$5,625,000 Acquisition Loan for Trophy Multifamily Asset in Malibu

Transaction Description: George Smith Partners secured $5,625,000 in proceeds for the purchase of a 9,585 square foot, 12-unit multifamily property located in Malibu, CA. The loan is fixed at a rate of 3.95% for 5 years, then floats thereafter at 12 month LIBOR plus 2.5% for 10 years. The loan represented  $468,750 per unit.

Challenge: First, the buyer was purchasing the property at a very high price per unit. Second, the property had been fully renovated by the seller and only had six months of operating history. At the time of application, one unit was vacant and four units had short-term leases, including two units leased to corporate tenants. The seller was receiving rents that averaged over $6.00 per square foot which is common in Malibu, but much higher than most locations in Los Angeles. Finally, the property was located on the inland side of the Pacific Coast Highway and had a steep slope at the front of the property, which caused some lenders to be concerned with earthquake risk.

Solution: GSP was able to source a lender that was comfortable with all of the unique aspects of the deal. Although the selected lender had an LTV maximum of 50%, proceeds were considerably higher than other lenders which were constrained by a cap on loan per unit. Also, GSP was able to source rent comp data that showed the in-place rents were well supported. Thus, the lender was willing to provide a term sheet even with the vacant unit and short-term leases in place. Additionally, a previous owner had performed an extensive seismic retrofit on the property, which eliminated the need for earthquake insurance. Once in application, the loan closed in approximately 30 days.