Proprietary and Confidential

HRACRE INTERNSHIP PROGRAM

REAL ESTATE FINANCE

July 7, 2020

Real Estate Finance Solutions

TOM DILLONSENIOR VICE PRESIDENT

“The single biggest problem in communication is the illusion that it has taken place.” – George Bernard Shaw

Don’t let me wallow in that illusion –

feel free to

ASK ANY QUESTIONS YOU HAVE!

What is ATLANTIC UNION BANK? Full service bank – providing the full range of financial services to

commercial and retail clients in our market area.

Largest community bank in Virginia, approximately $18.5 billion in assets.

Founded in 1902 in Fredericksburg area, now headquartered in Richmond.

Currently strong in full service banking across Virginia, with offices in North Carolina and Maryland as well.

PROVIDERS OF CRE LOANS BANKS

Specialize in “value add”; generally shorter terms, very flexible in loan terms and types of properties financed;

AGENCIES – Fannie Mae, Freddie Mac, VHDA, FHA

Specialize in multi-family property financing

LIFE INSURANCE COMPANIES

Long term, fixed rate, non-recourse loans on stabilized properties – “permanent financing”

WALL STREET “CONDUITS” – lenders packaging loans to be securitized for bond investors – also “permanent financing”

LENDER’S GOALACHIEVE REPAYMENT OF 100% OF ALL

PRINCIPAL AND INTEREST, PLUS ANY OTHER

COSTS OWED BY THE BORROWER, ON THE

CONTRACTUAL TERMS ORIGINALLY AGREED

TO BY BOTH BORROWER AND LENDER.

The Five ‘C’s of Credit

Capacity – can the borrower repay the loan?

Character – will the borrower repay the loan?

Capital – does the borrower have assets and net worth that indicate financial strength, and which might be used to repay the loan?

Collateral – does the borrower have an asset or assets she can pledge that the bank can sell if primary source of repayment doesn’t work (“Plan B”)?

Conditions – are economic conditions favorable to the repayment program?

FIVE C’s APPLIED TO REAL ESTATE FINANCE

Capacity – net operating income of property sufficient to pay principal and interest? Does property qualify for refinance with other lenders? Is it attractive to potential purchasers?

Capital – Sponsor has funds available to invest, both at the outset (time of purchase or to start construction), and if there are problems where all does not go according to plan.

Collateral – value and marketability when owned by the borrower; “pounce” value to the lender.

FIVE C’s APPLIED TO REAL ESTATE FINANCE (cont.)

Conditions – market vacancy, market rents, overbuilt/underbuilt property type, health of local economy.

Character – are the partners who control the borrowing entity trustworthy individuals who will honor obligations, not just to repay the debt but to operate and maintain the property as expected?

Lighthill Commerce CenterOffice/Warehouse Construction Financing

$3,854,000Virginia Beach

Real Estate Finance Solutions

$32,000,000

Park 216 ApartmentsConstruction

Financing,

Suffolk

Real Estate Finance Solutions

Waterfront Industrial FacilityAcquisition financing

$7,300,000Portsmouth, VA

Real Estate Finance Solutions

Leaning Tower of Granby - NorfolkUnique Construction and Financing Problems

Real Estate Finance Solutions

Hickman PlaceRetail Development Financing

$22,000,000Virginia Beach

Real Estate Finance Solutions

IP Configure – New HeadquartersHistoric Property, Adaptive Reuse Financing

$5,100,000Norfolk

Real Estate Finance Solutions

Discussion

What’s on your mind?