Real Estate Financing & Capital Markets Flashcards
6 cards from real REA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Real Estate Financing & Capital Markets flashcards as text
What is a 'preferred equity' investment in commercial real estate?
Answer: An equity position that receives priority distributions over common equity but is subordinate to all debt
Preferred equity sits between mezzanine debt and common equity in the capital stack, receiving priority distributions at a stated rate before common equity participates.
What is a 'bridge loan' used for in commercial real estate?
Answer: Short-term financing to acquire or reposition a property until it qualifies for permanent financing
Bridge loans provide temporary financing during the period between acquisition and stabilization, after which the borrower refinances into permanent debt.
What is the 'mortgage constant' and how is it used in real estate analysis?
Answer: Annual debt service divided by the loan amount; used to calculate required NOI for a given loan
The mortgage constant (annual debt service ÷ loan balance) is compared to the cap rate to determine whether leverage is positive or negative.
In the context of agency lending, what does 'Freddie Mac Optigo' refer to?
Answer: Freddie Mac's multifamily lending platform offering competitive permanent financing for apartment properties
Freddie Mac Optigo is the branding for Freddie Mac's multifamily loan programs, providing competitive fixed and floating-rate permanent financing through approved lenders.
What is 'interest rate cap' protection in the context of floating-rate real estate debt?
Answer: A derivative instrument that limits the borrower's maximum interest rate exposure for a fee
An interest rate cap is a purchased option that pays the holder when the benchmark rate exceeds the strike rate, effectively capping the borrower's all-in interest rate.
What is 'loan-to-cost' (LTC) ratio used for in real estate development financing?
Answer: Measuring the loan amount relative to total project costs for construction lending
LTC compares the loan amount to total development cost (land + hard costs + soft costs), and is the primary underwriting metric for construction lenders.