Cash Out Office Building Refinance Sized to a 30-year Amortization in North Hollywood, CA

Rate: 4.96%
Term: 5 Years Fixed, 30 Year Term
Amortization: 30 Years
Recourse: Full Recourse
Prepayment Penalty: 4,3,2,1
Lender Fee: None

Transaction Description:
George Smith Partners arranged perm financing for the refinance of a 14-unit office building in North Hollywood, California. The Sponsor was operating his business in the largest unit on the ground floor and was looking for maximum cash out while locking in a new fixed rate before the Fed increased rates. GSP worked closely with a lender who would utilize market rent on the owner user portion in order to increase the debt service coverage ratio and maximize loan proceeds. Despite the fact that the Sponsor didn’t have a lease on himself, GSP and the Lender worked hand in hand to ensure that market rent would be factored into the Lender’s underwriting on the Subject Property.

Challenge:
Most lenders would not utilize market rent for the owner used portion and wanted to internally underwrite the loan to 13 units. This would cut loan proceeds by $320,000 because the owner’s unit made up 18% of the Property’s income. Additionally, the appraisal came back with a remaining economic life of 20-years. As a result, the Lender adjusted their amortization to 20-years matching the remaining economic life of the Subject Property.

Solution:
George Smith Partners worked closely with the Lender to guarantee they used market rent in their underwriting to ensure the cash out proceeds would be met. When the remaining economic life came back at 20-years, GSP provided historical documents and property data to the Lender and the Appraiser illustrating how the remaining economic life of 20-years was incorrect. GSP leveraged their long standing lender relationship and worked carefully with the appraiser to get the amended economic life up to 30-years. , This allowed the Lender to adjust their amortization back to 30-years as well.

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