Transaction Overview
Shahin Yazdi placed the recapitalization of a note purchase once the note holder finalized the Deed in Lieu, 7 days following the note acquisition. The new $6,709,500 1st Trust Deed recapitalized the all-cash note purchase to 90% of the note purchase price on a 747 unit Columbus, Ohio apartment complex. The 10 Year loan is priced at SWAPs + 230, amortized over 30 Years following five years of Interest Only and carries a yield maintenance prepayment penalty. The lender will allow future mezzanine debt to a 1.80 DCR upon asset sale w/loan assumption.
Challenge: Despite the subject property’s attractive metrics, institutional lenders typically require a meaningful cash-down from the Borrower on recent purchases. The Borrower required maximum leverage to recapitalize his cash investment. The City filed an Emergency Order to replace 200 decks during the lenders’ due diligence process – viewed as a health-safety risk. Upon learning of the deck replacement order, the lender imposed a cash management system (aka hard lock box) that was unacceptable to the Borrower.
Solution: GSP promoted the assets’ strong cash flow and Borrowers’ strength to obtain the high loan to cost application. The sub-$10,000 loan per unit also facilitated the loan proceeds. A cash reserve deposit was funded by the Borrower at close in addition to recourse provided to 25% of the loan amount to mitigate the deck replacement order. The reserve funds will be released and recourse will burn off to carve-outs upon inspection and sign-off from the City on the deck replacements.
