$10,810,000 Acquisition and Reposition Financing on a Student Housing Property Adjacent a Major Southern California University; 4% Debt Yield at Closing

Rate: 30-Day LIBOR + 3.90%
Term: Three years plus two 12-month extensions
Amortization: 36 months interest only
Max Loan to Cost: 75%
Prepayment: 18-month minimum interest period
Guarantee: Non-recourse
Lender Fee: 1.00%

Transaction Description:

GSP arranged the $10,810,000 first mortgage on a 1960’s vintage, 96-bed student housing property in Los Angeles. The national balance sheet lender provided a non-recourse loan at 75% of total project cost including 100% of future CapEx funds totaling $59,000 per unit to complete an extensive interior and exterior renovation. Interest expense is not incurred on CapEx funds until drawn, and Sponsor cash flow is maximized as the loan is interest only during the initial three-year term. The 30-Day LIBOR plus 3.90% coupon requires interest rate risk protection and in order to minimize associated Sponsor cost the Lender structured the interest rate cap with a two year duration at closing plus an obligation to renew for the third year of the initial term. Due to low going in cash flow (4% debt yield), the Lender structured an interest reserve to cover debt service during the peak reposition period.

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