Transaction Overview
George Smith Partners arranged the acquisition bridge financing for an apartment complex that served as the up-leg of a reverse 1031 exchange. The property was located in Cudahy, CA, just outside of Los Angeles, and was operating with below-market rents. The complex nature of a reverse 1031 exchange required GSP to find and tailor a loan that complied with the specific rules and regulations of the reverse exchange. For example, as the 1031 accommodator is taking title to the property until the full exchange is completed, a non-recourse loan is required. With this in mind, it was crucial for GSP to work with a lender comfortable with this type of transaction and exchange. GSP ultimately identified a lender who could close in a timely fashion on the acquisition and had ample experience in financing reverse 1031 transactions. Additionally, GSP worked with the lender to get rid of any prepayment penalty, saving the borrower capital during the down-leg of the reserve 1031 exchange. The non-recourse loan holds a fixed rate of 7.5% and is interest only for the term of the loan. The loan was sized to 65% of purchase price.
