Making Debt Work for you.. – A case study:
240 Unit Multi- family
4.25 % 30 year
2- year Interest Only with option to convert to perm 10- year fixed rate
Our Sago Palms investors/borrowers purchased this distressed property several years ago utilizing a bridge loan to acquire and rehab. A bridge loan lays the foundation for a permanent solution whether the borrower is looking to refinance with permanent long term debt or sale/flip the asset etc. There are several questions we ask prior to funding a bridge loan. What leverages are being offered for this type of asset in the conventional market? What is the required conventional borrower profile? Local Cap Rates? Market Conditions? Turnaround time for stabilization? Etc…
After one year, the Sago Palms owners opted to refinance the hard money loan into a “mini perm” or 2-year loan. Prior to conventional financing, the borrowers needed more time to improve the profitability of the asset. Mini-perms offer lower rates versus hard money lenders. Their rates are typically 1-3% higher versus conventional rates. When the mini perm loan ballooned, the borrowers were indecisive to hold or sale this asset. Many of the perm debt solutions have prepayment penalties such as defeasance or yield maintenance. Eleanor Financial negotiated with a balance sheet lender a flexible 2 years’ interest only period with a low prepayment penalty and some cash out. The loan has a fixed spread which converts to a 10-year fixed rate and term after the two-year period. This allows the borrower more time to assess their objectives to either hold long term or sale the asset. Structuring the debt to align with our investor/borrowers short and long term investment goals is key to their success in the commercial real estate market.
Founded in 1999, Eleanor Financial Inc. is one of the nation’s largest commercial real estate finance and advisory firms headquartered in Houston, Texas. We work with a broad array of capital providers. Eleanor Financial Inc. arranges financing for transactions ranging from $2 million to $500 million for multifamily, co-op, office, retail, hotel, mixed-use, industrial, healthcare, student housing, self-storage and construction properties. We are currently offering long-term non-recourse debt options with leverages as high as 80% and 25-30-year amortization schedules even cash-out available including hospitality. If you need a quick close or in a distressed situation, we have the solution through one of our many bridge lenders. Please call or email us to structure financing for your next transaction.
Over $120 million closed loans in 2015