Transaction Overview
George Smith Partners secured a Non-Recourse refinance loan for a 5-unit multifamily property plus one 5-bedroom single family residence in Los Angeles. The loan is fixed at a rate of 3.60% for five years. The Sponsors purchased the Property just over a year ago. Since acquisition, they completely rebuilt the single-family home and renovated one of the apartment units. A lease was signed for the single-family home at nearly $10,000 per month. This comprised more than half of the monthly income at the Property. While discussing the transaction with capital providers, GSP found that several of them declined the deal due to the high concentration of income in one unit. Another lender marked down the rental income of the 5-bedroom unit to a lower monthly rate. This resulted in proceeds that were much lower than GSP’s request.
The selected lender was comfortable with the unit mix at the Property and included the full amount of income from the signed leases. An appraisal provided support for the high rental rate of the 5-bedroom home, which was supported by comps in the submarket. Although loan proceeds were almost as much as the Borrower’s cost to purchase the Property, the Lender gave credit for the considerable capital expenditures that the Borrower had invested in renovations. As a result, proceeds were not limited by a LTC constraint. The Lender was able to provide a rate lock at application.
