Multifamily

GSP successfully arranged a 10 year, fixed rate apartment refinance with an A/B note structure to allow for maximum loan proceeds. The Class-A property is located in a secondary Kansas location. Challenge: The subject property was held by 27 Tenants-In-Common. There are few lenders who are comfortable financing Tenant-In-Common structures. Those who do consider TIC requests refuse to underwrite 27 separate borrowers. In addition, the owners were seeking senior and mezzanine financing in order to satisfy their existing note without the injection of new cash. Although offering a sub-80% loan to value, the new lender would have to underwrite down to a 1.07 debt coverage ratio to reach the requisite loan amount. Solution: The 27 owners agreed to “roll-up” into a new LLC using IRS code 721. This allowed them to contribute the property to a new ownership entity without realizing a capital gain or loss. While the “roll-up” satisfied concerns with the type of ownership structure, many lenders refused to entertain the loan request without a high-net worth Sponsor. GSP identified a lender that is familiar with this specific Kansas submarket and fully understood the value of the real estate. This permitted the lender to overcome additional ownership structure concerns. The subject lender was also able to provide an A and B note structure, allowing them to underwrite down to a 1.07 debt coverage ratio. The lender intends to securitize the A note and hold the B note on their balance sheet. GSP identified a lender that not only was able to fund the entire loan amount, but offered very a competitive “all-in” rate. This single funder was a preferred alternative to using separate lenders and the requirement of tri-lateral agreements for the senior and mezzanine pieces.