George Smith Partners replaced a high yielding private money acquisition loan for a multifamily asset located in the Koreatown district of Los Angeles. The five Tenant-In-Common (TIC) borrowers purchased this asset through their respective IRA accounts. Each IRA is its’ own legal and financial entity and is unable to have interest beyond the individual IRA holding, thus no level of repayment or carve-out guarantee was available under this TIC ownership structure. Unit permitting issues with the city also precluded any level of institutional debt. GSP identified an asset-based lender willing to override the normal requirements for a carve-out guarantor. A long-term conventional lender has been identified as a potential take-out option subject to the unit permitting issue being resolved with the City of Los Angeles. Priced at 7.9% for 12 months, the interest only loan does not carry any prepayment penalty. There is no personal or entity level guarantee including carve-out previsions.
