Loan Amount: $19,750,000
JV Equity Raised: $10,750,000
Rate: L + 325
Term: 3 years + 2 One Year Extensions
Amortization: 3 Years I.O; 30 Years Thereafter
LTC: 65% LTC + 90% Of The Equity Required
Debt Yield: 5.43%
Lender Origination Fee: 0.75%
Summary: Continental Partners successfully arranged a $19,750,000 bridge loan, as well as $10,750,000 of joint venture equity for Americana Apartments, an 88-unit property in the Fremont submarket of the East Bay. The Sponsor requested a floating-rate, non-recourse, interest-only loan to purchase and renovate the Property. The 3-year interest only term loan had 2 additional 1 year extensions. The bridge loan was sized to 75% of purchase price and 65% of total cost, which included an interest reserve and renovation costs. The equity portion of the transaction was arranged with a combination of various equity sources, including a $1,500,000 preferred equity piece.
Opportunity: Continental was aware the Sponsor would only consider a bridge loan without any personal guarantees from the Sponsors. Most Lenders were having a tough time getting to initial proceeds as the debt yield was below 5.5% given the low cap rate at acquisition. Continental prepared a proforma looking out to 36 months with a detailed renovation budget of approximately $3.5MM. Continental also provided a number of rental comps in the submarket to justify the higher rents and proved to the Lender that once the business plan is executed the Sponsor would be able to refinance the existing bridge loan with a permanent takeout.
Result: Continental Partners sourced a Lender who ultimately provided a bridge loan amount that met the Borrower’s objectives. This Lender was able to increase initial funding to $16,225,000, a 5.43% debt yield on in-place NOI. Lender holdbacks included the budgeted capital expenditures and an interest reserve to cover the debt service shortfall and allowed for future advances for renovations costs, with the commitment based on the prospective stabilized value. The Sponsor plans to completely rebrand the property by performing extensive renovations to the interior and exterior including the installation of new vinyl wood plank flooring, modern cabinetry, quartz countertops, new kitchen appliances and tonal painting.