$233,600,000 Cash Out Refinance of a 1,359 Unit Downtown Los Angeles Multifamily Portfolio; 10-Years Interest Only at 4.02%

Rate: 4.02% Fixed
LTV: 60%
Term: 120 months
Amortization: Interest Only
Guarantee: Non-Recourse
Prepayment Penalty: Yield Maintenance

George Smith Partners arranged the refinance of Medici and Orsini I, two multifamily properties totaling 1,359 units located in Downtown Los Angeles. GSP advised the Sponsor to refinance the existing loans which were at 5.5% and 5.1%, respectively, with less than two years remaining, to take advantage of low interest rates in a rising rate environment. Upon analyses of interest rate savings over a 10-year term, GSP determined that the new interest rate payments would offset the early prepayment costs. In addition to securing long-term, fixed rate 10-year loans, the refinancing generated significant net cash proceeds from the appreciated equity of the two properties. Sized to 60% of value, the interest only, non-recourse loans are fixed at 4.02%.

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    $27,270,000 Refinance of 11-Property Portfolio; Fixed For 10 Years at 3.61%; Full Term Interest Only; Los Angeles, CA

    March 18, 2020

    Transaction Description:

    George Smith Partners placed the $27,270,000 refinance of eleven stabilized Los Angeles multifamily properties totaling 302 units. The interest rate is fixed at 3.61% for ten years with full term Interest Only payments.

    Since acquisition several years ago, the Borrower has invested a considerable amount in capital expenditures across the whole portfolio. Invoices were used to separate capital expenditures from recurring R&M expenses. This information helped to provide support for the Lender’s underwritten cash flow and property values. The Lender had previously provided the acquisition loan for the portfolio and is refinancing its own loans. For the refinance, they initially requested a higher level of due diligence than that of the previous loans. GSP worked with the Lender to waive these requirements and provide the same diligence as the loans from acquisition.

    Rate: 11 loans fixed at 3.61%
    Term: 10 years fixed
    Amortization: Full-Term Interest Only
    LTV: 55%
    DCR: 1.30x
    Prepayment Penalty: Stepdown
    Lender fee: 0%
    Guaranty: Non-Recourse

  • Expand

    $7,400,000 Interest Only Refinance for a Multifamily Property; 74% LTV at Breakeven DSCR; Venice Beach, CA

    October 8, 2019

    Transaction Description:

    George Smith Partners arranged a $7,400,000 refinance for a multifamily property in Venice Beach. The proceeds provided 74% leverage and was fixed at a rate of 5.00% with interest only payments. Over the past 15 months, the Sponsor renovated four of the units and upgraded the electrical and plumbing. GSP sourced a capital provider that understood the value of the location and the Subject Property along with the strength of the Sponsor in order to mitigate a breakeven debt service coverage ratio and a high loan to value.

    Challenges:
    The Sponsor was traveling for work in another country when loan documents were ready to be signed. Due to the Sponsor’s busy schedule, they were unable to go to a U.S. Embassy to sign loan documents and would not return from their trip for over 3 months.

    Solutions:
    GSP was able to get the Lender comfortable in allowing the Sponsor’s Power of Attorney (POA) to sign loan documents. The Lender has never allowed a POA to act as signer on behalf of a Sponsor and was hesitant to allow for a POA to sign for a new Sponsor. After many conversations GSP was able to convince the Lender to allow the POA to act as signer and even agreed to waive their internal legal fees during this process.

    Rate: 5.00%
    Term: 30 years
    Amortization: Interest Only
    LTV: 74%
    DCR: Breakeven, 1.0:1.0
    Lender Fee: $2,730

  • Expand

    Multifamily Townhome Project Refinancing: $157,500,000 Cash-Out Refinance of a 752-Unit Multifamily Property; 10-Years Interest Only at 4.29%

    June 20, 2018

    Transaction Description:
    George Smith Partners arranged the refinance of Colony Townhomes, a 752-unit multifamily property located in Canyon County, California. The refinance proceeds replaced a HUD loan, also previously arranged by GSP, with a remaining term of 23 years and with pre-payment penalties. Sized to 65% of value, the non-recourse, 10-year, interest only loan is fixed at 4.29%.

    Challenge:
    The Sponsor wanted to seize the opportunity to cash out significant appreciated equity, while locking in low interest rates in a rising interest rate environment. The early refinance meant that the Sponsor would have to incur the pre-payment penalty. The recent fluctuations in the 10-year Treasury spurred additional urgency in the transaction.

    Solution:
    The Sponsor’s original HUD loan was priced at 3.75% with over 20 years remaining. Through analysis, 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 hoping to achieve. Once the Sponsor decided to proceed, Rate Lock was accomplished in 14 business days and the loan closed 21 days later.

    While an early refinance does not make sense in every situation, frequently, the opportunity to liberate trapped equity as well as lock in long term fixed rates ahead of expected further rate increases offsets the prepayment penalty cost incurred by refinancing prior to the open prepayment window.

    Rate: 4.29% Fixed
    LTV: 65%
    Term: 120 months
    Amortization: Interest Only
    Guarantee: Non-Recourse
    Prepayment Penalty: Yield Maintenance

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