Loan Amount: $31,000,000
JV Equity Raised: $7,500.000
Rate: L + 420
Term: 4 Years + 1 Year Extension
Amortization: 4 Years I.O; 30 Years Thereafter.
LTC: 70% + 70% Of The Equity Required
Debt Yield: 5.7%
Prepayment: 1 Year Lockout then open to prepay
Lender Origination Fee: 0.75%
Summary: Continental Partners successfully arranged a $31,000,000 bridge loan, as well as $7,500,000 of joint venture equity for Bel Brook and Hideaway Apartments, a 146-unit property in the San Leandro submarket of the East Bay. The Sponsor requested a floating-rate, non-recourse, interest-only loan to purchase and renovate the Property. The 4-year term loan had an additional 1-year extension and four years of interest-only payments. The bridge loan was sized to 85% of purchase price and 72% of total cost, which included an interest reserve and renovation costs. This structure provided maximum flexibility for the Sponsor to utilize equity they had on hand to improve their IRR, while also providing flexible renovation dollars. The Borrower is able to pay off the loan after 12 months without a prepayment penalty. The equity portion of the transaction was arranged with an equity fund that agreed to provide a majority of the equity in a TIC Borrower structure.
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 5.75% given the low cap rate at acquisition. Continental prepared a proforma looking out to 36 months with a detailed renovation budget of approximately $3MM. 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 portfolio Lender who ultimately provided a bridge loan facility that met the Borrower’s objectives. This Lender was able to structure 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 Lender also agreed to fund the renovation reserve with invoices instead of having the Sponsor send cancelled checks to prove payment. 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.