Transaction Overview
George Smith Partners has successfully renegotiated the construction debt on a $10,000,000 construction loan on a 15-Unit multifamily property in West Los Angeles.
Challenge:
GSP arranged the original fixed-rate construction loan with a debt fund in 1Q-2020, prior to the Covid moratoria. However, due to the uncertainty of the supply of labor and materials during the pandemic, the Sponsor decided to delay vertical construction for about one year which delayed the lease-up and stabilization thereby reducing the remaining term which reached maturity in May 2023.
Despite the Sponsor’s willingness to pay down the indebtedness, GSP determined that a restructuring of the existing debt would be more cost effective than bringing in additional equity.
Solution:
GSP was able to negotiate with the construction Lender to convert its loan into a one-year bridge facility. The Lender increased the interest rate by 50 bps but did not charge a new origination fee. Hopefully, in one year, the financing markets will improve and an $8,000,000 loan at more conventional pricing will be available.
