$13,000,000 Acquisition and Reposition Financing on a 47-Unit Student Housing Property; Adjacent to a Major Southern California University

Rate: 30-Day LIBOR + 3.35%
Term: Three years plus two 12-month extensions
Amortization: 36 months interest only
Max Loan to Cost: 70%
Prepayment: 21-month minimum interest period
Guaranty: Non-recourse
Lender Fee: 1.00%

Transaction Description:

George Smith Partners arranged the $13,000,000 first mortgage on a 1960’s vintage, 102-bed student housing property in Los Angeles. The national balance sheet lender provided the Sponsor non-recourse financing at 70% of total project cost including 100% of future CapEx funds totaling $42,500/per unit to complete extensive interior and exterior renovations. Interest expense is not incurred on CapEx funds until drawn. The Sponsor’s cash flow was maximized as the loan is interest only during the initial three-year term. The 30-Day LIBOR plus 3.35% coupon required 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 a lack of cash flow for 12 months, the Capital Provider structured an interest reserve to cover debt service during the peak reposition period.

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