Transaction Overview
George Smith Partners secured a $5,230,000 non-recourse refinance for a 40-unit multifamily property in Los Angeles. The loan is fixed at a rate of 3.85% for five years and provides two years of interest only payments. Over the past three years, the Sponsors renovated 28 of the 40 units at a very high investment of $28,000 per unit. GSP sourced a bank lender that gave the Borrowers maximum credit for the higher income that resulted from leasing the newly renovated units. The Lender did not require seasoning on the new leases. The Lender did not have a floor on the rate at a time when many banks are applying floors to keep their rates above a certain threshold. The rate was competitive with Agency financing during a period when Freddie Mac was temporarily slowing down new loan originations. The Sponsors were operating the Property very efficiently with below-market expenses, and the third-party appraiser marked those expenses up to market. This resulted in a capitalized property value that did not meet the lender’s 65% LTV constraint. The Lender accommodated the Borrower by raising the LTV threshold so that loan proceeds and the rate would not be affected. The Lender was able to rate lock at application and was ready to close in about 50 days.
