$6,000,000 Multifamily Acquisition; 3.78% Fixed For Five Years, 2 Years IO

Transaction Description: George Smith Partners secured $6,000,000 for the acquisition of a stabilized 55 unit Los Angeles apartment building. Fixed at 3.78% for five years; the loan will float at 6 month LIBOR + 3.25 for the remaining 15 years of the loan term. The loan will amortize over 30 years after the initial two-year interest-only term. Pre-payment steps down from 5% and remains at 1% for the final 15 years.

Challenges: In discussing the transaction with capital providers, GSP discovered that a majority of underwriters sized proceeds using a stressed underwriting constant. For these lenders, proceeds were less than 60% of the purchase price. Due to a limited collection history, several lenders would not consider RUBs (Ratio Utility Billings) income for sizing proceeds. Our Sponsor had a short acquisition timeframe.

Solution: GSP identified a capital source that underwrote the actual note rate rather than a higher stressed constant and used a 1.2 DCR for sizing. RUBs income was also credited as additional income and contributed to the NOI. Proceeds netted were $200,000 more than the balance of those surveyed. A 45 day close was orchestrated under the original terms of the application.