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Special Purpose/Mixed-Use North Carolina Refinance

Rate: 6.07%
Term: 20 Years
Amort: 20 Years
LTV: 60%
Prepayment: 5,5,5,5,5, Open
Recourse

Transaction Description: George Smith Partners placed the refinance of a mixed-use commercial property in Durham, North Carolina. The asset consists of residential rental units and a day care/pre-school. Our Sponsor resides in one of the units and operates the pre-school. Excess proceeds were used to buyout an existing partner. Sized to 60% of appraised value, the recourse loan is fixed for 5 years at 6.07% prior to floating for the remainder of the 20 year term. Prepayment penalty is 5% flat for the initial fixed rate term and open thereafter.

Challenge: There were multiple State and Federal Tax Liens filed against the Borrower in addition to other credit issues that reduced the Sponsor’s credit score. The pre-school’s revenues had been declining since 2012, making it difficult for underwriters to accept this business model.

Solution: State and Federal Tax Liens were explained and documented by the Borrower’s Tax Attorney and IRS to gain a better understanding of the Liens. A lien pay-off was structured and additional proceeds were allocated to allow the buyout of the existing partner. Although business revenues had been trending down, there was an increase in enrollment at the end of 2014. This coupled with our Borrower’s plan to cut operating costs support a significantly improved 2015 EBITDA.

Advisors

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