Deferred financing costs are amortized over the maturities of nontraded REIT debt financing. What is the range of annualized cost of debt financing that these expenses add to the weighted average cost of debt financing (calculated based upon the stated interest rates for mortgages and other financing)?
Answer: The additional annualized deferred financing costs can add anywhere from 0.05% to 1.44% to the annualized cost of debt financing. For a sample of 38 nontraded REITs with deferred financing costs, the average additional cost of borrowing was 0.36% annualized, added to the weighted average cost of debt of 4.33% for a total average cost of borrowing of 4.66%.
