Summary: Continental Partners arranged the $7,000,000 non–recourse debt financing for the acquisition and renovation of a class A office building in the financial district of downtown San Diego, CA. The Sponsor is a professional real estate investor specializing in ‘value-add’ opportunities with over seven years of experience. The total project cost is approximately $9,400,000. The bridge loan was sized to 100% of purchase price and 75% of total project cost; which included tenant improvements, leasing commissions, renovation costs, and an interest reserve. The Sponsor is planning to invest nearly $1,950,000 to renovate the property, partition the interior from single tenant into multi-tenant office space to achieve their targeted market rents and stabilize the property. The Sponsor is able to pay off the loan after 18 months without penalty.
Opportunity: Continental Partners was aware the Sponsor would only consider a balance sheet bridge loan without any personal guarantees. Most Lenders were having a tough time getting to initial proceeds given the higher market rents needing to be achieved at property stabilization. Continental Partners prepared a pro-forma financial outlook over the next 36 months, with a detailed lease up analysis of approximately $1,200,000 ($48 per SF). Continental Partners also provided a number of quality rental comps to justify the higher rents the property will achieve and delivered the Lender ample evidence that once the business plan is executed, the Sponsor would be able to refinance the existing bridge loan into a permanent loan product.
Result: Continental Partners found a balance sheet portfolio Lender to provide a bridge loan facility. The Lender was able to structure a $350,000 interest reserve to cover the debt service shortfall and allowed for future advances for renovations costs, with the commitment based on total project cost, accruing interest only on the dollars Sponsor draws from the renovation reserve. The Lender also agreed to fund the renovation reserve with invoices instead of having the Sponsor send cancelled checks to prove payment which was very advantageous to the Sponsor. The entire loan was completed within 30 days of executing Lender’s loan application.