Continental Partners secured $73,200,000 in proceeds for the acquisition of a 294-unit multifamily property in Miami, FL.
Art 88 b

Transaction Details

Loan Amount: $73,200,000
Rate: Floating at SOFR + 3.25% with a 1.00% SOFR Floor
Term: 4 Years, One 12-Month Extensions
LTV: 75% Initial / 70% Stabilized
LTC: 75%
Debt Yield: 4.4% In / 6.0% Out
Guaranty: Non-Recourse
Lender Origination Fee: 1% no exit fee

Mitch Paskover

Transaction Description

Summary: Continental Partners secured $73,200,000 in proceeds for the acquisition of a 294-unit multifamily property in Miami, FL. The bridge loan is structured as $70,000,000 at close and $3,200,000 in future funding. The fully-funded proceeds represent 75% LTC. The loan floats at a rate of 30-Day SOFR + 3.25% with a 1.00% floor on SOFR. Continental discussed the transaction with over 22 different capital providers and received a wide range of feedback. Many lenders declined due to the Property being constructed in the 1970s with an exit debt yield around 6%. Other lenders provided quotes but were limited to a maximum of 70% LTC. Several quotes had pricing of SOFR + 4.0%.

Opportunity: Continental was able to source a lender that underwrote to an exit debt yield of only 6.0%, resulting in maximum proceeds. There was no required interest reserve or any type of cash management during the initial loan term. The spread of 3.25% over SOFR was maintained despite many other lenders widening their spreads due to market volatility. The CLO market slowed down in the second quarter as most debt funds were repricing loans since their cost of capital increased. Continental worked with the Lender to ensure the loan closed without changing the original term sheet.

Another challenge facing floating rate bridge loans is the requirement to purchase a cap. Until several months ago, the cost of a cap was negligible. However, the expense has become exorbitant due to the current volatility in interest rates. Continental lowered the up front cap cost by reducing the cap period from three years down to two and increasing the rate at which the cap is triggered (strike price).

Result: Continental Partners was able to source a Lender who understood the asset, the submarket, and the Sponsor’s business plan, ultimately delivering maximum a loan without any shortfalls in proceeds or repricing. The Lender lowered its exit debt yield test, allowing for the loan to deliver higher loan proceeds. Continental was also able to avoid an insurance issue, by conducting an extensive market survey and working with management company that agreed to allow the Sponsor to use their master insurance policy. “