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$26,400,000 Acquisition and Reposition Financing with Low 3.5% Going-In Debt Yield on Two San Fernando Valley Multifamily Properties

Rate: 30-Day LIBOR + 3.80%
Term: Three years plus two 12-month extensions
Amortization: 36 months, Interest Only
LTC: 70%
Prepayment: 15-month lockout; open thereafter subject to 0.25% waivable exit fee
Guarantee: Non-recourse
Lender Fee: 1.00%

GSP arranged the $26,400,000 first mortgage on two 1970’s vintage multifamily assets in Glendale, California. The national balance sheet lender provided a non-recourse loan at 70% of total project cost including 100% of future CapEx funds 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 3.80% coupon requires interest rate risk protection. In order to minimize associated sponsor cost the lender 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, the lender structured an interest reserve to cover debt service during the peak reposition period. The assets are cross-collateralized with the ability to release individual properties subject to debt yield and loan to value hurdles.


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