$6,350,000 Cash Out Refinance of 28 Units in Los Angeles; Maximum Credit for Unit Renovations

Rate: 4.4% fixed for 7 years, then floating at 6M LIBOR + 2.25%
Term: 30 years
Amortization: 3 years Interest Only followed by 30 year amortization
Prepayment Penalty: 3,2,1,0
LTV: 65%
DCR: 1.15x
Guaranty: Non-Recourse

Transaction Description:

GSP secured $6,350,000 in proceeds for the refinance of two properties comprising 28 units in Los Angeles. Since acquisition, the Borrowers made significant upgrades to the Property, including renovating 12 units at a cost of nearly $30,000 per unit. These units were re-leased at market rate, resulting in a considerable increase in income. The selected Lender was able to give the Borrower maximum credit for the higher income without using a loan-to-cost constraint. Additionally, two of the renovated units were leased just a week before close. The Lender was able to use the additional income based on the signed leases, without requiring any seasoning. Fixed at 4.4% for 7 years, the loan provides three years of interest only payments before rolling into a 30 year amortization schedule. Proceeds were maximized by using a 1.15x Debt Coverage Ratio on the actual mortgage constant.

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Related Financings

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    $6,350,000 Cash Out Refinance of 28 Units in Los Angeles; Maximum Credit for Unit Renovations

    March 27, 2019

    Transaction Description:

    George Smith Partners secured $6,350,000 in proceeds for the refinance of two properties comprising 28 units in Los Angeles. Since acquisition, the Borrowers made significant upgrades to the Property including renovating 12 units at a cost of nearly $30,000 per unit. These units were re-leased at market rate, resulting in a considerable increase in income. The selected lender was able to give the Borrower maximum credit for the higher income without using a loan-to-cost constraint. Additionally, two of the renovated units were leased just a week before close. The Lender was able to use the additional income based on the signed leases, without requiring any seasoning. Fixed at 4.4% for 7 years, the loan provides three years of interest only payments before rolling into a 30 year amortization schedule. Proceeds were maximized by using a 1.15x Debt Coverage Ratio on the actual mortgage constant.

    Rate: 4.4% fixed for 7 years, then floating at 6M LIBOR + 2.25%
    Term: 30 years
    Amortization: 3 years Interest Only followed by 30 year amortization
    Prepayment Penalty: 3,2,1,0
    LTV: 65%
    DCR: 1.15x
    Guaranty: Non-Recourse

  • Expand

    $22,367,000 Cash-Out Refinance of 200 Secondary Market Rental Units, CA

    March 20, 2019

    Transaction Description:

    GSP placed the $22,367,000 non-recourse cash-out permanent loan for 200 stabilized units in a secondary California market. This represented a substantial return on equity. Loan proceeds were increased post application as the supportable underwritten net cash flow improved during the due diligence process. Occupancy constantly operated at 98% with future increases forecasted at unit turn. Fixed for seven years at 4.73%, the non-recourse loan is interest-only for two years prior to amortizing over 30 years for the balance of the term.

    Rate: 4.73% Fixed
    Term: 7 Years
    Amortization: Two Years Interest Only; 30 Years Thereafter
    Loan-to-Value: 60%
    DCR: 1.35
    Recourse: Carve-Outs Only
    Prepayment: Loss of Yield
    Loan Fee: 0.50%

  • 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

    $7,125,000 Cash Out 50-Unit Multifamily Refinance Sized to 1.15 DCR on an Actual Mortgage Constant

    September 26, 2018

    Transaction Description:

    George Smith Partners secured $7,125,000 in proceeds for the refinance of a 50-unit multifamily property located in Los Angeles. Fixed at 4.515% for a period of 5 years, the loan self-liquidates at 6 month LIBOR plus 2.25% for the remaining 25 year term; there is no balloon date. Two years of Interest Only payments precede loan amortization. Sized to a 1.15 Debt Coverage Ratio, proceeds were coverage constrained. Prepayment steps down from 3% with no penalty after the third year.

    Although the building was previously retrofitted, several capital providers required a new PML earthquake risk assessment study due to the masonry construction. As cap rates continue their compression, cash flows are often the limiting constraint for sizing loan proceeds. Industry standard DCR constraints are limited to 1.20x or 1.25x and often use an inflated rate over the actual indexed note rate.

    The selected lender did not require any additional structural reports. Our underwriter allocated credit to our Sponsor for their success in fulfilling their business plan over the past two years; the balance sheet basis was not an underwriting factor. Net cash flow included the Property’s higher rental income as well as previously unreported RUBs income, parking income, and laundry revenue. A quoted competitive spread of 160 basis points over the 5 year swap rate demonstrated the Capital Provider’s belief in this location and sponsorship. Our 1.15 DCR constraint resulted in proceeds above the rest of the market.

    Rate: Fixed for 5 years @ 4.515%; floating @ 6 Month LIBOR+2.25%
    Term: 30 years
    Amortization: 30 years after 2 Years of Interest Only Payments
    LTV: 65%
    Prepayment Penalty: 3,2,½
    DCR: 1.15x

  • Expand

    $80,228,000 Cash-Out, Fixed-Rate Refinance of a 297-Unit Multifamily Property; 10-Years Interest Only at 4.20%

    September 19, 2018

    Transaction Description:

    George Smith Partners successfully placed a 10-Year, Cash-Out, Fixed-Rate refinance of a 297-unit multifamily property located in Downtown Los Angeles, California. This loan refinanced a 10-Year floating rate loan with a remaining term of 8 years, also arranged by GSP.

    Two years ago the Sponsor decided on a variable rate loan and paid an early prepayment penalty on his prior loan, allowing for a significant cash-out and reduction in interest carry. Our client benefited from lower interest rates for the past two years, however, as the long-term interest rates began to increase they decided to switch to a long-term fixed-rate strategy.

    There were two objectives for this transaction: 1) leverage appreciated equity, and 2) replace floating rate risk with a long-term fixed-rate. Recent fluctuations in the 10-year Treasury prompted additional urgency in the transaction and GSP moved quickly to arrange the new loan as soon as the former loan’s two-year lockout period expired. Sized at 55% of value, the non-recourse, interest-only loan is fixed at 4.20% for 10 years.

    Rate: 4.20% Fixed
    Term: 120 months
    Amortization: Interest-Only
    LTV: 55%
    Guarantee: Non-Recourse
    Prepayment Penalty: Yield Maintenance

  • 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

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