At A Glance

LocationSouth Florida
Transaction TypeRefinance (Bridge-to-Bridge)
Capital StructuredSenior Bridge Loan
Property TypeMultifamily/Medical Office
VintageMid 1980’s
Number of units / Property Size15± MF Units / 15,000± SF Medical Office
Total Capitalization$3,300,000*
Senior Debt$3,000,000* (Private Lender)
Leverage65% LTV

*Approximate figures

Project Background

Valencia Realty Capital (VRC) was recently engaged by a repeat client, a Northeast-based experienced multifamily owner/operator. The Sponsor has been expanding their portfolio in the Southeastern U.S., seeking to identify strong yielding opportunities given the current high interest rate environment. The subject asset was acquired by the Sponsors in 2019 in an off-market transaction. They had since completed a value-add plan on both the medical office spaces as well as the majority of multifamily unit interiors. Due to a maturing in-place senior bridge loan and a challenging regional bank environment, the sponsors were being forced into entertaining sub-optimal sale scenarios. While the asset was generating strong cash flows, Sponsorship felt there was still value-add that could be completed to maximize cash flow and exit value. With the time pressure to take out the senior lender, and a desire to identify a lender that would entertain minimal pre-payment penalties, the Sponsors were seeking a flexible bridge loan solution to allow them to complete the additional work and sell the asset thereafter.

Role of VRC

VRC ran a highly targeted marketing process to secure a flexible senior bridge loan, leveraging longstanding relationships to maximize proceeds, optimize pricing, and achieve a flexible pre-payment option. Through efficient negotiation, VRC was able to secure multiple options, which all required some level of “cash in” to transact. The Sponsors reached out to their original LP investor pool, and with VRC’s assistance through negotiations between the equity and the senior lender, were able to secure a nominal reinvestment into the asset, allowing the refinance to close.

Financing Structure

The total capitalization of the deal was approximately $3.3MM. VRC arranged a senior loan solution constrained by 65% of the stabilized value from a Northeast based private lender. The remaining capital came in the form of high-net-worth equity from the Sponsor and LP’s. Given the quick closing scenario and high loan to cost, the senior debt terms were competitive, including a 11.25% rate, 2-year term with only 6 months minimum interest, 1.0% origination fee and 1.0% fee at exit, full recourse to the core sponsorship team with non-recourse guarantees to other general partners. VRC assisted the Sponsors in closing the deal in under 30 days.

Adding Value

From this case study, we gain insightful perspectives into the intricacies of multifamily real estate financing in today’s capital markets. Key takeaways include A) The importance of thorough and adaptive communication strategies among all involved parties, crucial for navigating transactions in a challenging market environment and B) The need for honest and productive negotiations with debt and equity investors. By continuously canvasing the market for active capital sources and staying up to date on their current investment criteria Valencia is able to predict and navigate sensitive deal topics up front. This also allows VRC to be nimble in our ability to quickly identify capital sources which are targeting specific deal profiles. This market knowledge combined with an in-depth underwriting and diligence process allows VRC to deliver maximum value to our clients and capital sources that we work with.

Valencia Realty Capital’s role in this transaction highlights our dedication to providing comprehensive solutions in challenging commercial real estate scenarios. Our ability to manage a variety of moving parts, from senior to reinvestment of equity capital and navigating legal complexities, demonstrates our commitment to achieving our clients’ objectives. This case study highlights our expertise in understanding our clients’ needs and pain points, ensuring our clients not only meet but exceed their financial and operational goals in the commercial real estate sector.

To learn how Valencia Realty Capital can help to increase leverage and provide gap capital financing, contact us today.


Read our last Case Study: $14.5MM Private Debt & Equity Capital For SC Multifamily Acquisition, VRC Provides Co-GP Investment


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.