Transaction Overview
GSP arranged a significant return on capital for a four-parcel, 289 unit apartment complex in Wheat Ridge, Colorado. The Borrower requested maximum proceeds for reinvestment into new acquisitions. The non-recourse loan is fixed for 10 years at 3.96%.
Challenge: The Borrower’s existing lender relationships were unwilling to provide a cash-out refinance due to the subjects’ tertiary location. The property operates as 308 units, collecting at 96% of Gross Potential. GSP discovered that 7% of the units were non-conforming during our due diligence period. Standard protocol requires lenders not count income for non-conforming units although expenses associated with those units are still underwritten. This substantially lowered NOI and loan proceeds. At 40 years old, the asset required increased maintenance reserves and a potentially costly list of immediate repairs.
Solution: GSP secured a lender that did not artificially constrain loan-to-value due to the property’s tertiary location. The lender provided maximum proceeds at 75% LTV. The GSP team oversaw all of the physical and valuation inspections, working on-site with the appraiser and underwriter in supporting the valuation and cash flow to minimize the negative impact of the non-conforming units. The GSP team also worked with the Borrower to optimize its capital repairs budgets to further improve NOI and preserve the original loan request.
