$128,130,000 Forward Index Locked, Fixed Rate – 10 Year, I/O, First Mortgage in Downtown Los Angeles

Rate: 4.24%
Term: 10 Years, Fixed Rate
Amortization: Full Term I/O
LTV: 55%
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners successfully arranged the early index and rate lock for Orsini II, a 566-unit, institutional quality multifamily property located in Downtown Los Angeles. Orsini II is a mid-rise, over podium apartment complex comprised of five stories built over a three-level parking garage, walking distance to central downtown Los Angeles.

In 2016, GSP secured a $115,200,000 floating rate loan on the Property. Even though there were over 8 years of remaining term, due to last summer’s rapidly rising long term mortgage rates, the Sponsor decided to refinance with 10-year fixed rate debt to hedge further interest rate risk.

Challenge:

Locking in low interest rates in a rising interest rate environment and harvesting appreciated equity for future development opportunities meant that the Sponsor would have to incur pre-payment penalties on this early refinance. Additionally, the existing loan was locked-out from repayment until April 2019 which required securing a forward index lock and a deferred closing.

Solution:

While there was a 17 bps premium for the forward rate lock, GSP determined that the interest rate savings for a new 10-year loan would easily offset the early prepayment costs of the existing loan, as well as provide for the major cash out the Sponsor was seeking.

The $128,130,000, 55% LTV, fixed rate refinance funded in April 2019. The non-recourse, 10-year, interest only loan is fixed at 4.24%.

Advisors

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