Summary: Continental Partners successfully arranged a 95% of cost bridge loan totaling $115,988,000 secured by a portfolio consisting of multifamily properties located throughout San Francisco, CA. The loan was secured by six promissory notes, senior and mezz loans, executed by the Borrowers in favor of the Lender. The 3-year term loan had 2, one-year extensions and 3-years of interest only payments. The Sponsors highly levered 95% loan-to-cost request to acquire this large multifamily portfolio closed in under 59 days.
Opportunity: Multiple Lenders quoting the transaction were not able to come up with a loan amount totaling 95% of cost, given the low cap rates at purchase (all cap rates were below 4.35%). The Lenders bidding on the portfolio were concerned the Sponsors were not going to be able to buyout the rent controlled tenants and increase the NOI enough to refinance the highly levered loan. Continental Partners approached a multitude of lenders including banks, CMBS Lenders, mortgage REITS and life insurance companies. Continental Partners found a Lender willing to provide a loan at 95% of total cost after reviewing the detailed request presented by Continental Partners.
Result: Continental Partners completed a detailed package outlining the Sponsors history with rent controlled buildings. Continental Partners was able to present a historical chart displaying the percentage of tenants who agreed to be bought out, which enabled the Sponsor to rent the units at market rates. At loan closing, funds were escrowed to fund an interest reserve to help offset the interest shortfall. Based on an understanding of the Sponsor’s business plan the Lender was able to commit to a loan amount that met the Borrower’s request. The Lender reduced its debt service coverage covenant, below its hurdle of 0.80 DSCR, in order to originate a loan amount that would meet the Borrower’s requirements.