Transaction Description: Gary M. Tenzer, Henry Elder and Ryan P. Parker successfully placed the non-recourse acquisition bridge financing for a 78% leased, 385 unit newly developed apartment project located in Montclair, California. Sized to 75% of purchase, the loan is interest only throughout the five year term. With a coupon currently below 3.50%, the loan will float at 3.23% over the 30 day LIBOR.
Challenge: The Sponsor’s objective was to acquire the property with an interim bridge loan so that the property could be fully stabilized prior to securing permanent financing. Initially, close of escrow was structured to occur upon the earlier of the property reaching 90% occupancy or a date certain. The loan was structured and approved to close with the 90% precondition. When the rate of lease-up lagged, the investor still chose to close prior to the deadline. Since the loan was approved to fund at 90% occupancy, closing at a lower occupancy required the loan be restructured, re-approved and closed within a very short period of time.
Solution: GSP worked with the lender to support the property’s economics at a lower occupancy level to fund prior to the termination date specified in the Purchase and Sale Agreement despite its 78% occupancy. The revised structure contained a small hold-back to be funded when the property reached 90% occupancy. No additional guarantees or credit support was required of the borrower to facilitate the earlier closing. This transaction was one of the last loans funded by GE Capital prior to their finance division being sold.
- Rate: 1 Month LIBOR + 3.23%
- Term: 5 Years
- Amort: Interest Only
- LTC: 75%
- Prepayment: 0.25% Exit Fee
- Non-recourse
- Lender Fee: 0.5%
