Summary: Continental Partners arranged the $54,000,000 non – recourse debt refinancing of a Class B multifamily portfolio located in Southern California. Three years of interest – only payments maximized the Sponsor’s cash flow during the hold period, but still provided a reasonable balloon payment at the end of the term. One asset in the portfolio was situated in a high-risk flood zone, creating a possible requirement for insurance. Continental Partners identified a national bank Lender who understood the risk assessment and was comfortable with the multiple asset location, which actually mitigated the overall risk. Sized to 75% of value, the non – recourse loan was fixed at 4.13% for ten years, amortized over 30 years.
Opportunity: The Sponsor, an experienced value-add real estate investment group; had identified an underperforming multifamily portfolio which they acquired and renovated.They contacted Continental Partners to help assist with a 10 year fixed rate loan that would take out the existing financing and provide substantial cash out. Given the age of a couple assets within the portfolio, several Lenders were not comfortable completely cashing out the Sponsor.
Result: A market survey was completed by Continental Partners to show how strong the rents were for the surrounding submarkets. Based on the Continental Partners survey, the Lender was able to better understand how quickly the market was absorbing units.This more complete understanding allowed the Lender to get comfortable with the Property, so much so that they committed to a larger loan amount than originally requested by lowering their debt yield below their typical threshold of 7.5%.In addition, the Lender worked with the Sponsor in providing a flexible prepayment structure for the last 24 months of the loan, allowing the Sponsor to sell the asset without paying any significant prepayment penalties.