Since 1977, we have been experts in providing financing solutions in the form of Real Estate Trust Preferred Securities (TRuPS)
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REAL ESTATE TRUST
PREFERRED SECURITIES
(TRuPS)

 

Ocean Pacific Capital has been providing Commercial Real Estate financing for clients since 1977. We have extensive experience in providing financing solutions in the form of Real Estate Trust Preferred Securities (TRuPS). Real Estate Trust Preferred Securities or TRuPS for short are similar to debentures and preferreds that is generally longer term, has early redemption features, makes quarterly fixed interest payments, and matures at face value.

Trust preferreds have been created by companies for their favorable accounting treatments and flexibility. Specifically, these securities are taxed like debt obligations by the IRS, while having many characteristics of equities. They are recorded as debt in a company's accounting statements as according to GAAP procedures, but may be treated as capital for regulatory purposes.Because the interest paid to the trust is tax deductible, the company may enjoy a significantly lower cost of funding.

They offer many advantages over other funding choices including equity or secured/unsecured debt. They are cost effective and typically will improve ROE if used as a substitue for equity. Also the issuer can pick from a variety of pricing alternatives and have efficient execution time, with no marketing or SEC registration requirements.

Trust preferred securities (TruPS) are cumulative preferred stock issued by bank holding companies through a special purpose vehicle. For the issuing bank holding company, TruPS combine benefits of both debt and equity.

The special purpose vehicle is wholly owned by the bank holding company and is usually a trust. It sells the TruPS to investors and uses the proceeds to purchase a subordinated note from the bank holding company. This becomes its sole asset, and cash flows from the note largely mirror the dividends payable on the TruPS. The note has an initial maturity of at least 30 years. Dividends are paid quarterly or semi-annually. Dividends may be deferred for at least five years without creating an event of default or acceleration.

From a tax standpoint, TruPS have a significant advantage over the direct issuance of preferred shares. This is because dividends on preferred shares are not deductible as a business expense, but interest on a subordinated note is. In this regard, the TruPS behaves like debt. In another regard, it behaves like equity. In 1996, the Federal Reserve ruled that up to 25% of a bank holding companies tier 1 capital may comprise TruPS or directly-issued preferred stock. In 2005, the Fed reaffirmed this treatment of TruPS after FASB modified the accounting treatment of TruPS under GAAP.

Initially, TruPS were only issued by larger bank holding companies. This changed in 2000, when several institutions issued TruPS, which were pooled in a CDO. Since then, the TruPS CDO market has grown dramatically and has become a significant source of capital for small and medium sized bank holding companies. Contact one of our TRuPS specialists today for a free consultation at 1-800-595-1474 or fill out a simple information request form.

 


Whatever your financing needs,
we will tailor a loan that's right for you.

 

Wall Street Journal
Commercial News

2/20/17

WSJ.com: Commercial Real Estate

Kroger Co. Gobbles Up Murray's Cheese
The supermarket giant has purchased the famous New York cheese store chain and its Greenwich Village flagship store for an undisclosed amount.

A High Line Plan Emerges in Newark, N.J.
A raised pedestrian bridge is one of the signature features of a 22-acre public-private redevelopment project called Mulberry Commons, recently unveiled by the city of Newark and developers.

Suburban Offices Woo Millennials With Food, Fitness and Fun
Office property owners in New York?s suburbs are working to attract millennial workforces with amenities like restaurants, hiking trails, fitness clubs and natural lighting.

Mumbai's Slums Make Way for Luxury Towers
In Mumbai, the land-starved financial capital of India where millions live in slums, developers are turning to rules that allow them to build upscale towers in exchange for providing housing to slum dwellers.

Mall Owners Rush to Get Out of the Mall Business
A surge in store closures is prompting some of the largest U.S. shopping-center owners to walk away from troubled locations rather than restructure their debts.

Investment Firm Taking Space in N.Y. College
Two Sigma Investments plans to open what it calls a collision lab at Cornell University?s technology campus now rising on Roosevelt Island.

Whole Foods to Open a Lower-Priced '365' Store in Brooklyn
Whole Foods Market plans to bring its lower-priced store chain, 365 by Whole Foods Market, to Brooklyn?s Fort Greene neighborhood.

BRE #:00619059
Charles Elfsten, President
Charles A. Elfsten
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