Transaction Overview
Transaction Description_:_ GSP successfully placed the cash-out refinance of a Los Angeles Class A multifamily property with an off-shore commercial bank. GSP was engaged to refinance a maturing $65,000,000 construction loan with new floating rate debt, interest only loan, open to prepayment at any time. The loan is priced at 30 day Libor + 155 with no floor, currently 1.72% all-in, with limited recourse to the Sponsor.
Challenge_:_ Our request was to obtain financing with no cash-flow covenants (i.e. debt-yield or DSCR benchmarks) which could trigger a cash flow sweep or force the Sponsor to re-margin the balance to conform to the DSCR constraints – a common structure with many capital providers. To maintain a low mortgage constant, we sought 5-year interest-only, floating rate mortgage with no requirement to purchase an interest rate cap, collar or other interest rate derivative.
Solution_:_ GSP promoted the Sponsor’s financial strength, the buildings’ strong lease-up history, the Sponsor’s extensive management experience and the growing demand for multifamily rental housing in the downtown market. GSP structured a floating rate loan without cash flow covenants or an interest rate cap or swap.
