Multifamily

GSP successfully placed the acquisition debt on a 1970’s vintage, 96-unit multifamily property in suburban Salt Lake City. The $8,500,000 non-recourse senior note represented 88% of the initial purchase price. The collateral includes excess acreage that will be released for the developed of additional units in the future. The interest only three year term loan floats at LIBOR plus 5.8%. Challenge: Sponsor requested high leverage non-recourse debt but required flexibility to release and develop the excess land. The parcel release will reduce the lender’s collateral that at 88% of capitalization, is already above normal leverage thresholds. Solution:GSP worked with the lender to structure a minimum release price for the excess land based on the appraised unentitled value at closing and a minimum 85% loan to value post-release during the first 18 months of the loan term and minimum 80% thereafter. This structure allows the sponsor to capitalize on increased cash flow on the existing units due to business plan implementation and minimizes the equity contribution necessary to rebalance the loan upon release of the development parcel.