Transaction Overview
Bryan Shaffer placed two Single Resident Occupancy (SRO) transactions to two separate investors. The downtown Los Angeles/Skid Row project is a 198 unit SRO built in 1924, owned and managed by a public REIT. The Torrance asset is a mixed-use SRO with ground floor retail/restaurant space. Both acquisitions were sized and priced similarly to 75% of purchase, fixed for 7 Years at 6.5%, amortized over 30 Years.
Challenge: In addition to the marginal locations, SRO usage presents a challenge for most lenders as they are not traditional housing units in that kitchens and bathrooms are shared. Similar to a dormitory in configuration, many are rented with daily and weekly uses like a hotel. Income is subject to wild swings due to the short term rentals.
Solution: Sponsors requested that we examine both market rate and affordable options to finance these assets to maximize a high probability of close due to the unusual product type and low-quality locations. GSP identified a mission-driven portfolio lender who understands SRO uses their valuable housing options for low income tenancy who cannot afford housing on a more traditional level. GSP secured 75% loan to value financing and worked with the Sponsor to develop a viable long term operational plan for these asset.
