At a Glance
| Location | South Carolina |
| Transaction Type | Light Value-Add Acquisition |
| Capital Structure | Senior Bridge Debt |
| Property Type | Garden Style Multifamily |
| Property Size | 200 Units* |
| Total Capitalization | $23,000,000* |
| Cost of Capital | SOFR+350* |
| Senior Debt | $17,250,000* |
| Leverage | 75% Loan-to-Cost |
| Vintage | Early 70’s |
*Approximate figures
Project Background
Valencia Realty Capital (VRC) was engaged by a new client relationship seeking capital markets advisory services for the acquisition of a 200± unit multifamily property in a high-growth submarket of South Carolina. With strong in-place cash flow and a substantial track record, the sponsor initially structured a conventional capital stack using agency senior debt and institutional LP equity. However, as agency rates climbed during the closing process, projected loan proceeds declined, compressing returns to their LP. Due to the LP’s unwillingness to incorporate preferred equity or private lenders, they ultimately withdrew from the deal.
With a signed PSA and hard deposits at risk, the sponsor faced mounting pressure to restructure the capital stack and secure new financing. Key challenges included: (1) pushback from lenders and equity groups due to the property’s 1970s vintage, (2) a $10MM+ high-net-worth equity raise requirement, (3) a value-add strategy outside the comfort zone of many traditional capital sources, and (4) limited sponsor track record in the submarket.
Despite the complexity and time sensitivity, VRC quickly assessed the situation and generated interest from multiple bridge lenders and preferred equity providers prior to formal engagement, positioning the sponsor to move forward confidently with the acquisition.
Role of VRC
VRC immediately began re-engineering the capital stack to both support a more expedited closing and to assemble a more entrepreneurial capital team willing to underwrite and understand the nuances of the business plan. Engaging a curated group of preferred equity investors and private credit lenders, VRC sourced six tailored term sheets each providing different benefits for the sponsorship group. These ranged from fixed-rate structures designed to hedge against interest rate volatility to execution options with zero prepayment penalties, limited interest reserves, and greater flexibility in managing deal cash flows.
After evaluating competing proposals, VRC advanced two credit groups to final negotiations based on their alignment with the sponsor’s business plan, including a strong preference for fixed-rate execution and streamlined closing mechanics. Throughout the process, VRC played an active role not only in negotiating favorable terms but in facilitating seamless coordination between all stakeholders—including lender counsel, equity partners, title, insurance providers, and third-party consultants.
The sponsor ultimately selected a New York–based private credit group that demonstrated a deep understanding of the asset’s underwriting nuances and a willingness to tailor their structure around the sponsor’s timeline and project requirements.
The Deal Comes Together
The final financing solution featured a senior bridge loan with a competitive fixed interest rate in the low 8% range, structured with a 24-month term and multiple extension options that aligned closely with the sponsor’s projected hold and value-creation period. Key negotiated terms included:
- Fixed-Rate Execution: Mitigated capital markets risk and provided rate certainty in a volatile environment.
- Minimal Interest Reserves: Reduced interest-on-interest drag and preserved sponsor liquidity.
- Non-Recourse: Sponsor would not allow for any interest or carry guarantees
- Accelerated Timeline: Lender committed to a 30-day closing, ensuring the sponsor could adhere to the seller’s rigid timeline without compromising underwriting standards.
- Flexible Extension Options: Allowed for optionality in the event of market dislocation or longer-than-anticipated lease-up.
A late-stage hurdle emerged related to insurance requirements. Due to the property’s vintage (~ early 1970’s), there was heightened fire risk stemming from potential aluminum wiring—triggering lender-specific insurance underwriting restrictions. The selected capital partner required a maximum deductible not supported by the sponsor’s original insurance quote.
To resolve the issue without significantly inflating operating costs, VRC negotiated the creation of a capital escrow. Funds were held back by the lender to cover potential remediation of the aluminum wiring within the first year of ownership—thus meeting underwriting mandates while avoiding an insurance premium increase.
More Than Just a Capital Matchmaker
Through its hands-on involvement and deep lender relationships, VRC helped the sponsor pivot away from a stalled capital stack and engineer a flexible private capital solution that preserved deal-level economics, met an aggressive closing timeline, and created a manageable high net worth capital raise for the Sponsor.
VRC’s ability to navigate both standard structuring and nuanced technical issues—such as vintage-related insurance concerns—allowed the deal to move forward with minimal friction. The sponsor benefited from a fixed-rate, efficiently priced senior loan with a low cost of capital and minimal drag from reserves or insurance premiums.
By acting as an extension of the sponsor’s deal team and maintaining consistent communication across all counterparties, VRC ensured the successful closing of a complex transaction in one of the Southeast’s most promising multifamily markets.
If capital of this nature may be of interest, book a call to discuss a potential capital arrangement.
Read our last Case Study: $15.MM Senior Stretch Bridge Loan for 110-unit Naples Multifamily Acquisition
Disclaimer: This article is written as a “high-level” overview to illustrate a real-life deal example for educational purposes only. In order to preserve the confidentiality of the Parties involved in this transaction, some identifiable information has been modified slightly including approximations of financial figures. Please do not construe this article as legal, tax or financial advice. As all situations are unique and nuanced, be sure to seek the counsel of qualified professionals before making any investment or financial decisions.