Transaction Overview
George Smith Partners successfully placed acquisition financing for a 100-unit apartment building in Rialto, California, acquired as borrower’s replacement property in a 1031 exchange transaction. The borrower requested long-term permanent financing to 70% loan to purchase with the ability to rate lock at application. The property has a history of high occupancy; there was only one vacancy at time of purchase. The 3.87% five year fixed rate was locked at application and carries a 4,3,2,1 prepayment penalty. The 30 year term amortizes over 30 years.
Challenge: Rialto is an area of Los Angeles considered by many lenders as transitional. Those lenders initially contacted would only provide leverage to 65% of purchase on terms of 7 to 10 years. Crime records identified the property as having 3 meth labs in the late 1990’s. Although those operations ceased 14 years ago, many lenders tightened their underwriting to limit loan proceeds.
Solution: Mr. Stein demonstrated to a portfolio lender the borrower’s proficiency in leasing and management of similar properties. The capital provider understood the value of the Sponsor’s management and leasing experience and became comfortable with the property’s long-term occupancy history and consistent debt coverage ratios.
