At A Glance

Valencia Realty Capital (VRC) recently assisted a new client with an emergent capital need for a multi-family portfolio recapitalization. This case study highlights VRC’s expertise in navigating complex financing scenarios and swiftly securing capital to meet urgent requirements.

Transaction Type5-property portfolio recapitalization
Capital StructuredPreferred Equity
Capital Amount$2,250,000 at 87% “Last-Dollar” LTV
Property TypeMultifamily
Asset LocationGreater Minneapolis, MN MSA
Number of Units200+
Total Portfolio Value$30,000,000
In-Place NOI$2,100,000
In-Place Senior Debt$23,800,000 (80% LTV across the portfolio)

Bank and HUD permanent debt with rates from the mid-2%’s to low-3%’s

*Approximate figures

Sponsor Background

The sponsor is a fully vertically integrated multifamily operator managing several thousand apartment units throughout the Midwest. They approached VRC with an urgent capital need with a tight 14-day timeframe.

Preferred Equity Investor Terms

To meet the client’s $2.25 million liquidity need, VRC secured a preferred equity facility from a specialty credit investor. The “debt-like” capital was structured in second position on the capital stack, subordinate to the in-place bank and HUD mortgage loans, and included the following terms:

Total Amount$2,250,000
Last-Dollar LTV87%
Term5-Years
PricingMid-Teens IRR
Lender Due Diligence Deposit$5,000

Through VRC’s established relationship with the investor, the prepayment lockout period was reduced to 2 months, and the pricing was improved by over 100 basis points.

Execution

Upon recognizing the client’s urgent capital need, VRC initiated a swift and targeted approach to identify a suitable capital source. Within 48 hours of the initial conversation, VRC matched the client with a capital source with whom they interviewed extensively and had previously transacted. This pre-existing relationship enabled VRC to quickly understand and meet both parties’ needs.

Within three days of negotiation, VRC structured a preferred equity facility at the operating agreement level. This structure provided the sponsor with the necessary flexibility to access the required capital without significantly impacting the equity structure of the underlying assets.

Outcome

Valencia Realty Capital successfully closed the $2.25 million preferred equity facility within 11 days of the initial client meeting, showcasing VRC’s ability to efficiently and effectively meet urgent financing needs.

This case study exemplifies Valencia Realty Capital’s capability to navigate complex financing requirements and deliver timely solutions. By leveraging deep relationships and thorough understanding of capital sources, VRC ensures swift and favorable outcomes for its clients.

Valencia Realty Capital remains committed to providing strategic capital advisory services that unlock value and foster growth for real estate entrepreneurs.

To learn how Valencia Realty Capital can help to unlock trapped liquidity with “gap capital,” contact us today.


Read our last Case Study: $3MM Refinancing for Value-Add Multifamily/Medical Office Asset in Florida


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.