Summary: Continental Partners arranged the $7,440,000 first mortgage debt financing as well as the needed $2,700,000 in a joint equity venture for a 185-unit Class C+ multifamily asset in Northern California. The first mortgage loan was 80% loan-to-purchase price and over a LIBOR-based index, that was interest-only. The equity portion of the transaction was arranged with a proprietary Continental Partners Family Office that agreed to provide 90% of the equity while the Sponsor only had to put 10% as their co – invest. The Family Office also allowed the Sponsor to charge a 1% acquisition fee and a management fee.
Opportunity: Under the Seller’s management, none of the units had been renovated and rented out at market rents, which meant the Seller had not realized the Property’s maximum value. The units had significant upside which could be realized through renovations. A number of Lenders and equity groups were bearish on the Sacramento market given the recent rise in rents and values.
Result: Continental Partners helped complete the Sponsor’s business plan and finished a market survey to confirm the market rent comps in order to justify the new business plan. Continental Partners found a Lender that provided an interest – only bridge loan facility to acquire the Property, structured an interest reserve to cover the debt service shortfall and allowed a significant allocation towards future advances for building and unit renovations. The Lender’s loan commitment was based on the prospective stabilized value of the Property. Based on an understanding of the business plan, as well as market research, the equity source agreed to larger promote for the Sponsor after the preferred return than originally requested, which allowed the Sponsor to capture a larger portion of the upside. In addition, the Lender worked with the Sponsor to provide a flexible prepayment structure, allowing the Sponsor to sell the asset without paying any significant prepayment penalties.