Transaction Overview
George Smith Partners arranged the $12,940,000 first mortgage on a value-add multifamily asset from a national balance sheet bridge lender. The non-recourse loan provided the borrower 85% of the purchase price plus 70% of future repositioning costs. The three-year term is interest only with two – 1 year options. Priced at LIBOR plus 5.15%, there was a one-point origination fee and ½ point exit.
Challenge: The appraiser’s proforma property tax expense upon exit was materially greater than the original underwritten tax expense. The resulting appraiser NOI upon stabilization was well below the lender’s acceptable debt yield threshold.
Solution: By structuring a pari-passu 70/30 (lender/borrower) funding on future advances, proceeds at close were maintained as well as an immediate capital repair despite the reduced underwritten NOI. The balance of the reposition costs will be funded from cash flow after debt service.
