| Transaction Description: |
GSP arranged financing for three multifamily properties in Los Angeles, California for a combined loan amount of $4,385,000. The proceeds from two cash out refinances were used to purchase the third property. Borrower had 35 days to close all three transactions.
Property #1: Purchase of 22 Multifamily units at 3.30% “going in” cap rate Existing rents were below market by 35% and subject location is non-rent controlled Purchaser needed a bridge loan to obtain sufficient proceeds to close escrow and carry the property during the lease up period
Property #2: Cash out Refinance of 16 Multifamily units To maximize proceeds, borrower elected for monthly adjustable program
Property #3: Cash out Refinance of 6 Multifamily units |
Challenge:
1: Borrower needed to close multiple transactions in a limited timeframe.
2: The margin of error was very low due to reliance on proceeds from both cash out transactions to close on the acquisition of the third property.
3: The appraisal initially valued the purchase property below the purchase price, with stabilized rents 16% below lender’s underwritten value, and 1,200 square feet below recorded gross leasable area. |
Solution:
1: GSP identified an extremely aggressive bridge lender willing to fund within the given time frames. Each of the refinance lenders was aware of the urgency and was able to expedite the processing and closing process.
2: Loan proceeds were constantly balanced to ensure that borrowers had sufficient money to close.
3: GSP contested the appraisal and had the building re-measured by a licensed appraiser within 2 days. Stabilized rent and value were adjusted to substantiate the loan request and the borrowers closed all three loans |
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Property #1: Bridge Financing
Loan Amount: $1,960,000
Rate: Prime + 1.00%
LTC: 61.3% (debt coverage constrained)
Amort: Interest Only
Term: 2 yrs
Interest Reserve: 6 month
Recourse
Lender Fee: 1.00%
No Prepay or Exit Fee
Property #2
Loan Amount: $1,775,000
Rate: Monthly Adjustable
Index: 12-Mat
Recourse
Lender Fee: Par
Property #3
Loan Amount: $650,000
Rate: 6.20%
Term: 5 yr fixed
Amort: Interest Only
Recourse
Key Players: Marc Schillinger
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