Rate: 7-Year Treasury + 1.95%
Term: 7 Years
LTV: 55%
Lender Fee: Par
Exit Fee: 4-years Yield Maintenance, step down pre-pay thereafter 1.0%, 0.5%, open.
Non-Recourse
Amortization: 1-Year Interest Only, 30-Year Amortization thereafter

Transaction Description:
George Smith Partners successfully structured non-recourse acquisition financing on a 2015 constructed Class-A multifamily property coming out of lease up in Dallas, Texas. The property is located in a submarket with rising concessions and flattening rents due in part to significant supply coming online and seasonality. In order to provide the best execution for the sponsor in an unstable credit market, GSP identified a balance sheet lender whose confidence in the strong macro-market fundamentals allowed them to size the loan to a 7% in place debt yield despite the lack of operating history. The lender did not require an appraisal and locked rate at loan application, which minimized execution risk in a volatile interest rate environment. The seven year loan has a fixed coupon at the 7-year Treasury plus a spread of 1.95%, with one-year interest only before converting to a 30-year amortization schedule, allowing the borrower to maximize cash flow while the property continues to stabilize and concessions burn off. The loan has a flexible pre-payment schedule with four years yield maintenance then converting to a step down pre-payment schedule of 1.0%, 0.5%, 0.0% for the remaining three years of the loan term.

Advisors

Nick Rogers Vice President

Term: 30 years
Rate: Fixed for 7 Years at 3.85%, followed by floating at 12 MAT + 2.75%
Amortization: 3 Years Interest Only, followed by 27 Year amortization
Prepayment Penalty: 2.5%, 2.5%, 2.5%, 2.5%, 2.5%, 1%, 1%
LTV: 65%
DCR: 1.15
Origination Fees: Par

Transaction Description:
George Smith Partners secured $9,550,000 in proceeds for the cash-out refinance of a 53 unit apartment building located in Los Angeles. The loan is fixed at a rate of 3.85% for a period of 7 years, then floats at 12 MAT + 2.75% with a floor of 3.85%. The 30-year loan offers 3 years of interest only payments followed by a 27-year amortization schedule. A challenge occurred when it was discovered that the property is located in a special study zone on the Hollywood Fault Line. As a result, some lenders declined the deal entirely, while others required a PML report and earthquake insurance depending on the result. GSP was able to source a lender that did not require a PML or other third party reports, which saved the borrowers a great deal of time and expense. The loan also went into application in mid-November at a time when most lenders’ rates had already jumped by 25 basis points or more. The lender accommodated the borrower by holding the rate long enough to allow the borrower to quickly lock in an extremely competitive rate.

Advisors

Matthew Kirisits Director