Transaction Overview
Transaction Description GSP arranged the acquisition financing of a 200 unit stabilized apartment building in Colorado Springs, Colorado. The property was constructed in 1949 and had been owned and privately managed by a local family for many years. The Borrower’s goal is to close on the acquisition with long term debt and raise the NOI through capital improvements and third party management that will effectively push rents.
Challenge: Amortization was an issue due to the age of the building. The Appraiser concluded a 35 year remaining life netting a 25 year amortization period which eroded proceeds. This market experiences seasonality in rents and the Buyer entered into the PSA during a trough, further eroding proceeds.
Solution: GSP re-visited the amortization and, using the property condition report and the Buyer’s improvement plan, was able to support a 30 year amortization and net additional proceeds. GSP requested a 12 year term, eliminating the stress underwriting constant and increased proceeds by over $400,000. The Lender agreed to 1 Year of interest only to off-set the slightly higher interest rate impact on cash flow. This was only the second 12 year deal funded by the Lender nationwide. A relatively new product, the market for 12 year lender secured notes is establishing itself quickly.
