Transaction Overview
George Smith Partners secured $3,350,000 in proceeds for the purchase of a 13-unit multifamily property located in an infill area of Los Angeles. The loan is structured as $1,963,000 at closing and $1,387,000 in holdbacks for capital expenditures and interest reserves. Six of the thirteen units were vacant at close. The fully funded loan represents 70% of the project capitalization.
The Sponsor requested a loan with both low pricing and non-recourse execution. Several challenges were encountered in meeting both goals. The small size of the loan ruled out almost all debt fund lenders, who typically seek financings larger than $10,000,000. While banks offered rates in the 5% range, they required the Sponsor to sign full recourse. Private money lenders quoted the deal with prohibitive interest rates above 8.0%.
The selected Capital Provider was the only one to provide non-recourse execution with a rate in the 5’s. The loan did not stipulate a required debt yield based on the stabilized cash flow. Additionally, the Lender released additional money at closing for expenses the Buyer incurred while in escrow. This amount totaled $260,000 in reimbursements for soft costs. The loan closed about 45 days from the signed application.
