Downtown Los Angeles

Bryan Shaffer successfully placed the cash-out refinance of a 30 unit apartment building in downtown Los Angeles. The product mix is a 100% studio floor plate. Cash out proceeds were sized to 75% of value for the 1914 construction of the brick building. Amortized over 30 years, the rate lock was executed at application, fixed for five years at 4.0%, mitigating the run-up in treasuries. The loan will float at 250 over LIBOR for years six through 15. There is no balloon risk for 15 years although the loan is pre-payable without penalty after the third year. Challenge: All-brick structures present a concern as to how the building will perform during an earthquake. All-studio configuration as well as the Class C location in a lower income area of Los Angeles ruled out a large percentage of institutional lenders. At the time of funding, the Fed was considering ending their bond purchasing program, resulting in an unstable secondary market and rapidly rising rates. Solution: GSP has funded a number of transactions with a local balance sheet lender who is active in this specific market and understands this location and demand for this configuration. The lender permitted an early rate lock that pre-dated a 50 basis point treasury movement once the loan was ready for funding. Cash out was justified and permitted due to a recent rehabilitation and an increase in operating cash flow.