$11,150,000 Acquisition and Reposition Financing on a Multifamily Property; 4% Debt Yield at Closing; Los Angeles, CA

Rate: 30-Day LIBOR + 3.25%
Term: Three years plus two 12-month extensions
Amortization: 36 months interest only
Max Loan to Cost: 63%
Prepayment: 15-month minimum interest period
Guaranty: Non-recourse
Lender Fee: 1.00%

Transaction Description:

George Smith Partners arranged the $11,150,000 first mortgage on a 1980’s vintage, 42-unit multifamily property in Northridge, California adjacent to a major Southern California University. The national balance sheet lender provided non-recourse financing at 63% of total project cost including 100% of future CapEx funds. This equated to $64,200/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 3.25% coupon requires interest rate risk protection and in order to minimize associated sponsor cost the Capital Provider 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 (4.15% debt yield), the Lender structured an interest reserve to cover debt service during the peak reposition period.

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