Transaction Overview
George Smith Partners successfully arranged two, 10-Year, fixed rate loans for a total of $13,898,000 on two Southern California multifamily properties.
The first loan was for $6,125,000 and was used to refinance an 18-unit multifamily property built in 1986, located in Hollywood, CA. The second loan was for $7,773,000 and was used to refinance a 26-unit multifamily property built in 1991, located in Culver City, CA.
Both properties had undergone significant renovations and upgrades within the past four years. Despite COVID-19 regulations allowing tenants to suspend rent payments, both properties have stayed fully leased throughout 2020, with all tenants continuing to pay rent
Opportunity:
Although the properties had been previously financed with floating rate debt after undergoing their renovation programs several years ago, GSP demonstrated to the Sponsor that despite the requirement to pay a prepayment penalty on their existing financing, this refinancing would:
1) Reduce the current interest rate by approximately 135 bps
2) Increase the cash flow
3) Eliminate floating rate risk
4) Provide significant net cash-out proceeds
5) The prepayment expense is offset by the interest savings within approximately 18 months.
Both loans are fixed at 3.33% and are interest only for the first five years. The loans are not cross-collateralized, are non-recourse and sized at 70% of appraised value.
