$2,180,000 Non-Recourse 100% Cash-Out Refinance on a Multifamily Portfolio

Rate: 4.45% Fixed
Term: Ten Years
Amortization: Three Years Interest Only; 30-Year Amortization Thereafter
LTV: 75%
Prepayment: Step-Down
Guarantee: Non-Recourse
Lender Fee: None

GSP successfully placed $2,180,000 in non-recourse permanent financing for a three property multifamily portfolio in the Pacific Southwest.  The 75% leverage loan carries a low fixed coupon of 4.45% for the duration of its 10-year term.   Cash flow is maximized via three years of interest only payments prior to converting to 30-year amortization.  The loan presented significant challenges including a 100% cash-out requirement, sponsorship with credit issues, the property’s workforce housing tenant base, as well as tax and unpermitted work liens clouding title.  GSP leveraged its strong lender relationships and emphasized the sponsorship’s length of ownership and its real estate investment track record to ultimately overcome these issues.  The loan carries a flexible step-down prepayment penalty offering the ability of early payoff or sale and no lender fee was charged.

Advisors

Related Financings

  • Expand

    $5,230,000 Non-Recourse, Multifamily, Cash-Out Refinance; Los Angeles, CA

    December 4, 2019

    Transaction Description:

    George Smith Partners secured a $5,230,000 non-recourse refinance for a 40-unit multifamily property in Los Angeles. The loan is fixed at a rate of 3.85% for five years and provides two years of interest only payments. Over the past three years, the Sponsors renovated 28 of the 40 units at a very high investment of $28,000 per unit. GSP sourced a bank lender that gave the Borrowers maximum credit for the higher income that resulted from leasing the newly renovated units. The Lender did not require seasoning on the new leases. The Lender did not have a floor on the rate at a time when many banks are applying floors to keep their rates above a certain threshold. The rate was competitive with Agency financing during a period when Freddie Mac was temporarily slowing down new loan originations. The Sponsors were operating the Property very efficiently with below-market expenses, and the third-party appraiser marked those expenses up to market. This resulted in a capitalized property value that did not meet the lender’s 65% LTV constraint. The Lender accommodated the Borrower by raising the LTV threshold so that loan proceeds and the rate would not be affected. The Lender was able to rate lock at application and was ready to close in about 50 days.

    Rate: Fixed at 3.85% for 5 years then floats at 6 Month LIBOR + 2.35%
    Term: 30 years
    Amortization: 30 years
    Prepayment Penalty: 3,2,1,0
    LTV: 65%
    DCR: 1.15
    Interest Only: 2 Years
    Guaranty: Non-Recourse

  • Expand

    $4,100,000 Non-Recourse Cash-Out Refinance, 14-Unit Multifamily Property; West Los Angeles, CA

    October 23, 2019

    Transaction Description:

    George Smith Partners successfully secured a $4,100,000 non-recourse permanent refinance of a 14-unit, multifamily property in West Los Angeles. Loan proceeds were used to pay off the existing variable, higher interest rate bridge loan into a lower interest, fixed rate loan. There was significant cash-out to the Sponsor, who had recently completed an extensive reposition and upgrade of the Property. Due to the Sponsor’s business plan, flexibility and interest only were paramount. As such, GSP worked with the Lender to structure a 5-year fixed rate term with 3 years interest only and a step-down prepayment structure of 3%, 2%, 1%. This structure allows the Sponsor to maximize current cash flow while providing the flexibility of a step-down structure that burns off when the loan begins to amortize.

    Rate: 4.20%
    Term: 30 years; 5 years fixed then converts to floating rate at Libor + 2.25%
    Amortization: 3 Years Interest Only then 30 year amortization
    LTV: 65%
    Minimum DSCR: 1.20x
    Guaranty: Non-Recourse
    Prepayment: Stepdown, 3%, 2%, 1%, open

  • Expand

    $9,300,000 Non-Recourse Cash Out Refinance For Los Angeles Multifamily Property

    July 17, 2019

    Transaction Description:

    George Smith Partners secured a $9,300,000 Non-Recourse refinance loan for a 35 unit multifamily property in Los Angeles. The loan provides 65% leverage and is fixed at a rate of 4.04% for seven years. Over the past 3 years, the Sponsors renovated 27 of the 35 units with a heavy lift that neared $50K per unit. GSP sourced a lender that gave the Borrowers maximum credit for the higher income that resulted from leasing the newly renovated units. The Lender did not require seasoning on the new leases. In order to maximize underwritten cash flow, GSP provided data that demonstrated the very low vacancy percentage in the submarket. This allowed the Lender to use a slightly lower vacancy factor than that of a typical apartment transaction. Additionally, the Lender used market rate expenses despite some variation in the historical P&Ls. The Lender was able to rate lock at application and close in about 55 days.

    Rate: Fixed at 4.04% for 7 years then floats at 6 Month LIBOR + 2.25%
    Term: 30 years
    Amortization: 30 years
    Prepay: 4,3,2,1,0
    LTV: 65%
    DCR: 1.15
    Guaranty: Non-Recourse

  • Expand

    $17,000,000 Non-Recourse Multifamily Refi with $10,000,000 Cash Out Sacramento, CA

    October 17, 2018

    Transaction Description:

    George Smith Partners successfully arranged the refinance of a 14 building, 120-unit multifamily asset located in the Arden-Arcade neighborhood of Sacramento, CA. GSP worked with a life company with a strong appetite for multifamily lending and ultimately structured a loan in which the Sponsor pulled out $10,000,000 of cash. The non-recourse loan has a fixed rate of 4.24% and refinanced an existing agency loan. Some of the unique features of this loan included: rate lock at application, assumption rights in the event of a sale and future loan advances/top-offs upon increase in NOI.

    Rate: 4.24%
    Term: 10 years
    Amortization: 30 years
    LTV: 65%
    DCR: 1.35x
    Prepayment Penalty: Yield Maintenance
    Guarantee: Non-Recourse
    Lender Fee: 0%

  • Expand

    $9,150,000 Cash-Out Refinance, Non-Recourse, Full Term Interest-Only

    August 1, 2018

    Transaction Description:
    George Smith Partners secured $9,150,000 for the non-recourse cash-out refinance of a newly built 25-unit multifamily building located in Los Angeles. The building is situated in one of the most sought after areas in Los Angeles and is in close proximity to popular restaurants, bars and entertainment in nearby Culver City. The construction take-out permanent loan is fixed at 5.04% for ten years with full term interest-only and has a yield maintenance prepayment penalty structure.

    Challenge:
    The building was in lease up when the financing process started. Thus, the owner did not have any seasoning on the newly leased units nor any historical operating expenses.

    Solution:
    GSP identified a capital source who was willing to provide proceeds at over 90% of cost and understood the strength of the asset in addition to the experience of the Developer. Based on these strengths, the Lender was able to underwrite to in-place income without seasoning, proforma operating expenses, and a 7.35% debt yield, which maximized loan proceeds. The Lender was able to fund once the property achieved 80% physical occupancy. The Sponsor locked a full term interest-only structure, which is advantageous to the property’s cash flow as the new leases continue to season.

    Rate: 5.04% Fixed for 10 years
    Term: 10 years
    Amortization: Interest Only
    Prepayment Penalty: Yield Maintenance
    DY: 7.35%
    LTV: 59%
    DCR: 1.35x on an IO basis
    Guarantee: Non-Recourse
    Origination Fees: Par

  • Expand

    Multifamily Refinancing: $4,500,000 Non-Recourse Cash-Out Refinance for a 3-Property Multifamily Portfolio in South Los Angeles and Inglewood

    June 28, 2018

    George Smith Partners arranged the cash-out refinance of a 3-property, 28-unit multifamily portfolio in South Los Angeles and Inglewood, California.  The Sponsor had purchased all three workforce housing properties in the past five years and had existing debt on each property that was not maturing.  The impetus for the refinance was to secure long term fixed rate financing to hedge against rising interest rates.  Maximum proceeds and maximum interest only were requirements.  The location of the properties, which are in growth corridors but have yet to gentrify, posed challenges for many lenders and the quotes were scarce.

    GSP leveraged its strong relationships to identify a lender willing to quote the deal with maximum proceeds.  Initially, the Lender was only comfortable with one year of interest only.  However, GSP was ultimately able to secure 3 years of interest only for the entire portfolio by emphasizing the Sponsor’s strong track record and large operating portfolio.  Interest rates rose about 50 basis points in the 70 day period from application to closing, but the lender was willing to hold the application rate. Fixed for 5 years at 4.48%, the non-recourse loan is sized to 65% LTV and carries a flexible, step-down prepayment structure.

    Rate: 4.48% rate

    LTV: 65%

    Term: 5 year fixed; 20 year term

    Amortization: 3 years of IO; 30 year amortization thereafter

    Prepayment Penalty: 5-4-3-2-1 Prepay

    Guarantee: Non-recourse

Don't Miss a Fact,
Sign Up for FINfacts!

FINfacts is a weekly newsletter highlighting recent financings and economic insights.

Subscribe Here