Transaction Overview
George Smith Partners successfully placed the $10,000,000 facility to fund pools of single family residences leased as rental investments. The renovated and fully leased/occupied single family detached homes are located in sixteen counties surrounding the Bay Area. Additional housing units will be funded under pre-determined criteria outlined below.
Challenge: Because of the unique product and loan type, the terms of the loan agreement had to be drafted organically from the ground up. The properties at acquisition do not always meet the Lender’s typical lending requirements; potentially precluding the Borrower from executing their business plan. Placing security interests on each home purchased in a portfolio of hundreds presents a logistical nightmare for both the Lender and Borrower.
Solution: By segmenting the loan into three periods (Accumulation, Fixed Rate IO, and Floating Rate Fully Amortizing Loan Period), the Borrower enjoys greater flexibility in achieving DSCR coverage as properties are stabilized. The Borrower first acquires properties in an acquisition pool, thereafter transferring the homes into a long-term holding pool upon stabilization. The Lender secures its interests in the properties by way of a blanket deed of trust – an efficient and streamlined process with individual assets free from any liens or encumbrances.
