$10,066,000 Non-Recourse Cash-Out Refinance for Los Angeles Multifamily Property

Rate: Fixed at 4.25% for 5 years then floats at 12MAT + 2.65%
Term: 30 years
Amortization: 30 years
LTV: 70%
Prepayment Penalty: 1.75% for three years then 1%
DCR: 1.15
Guarantee: Non-Recourse

George Smith Partners secured a $10,066,000 non-recourse cash-out refinance loan for a 71-unit multifamily property in Los Angeles. Although the rental units at the property were fully occupied, the Sponsors were still in the process of implementing RUBS (Ratio Utility Billing System) and establishing storage income. Additionally, some tenants had rent increases that were scheduled to kick in during loan application. GSP sourced a lender that gave the borrower credit for all of the additional income based on signed leases, rather than requiring seasoning. This higher underwritten income resulted in proceeds that were much greater than those offered by the rest of the market. The lender also offered a 60-day rate lock during a time of rapidly rising interest rates.

During due diligence, several challenges were encountered that delayed the closing of the loan. The existing lender required a lengthy notice period in order to process the payoff which further delayed closing until after expiration of the 60-day rate lock. The new lender generously extended the rate lock for two additional weeks and held the rate in the original application.

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    $17,000,000 Non-Recourse Multifamily Refi with $10,000,000 Cash Out Sacramento, CA

    October 17, 2018

    Transaction Description:

    George Smith Partners successfully arranged the refinance of a 14 building, 120-unit multifamily asset located in the Arden-Arcade neighborhood of Sacramento, CA. GSP worked with a life company with a strong appetite for multifamily lending and ultimately structured a loan in which the Sponsor pulled out $10,000,000 of cash. The non-recourse loan has a fixed rate of 4.24% and refinanced an existing agency loan. Some of the unique features of this loan included: rate lock at application, assumption rights in the event of a sale and future loan advances/top-offs upon increase in NOI.

    Rate: 4.24%
    Term: 10 years
    Amortization: 30 years
    LTV: 65%
    DCR: 1.35x
    Prepayment Penalty: Yield Maintenance
    Guarantee: Non-Recourse
    Lender Fee: 0%

  • Expand

    $9,150,000 Cash-Out Refinance, Non-Recourse, Full Term Interest-Only

    August 1, 2018

    Transaction Description:
    George Smith Partners secured $9,150,000 for the non-recourse cash-out refinance of a newly built 25-unit multifamily building located in Los Angeles. The building is situated in one of the most sought after areas in Los Angeles and is in close proximity to popular restaurants, bars and entertainment in nearby Culver City. The construction take-out permanent loan is fixed at 5.04% for ten years with full term interest-only and has a yield maintenance prepayment penalty structure.

    Challenge:
    The building was in lease up when the financing process started. Thus, the owner did not have any seasoning on the newly leased units nor any historical operating expenses.

    Solution:
    GSP identified a capital source who was willing to provide proceeds at over 90% of cost and understood the strength of the asset in addition to the experience of the Developer. Based on these strengths, the Lender was able to underwrite to in-place income without seasoning, proforma operating expenses, and a 7.35% debt yield, which maximized loan proceeds. The Lender was able to fund once the property achieved 80% physical occupancy. The Sponsor locked a full term interest-only structure, which is advantageous to the property’s cash flow as the new leases continue to season.

    Rate: 5.04% Fixed for 10 years
    Term: 10 years
    Amortization: Interest Only
    Prepayment Penalty: Yield Maintenance
    DY: 7.35%
    LTV: 59%
    DCR: 1.35x on an IO basis
    Guarantee: Non-Recourse
    Origination Fees: Par

  • Expand

    $18,000,000 Cash-Out Refinance at 4.47% Fixed for Seven Years, Non-Recourse

    May 9, 2018

    Transaction Description:
    George Smith Partners secured $18,000,000 for the cash-out refinance of two stabilized multifamily buildings in Los Angeles containing a total of 116 units. Constructed in the 1960s these buildings are situated in one of the most sought after areas in Los Angeles and in close proximity to popular restaurants, bars and entertainment. Fixed at 4.47% for seven years, the non-recourse loans float at 6 month LIBOR + 2.25% for the remaining 23-year term. The non-recourse loans are fully amortizing and have a 5,5,4,3,2,1 step down prepayment penalty.

    Challenges:
    Many of the buildings have long term residents who have lived at the properties for over a decade. The long term residency leaves the owner with dozens of units with uncaptured market rents, ultimately affecting the amount of loan proceeds.

    Solution:
    GSP worked with a Lender who understood the strength of these assets and was able to underwrite to a 1.15 x DCR at the actual note rate in order to maximize loan proceeds. Both properties also had a handful of recent move ins, which gave the Lender comfort in the future upside of the properties as units continue to turn.

    Rate: 4.47% Fixed for 7 years; 6 Month LIBOR + 2.25% thereafter
    Term: 30 years
    Amortization: 30 Years
    Prepayment Penalty: 5,5,4,4,3,2,1
    LTV: 65%
    DCR: 1.15
    Guarantee: Non-Recourse
    Origination Fees: Par

  • Expand

    $35,470,000 Non-Recourse Cash-Out Refinance at 3.70% & 3.90% Fixed for Seven Years

    January 3, 2018

    Transaction Description:
    George Smith Partners secured $35,470,000 for the cash out refinance of a stabilized multifamily portfolio containing 187 units in West Hollywood. Fixed at 3.70% & 3.90% for seven years, the 30 year fully amortizing non-recourse loans float at 6 month LIBOR + 2.25% for the remaining 23-year term and have a 5,4,3,2,1 step down prepayment penalty.

    Challenges:
    Many of the buildings have long term residents who have lived at the properties for over a decade. The long term residency coupled with stringent West Hollywood rent control constraints leaves the owner with uncaptured market rents, which ultimately affects the amount of loan proceeds.

    Solution:
    GSP sourced a lender who understood the strength of these assets and was able to underwrite to a 1.15x DCR at the actual note rate. The capital provider was amenable to increasing loan proceeds after rate lock and with a handful of recent move-ins, they became comfortable in the future upside of the portfolio as units continue to turn.

    Rate: 3.70% & 3.90% Fixed for 7 years; 6 Month LIBOR + 2.25% thereafter
    Term: 30 years
    Amortization: 30 Years
    Prepayment Penalty: 5,4,3,2,1
    LTV: 65%
    DCR: 1.15
    Guarantee: Non-Recourse

  • Expand

    $9,100,000 Non-Recourse Cash Out Multifamily Refinance @ 4.15% Fixed for Ten Years

    October 4, 2017

    George Smith Partners secured the $9,100,000 non-recourse cash out refinance for 256 multifamily units in a Western States secondary market. Our Sponsor refinanced his existing floating rate loan into new long-term fixed rate financing.  Since initial acquisition, the Borrower commenced on a water conservation program but had yet to complete capital upgrades that would qualify him for green certification.  An interest rate reduction was offered if a completion reserve was set-aside to complete upgrades and secure the green certificate.  Initially estimated at over $100,000, the budget and subsequent reserve was confirmed at $38,000.  A pre-commitment rate lock opportunity was structured for 45 days at no cost, allowing the Borrower to monitor secondary market activity and lock at their discretion.  Fixed for 10 years at 4.15%, the non-recourse loan amortizes over 30 years. All lender fees and third party costs including legal were capped at $13,000.  Future secondary financing will be permitted to 75% of value.

    Rate: 4.15%
    Term: 10 Years
    Amortization: 30 years
    LTV: 55%
    Guarantee: Non-Recourse
    Prepayment: Yield Maintenance
    Origination Fee: Par