Transaction Overview
GSP’s David Stepanchak placed the cash-out permanent loan on a two-tenant, 100% occupied office building in a Southern California beach community. The non-recourse loan is fixed for 10 years at 4.50%, amortized over 25 years and carries a yield maintenance pre-payment penalty.
Challenge:One tenant comprises 83% of the net rentable with turn-over event risk during the loan term. The Sponsor, an active Southern California real estate developer, was negatively impacted in the downturn that absorbed most of his liquidity and required the restructuring of two commercial real estate loans. The appraisal confirmed a lower valuation than anticipated and threatened loan proceeds.
Solution:Although a return of equity was being requested, the 45% underwritten LTV and Class A condition of the asset mitigated the requirement for turn-over reserves. GSP worked with a national Life Insurance lender who invested the time to fully credit qualify the borrower prior to the issuance of an application. The Sponsor’s dedication to make capital providers whole was well documented proving that credit is so much more than a FICO score and balance sheet. This capital provider allowed cash-out proceeds to serve as liquidity to supplement the Borrowers’ balance sheet. The underwriter agreed to raise the LTV constraint so as to not negatively impact loan proceeds.
