$6,500,000 7-Year Construction Loan 18-Unit Multifamily Project; 70% LTC; Prime + 0.75%; Culver City, CA

Rate: Prime + 0.75%
Term: 18 Months + 1, 6 Month Extension
Amortization: Interest Only
LTC: 70%
Guaranty: Recourse

Transaction Description:

George Smith Partners secured a $6,500,000 construction loan for the development of an 18-Unit Class A apartment building located in the greater Culver City submarket of Los Angeles. The interest only loan is priced at Prime + 0.75% for the full 18-month term and includes a 6-month extension option. The proceeds represent 70% of the total project cost. The transaction also includes a 5-year mini perm option priced at the 5 Yr. Treasury + 2.15% with a 30-year amortization schedule, which can be exercised upon stabilization of the Project.

Challenges:

Although the Sponsor had previous experience as a general contractor this was his first endeavor as a developer and guarantor. His experience with this Class A asset type was limited and a significant portion of his net worth was tied to a startup technology company with limited operating history. The Sponsor also had a strict deadline he needed to adhere to as his construction permits were reaching their expiration date. Additionally, the construction costs and Sponsor cash equity fluctuated throughout the application process, which complicated the reconciliation of the closing statement and final loan amount.

Solutions:

GSP demonstrated that the Sponsor had chosen a capable general contractor to oversee the Project and helped structure a contract that gave the Lender confidence that the development would be completed. With respect to net worth, GSP procured ample evidence supporting the financial growth and stability of the startup. GSP prepared all required closing documents in a timely manner and provided a material portion of the due diligence prior to entering application in order to execute the transaction before the expiration of the Sponsor’s permits. GSP kept a diligent record of costs and equity invested to date. The Lender gave credit for this prior equity and reduced the Sponsor’s required down payment at close.

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