Transaction Overview
George Smith Partners placed the non-recourse $15,628,000 cash-out refinance of 5 apartment properties in West Los Angeles. The loans were sized to 65% loan-to-value and are fixed for 7 years at 3.95% with 5 years of interest-only payments. They will amortize over a 30-year schedule thereafter. The five separate loans are not crossed collateralized or cross defaulted.
Challenge: The loan request was highly structured and the five separate ownerships required five loans that could not be crossed or pledged to other entities. Interest-only and non-recourse components are challenging to obtain for cash-out refinances. The borrowers have a sophisticated ownership entity structure that required extensive documentation. Several limited members of the partnership owned a significant percentage of the equity interest, but preferred not to execute non-recourse carve-outs.
Solution: The aggregated size of the loan requests afforded the opportunity to structure five identical but separate stand-alone transactions. George Smith Partners highlighted the financial quality of the managing members along with the prime locations of the properties to mitigate the return of equity, delayed amortization concerns and obtain a below market interest rate. The Sponsors’ resume also allowed us to negotiate the carve-out guarantee structure.
