirmation by an independent party will be provided to the Detroit Investment Fund for each construction draw.
  • Security shall consist of a first or second position on the real estate being financed and an appraisal should be obtained from an approved appraiser.
  • Amortization - interest only until sale or lease/rental of the unit.
  • Maximum LTV of 90%
  • Pre-sale contracts and minimum release rates to be established based on the size and scope of the project.

Real Estate Mortgage Loans for Residential Rental and Retail Centers

  • Term of up to 7 years with maximum amortization of 30 years for apartments and 20 years for retail centers.
  • Maximum LTV of 90%
  • Minimum debt service coverage of 1.05 for total debt.
  • Retail center mortgage loans must be supported by leases with credit tenants for terms exceeding the maturities of the senior debt and which generate sufficient cash flow to meet the debt service coverage requirements.