Transaction Overview
GSP successfully arranged the $1,914,000 construction loan take-out on a 6-unit apartment building in Studio City, California. The loan is fixed for 5 years at 3.65% prior to floating at LIBOR+2.25% (floored at the start rate) for the remainder of the 30 year term.
Challenge: Lenders have seasoning requirements to allow for a return of equity to the Borrower. This is especially relevant when the collateral has only recently commenced operations. With just few months of occupancy, the building had very limited cash flow information, and was therefore difficult to underwrite. Due to the limited size of the complex, this request exceeded most Lenders’ standard loan per unit constraint.
Solution: GSP emphasized the quality of the collateral and provided the Lender with comparable rents and values to support the high loan per unit. GSP negotiated an exception from normal guidelines to obtain the additional requested cash-out. GSP was also able to negotiate an open fourth year to prepayment to accommodate the Borrower’s request to potentially sell the units as condos.
