Transaction Details

Loan Amount: $142,500,000
Rate: L + 3.65%
Term: 30 Months
Amortization: Interest Only
LTC: 90%
DCR: 0.70
Prepayment: 18 Month Lockout
Recourse: Non-Recourse
Lender Origination Fee: 1%

Transaction Description

Summary: Continental Partners successfully arranged a $142,500,000 bridge loan secured by a portfolio consisting of 29 multifamily properties located in San Francisco, CA. The Sponsor requested a highly levered 90% bridge loan to acquire this large portfolio. The loan was secured by three promissory notes executed by the Sponsors in favor of the Lender. Note-A was in the amount of $122,500,000, Note-B was in the amount of $10,000,000 and the mezzanine loan secured the remaining $10 million. The three loans were coterminous due in 5 – years and all three loan were interest only. From start to finish, the transaction closed in under 57 days.

Opportunity: Given the low cap rates at acquisition, many Lenders quoting the transaction were not able to hit a loan amount totaling 90% of value. All of the cap rates were below 4.25%. The bidding Lenders were concerned the Sponsor was not going to be able to buy out the rent controlled tenants and would not be able to increase the NOI to a point to take out the new loan. Continental Partners approached numerous lenders including banks, CMBS Lenders, mortgage REITS and life insurance companies to identify a Lender willing to provide a loan sized to 90% of the total cost.

Result: Continental Partners completed a comprehensive package outlining the Sponsors experience and highlighting their history with rent controlled buildings. Continental Partners created a historical chart showing the percentage of tenants who agreed to the buyout, enabling the Sponsor to rent the units at market rates. At loan closing, $4,600,000 was escrowed to fund an interest reserve to help offset the interest shortfall. Based on an understanding of the Sponsor’s business strategy the Lender was able to commit to a loan amount that met the Borrower’s request. The Lender reduced its debt yield, below their hurdle of 6.00%, in order to fund a loan amount that would ultimately meet the Borrower’s requirements.