$7,150,000 Acquisition Bridge Loan for 29-unit Multifamily Property in Pasadena, California

Rate: Prime + 0.50%; 4.25% Floor
LTV: 65% of Purchase Price
Term: 5 Years
Amortization: 2 Years Interest Only Followed by 30 Year Amortization
Recourse
Prepayment Penalty: None

Transaction Description:
George Smith Partners secured $7,150,000 for the purchase of a 29-unit multifamily property in Pasadena, California. Sized to 65% of purchase, the 5-year loan was priced at a floating rate of Prime plus 0.50%, with a floor rate of 4.25%. The loan has 2 years of interest only payments with a 30-year amortization schedule following thereafter. GSP closed the loan less than 30 days after the application was filed.

Challenge:
The Sponsor acquired the property as part of a 1031 exchange and had 40 days to meet the exchange window. Despite the short timeline, the borrower wanted to secure bank pricing and was reluctant to consider non-bank lenders. In addition, the property was operating with units at below-market rents, despite the building’s location in a non-rent controlled area. Thus, in-place cash flow was not enough sufficient to satisfy traditional underwriting criteria for many potential bank lenders.

Solution:
GSP sourced a bank that provided proceeds of 65% of purchase price. The selected lender was known to have certainty of execution and a quick close process. Our team was able to provide both rent and sales comps showing the huge amount of income upside in the property and demonstrating how the seller had not efficiently captured the value of the asset. The lender was able to overcome the low going-in DCR by requiring a payment reserve of $400,000, which will be released once the property’s DCR reaches 1.25. GSP also emphasized the sponsor’s recent success in increasing income and NOI at another multifamily property in a nearby market. By creating a sense of urgency among all parties, GSP was able to complete the transaction within the buyer’s short timeframe and close the deal just a few days before the expiration of the 1031 exchange.

Advisors

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