Transaction Overview
George Smith Partners placed the acquisition debt of a 14 unit Los Angeles County multifamily rental with an institutional portfolio lender. Fixed for five years at 3.8%, the non-recourse loan is interest only for the first three years before amortizing over a 30-year schedule. Prepayment steps down from 3% and is open without penalty for the remainder of the 27-year term. Due to a tight escrow timeframe, closing occurred 28 days after the term sheet execution.
Problems: Our Sponsor went hard, non-refundable Day 1 and thus required certainty of execution. The seller was non-cooperative and refused to offer updated cash flows or rent rolls. Miscellaneous income (laundry, RUBs) was unverifiable with the statements provided. With a hard deposit, the seller was unwilling to allow for an escrow extension regardless of circumstances.
Solutions: GSP targeted a known capital provider who is active in this multifamily segment and could underwrite market rate conditions in addition to offering a certainty of execution. A tighter DCR constraint and their ability to underwrite using the actual coupon in place of a stressed constant maximized loan proceeds. Third party reports were expedited and the credit file was submitted to loan committee upon receipt. Loan documents were streamlined for this non-recourse execution.
