GSP arranged a 30-year self-amortized, 5-year fixed rate cash-out refinance for a Southern California Apartment Building.

Transaction Description:  Our client acquired a distressed apartment building late 2010 in an all-cash purchase. They engaged GSP to recoup a significant portion of their equity after only three months of ownership. They required a portfolio lender that would allow flexible prepayment on a fixed rate loan with no balloon risk.

Challenge: Portfolio lenders maintain strict guidelines on cash-out. Although stabilized, the asset had less than 1 year of cash-flow history. The Managing Member was willing to personally guarantee but only owned 7.5% of the borrower. Additionally, one limited partner owned in excess of 50% and would not guarantee. Lenders typically require all members with 20% or more ownership personally guarantee as well.

Solution: GSP demonstrated that the borrower had fully stabilized the asset in a strong rental market. The lender also recognized and gave credit for all of the capital upgrades added since acquisition allowing the cash-out to be a factor of total capitalization rather than just the purchase price. Finally, GSP convinced the lender to underwrite the additional limited member but not to require a personal guarantee given the financial strength and experience of the Managing Member.