Financing Foreign Investors “when negotiating commercial real estate, one common variable holds true, each transaction is unique as the people and properties involved” – Joe Berko

 In New York, 90% of all real estate transactions are carried out with a Real Estate Broker  Advantages of using a Broker Knowledge Experience  An effective Broker knows how to analyze an asset Strengths/Weaknesses of Asset Opportunities/Threats in Marketplace  A good Broker knows which Bank to place the loan with Gets the Best Terms Knows How to Close  The Hammer Effect No Room for Error

1.How do we help Foreign Investors obtain financing in the US? 2.What are the parameters of getting a Mortgage 3.Which Banks do we need to approach when were are financing different assets 4.Alternatives that exist in today’s market for Foreign Investors 5.Current state of financing as it pertains to the New York City Real Estate Market Topics for Discussion

 Overcoming the Bank’s Skepticism  The Bank has to undertake the following existing risk when funding a commercial loan: Bad Tenants High Rollover Vacancy Difficulty in Leasing Damages Drop in Property Values (Micro & Macro)  The Borrower has to undertake the following risk factors as well: Bad Management Absentee Landlord Other Responsibilities that inhibit the Borrower from honoring its debt obligation Part 1: Financing Foreign Investors

Part 2: Mortgage Parameters  Bank looks at the following: Experience Economic Strength Character of Borrower  Foreign Investor will likely have no local experience, no social security & no verification of payment of bills  Liquidity is the only source of Reliability  Simply put, Many Banks have a “No Lending Policy to Foreign Investors”

The Power of knowledge  Berko & Associates works with a select group of banks that will fund Foreign Investors  Banks will deal only with well capitalized Borrowers.  Banks prefer borrowers that have contracted a strong local management company’s. Direct Deposits of Rent Roll into Account Maintain Maintenance of Security Deposit Large Escrow Accounts East 100th

Part 3: Approaching The Bank  Understanding the philosophy of the Bank’s lending criteria is very important  The Broker must match the Borrower with the Right Lender  How do we determine between two similar offers from two similar Banks Underwriting Criteria DSCR Requirement Interest Rate Which Appraisal Companies did the Bank Use  This makes a big difference between a satisfied client and a frustrated one

Example Underwriting Rate – 6% Escrow Violation Well known appraiser BANK ABANK B Loan $1,000,000 LTV 75%65% Rate 4.50% Amortization 30 years25 years Term 5 years3 years DSCR % LTV if retail is greater than 25% of total income cure violations before closing Appraisal done in house. *Bank A *Bank B

Success Comes With Preparation  Banks are willing to lend to Foreign Investor when the borrowers are financially solid  The Asset is well positioned when the Asset has: Prime Location Solid Tenancy Local management company (Experienced & Reputable) LTV up to 50 % Interest Rate is similar to local borrower Extra Escrow  Local Israeli Banks in New York City are selectively participating in funding Israeli Investors with better terms then local New York Banks on a very selective basis Criteria is an existing relationship

Part 4: Alternatives for Investors  Joint Venture Partnership  Acquire an asset with Assumable Financing Shorter Process Preapproved Amount of Money, Interest Rate & Terms are Well Defined No Surprises Borrower Still Needs Approval & There is a 1% Assumption Fee  Buy an entity that holds the Asset; Assume its debt obligations & reap the benefits of the asset Easy Entry into Market. In some case no need for any qualification process by the lender Has it’s own risk

Part 5: NYC Market Overview

The NYC Real Estate Market is ALIVE & WELL  In 2010, many new Banks entered the Real Estate Market  Bank of China $800 Million loan for a 48 story Class A Office Building at 245 Park Ave $475 Million loan for 1515 Broadway  Deutshe Bank $225 Million loan for 1775 Broadway  CMBS Market has seen a 13% increase over the last year  Construction Financing is slowly coming back.

Record Year for the Hospitality Industry in 2010  48.7 Million Tourists Spent $31 Billion Dollars in NYC last year  36 Hotels opened in 2010 with 26 Hotels expected to open in the next 24 months  Morgan Stanley $92.5 Million loan for the Hilton in Times Square

Historically Low Interest Rates; Lock in Now  Low Interest Rates by Banks across all assets sectors  Imminent fear of Inflation will cause Interest Rates to Rise  Arbitrage Opportunity Relatively High Cap Rates with Low Interest Rates  Sellers Receive Premium for Stabilized Assets as an example year.  At the same time, Investors can profit from acquiring Leveraged & Distressed Assets  The overall consensus in that Real Estate is valued at 20% lower than prior years  New York City is unique because it offers investors stability and growth opportunity. The Time is Now to Grab the Bull by the Horns and Buy a Piece of the Rock.