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8/14/20
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A family-owned portfolio of four Pasadena apartment buildings has been refinanced with new Fannie Mae loans totaling $32.8 mil. The 1970’s vintage properties total 176 units and are clustered together on East and West California Blvd, and Madison and El Molino Avenues.
Three of the four loans, all arranged by Andrew Levant of Kennedy Wilson, were locked at a historically low interest rate of just 2.31%. The loans are for 10 years fixed, full-term interest-only with significant cash out. The fourth property fell under the small loan program (sub $6 mil) and was priced at 2.71%.
According to Levant, “These are the lowest interest rates by far that any DUS lender has ever seen on 10-year money”. In addition to upward of $10 mil cash out, the property net cash flows were dramatically improved overnight with these interest only refinancings.
The record setting rates were based on a combination of Tier 4 pricing, which has a maximum 55% LTV and 1.55:1 DSCR, and qualifying for Fannie Mae’s “Green Program” which shaved 15 basis points off the lender’s spread and entirely dropped the artificial floor on Treasuries, saving the borrowers about 50 basis points off standard Tier 4 pricing, explains Levant. The Green Program involves pre-inspections done at each property with a goal to identify ways in which to reduce energy consumption by 30% or more. This is achieved through LED lighting and low flow sink faucets, shower heads and toilets.
The cost to carry out the Green program for all four of these family-owned and operated properties was approximately $85k (+/- $500 per door). The lender holds back 125% of the estimated cost and the borrower has at least 12 months in which to complete the work. Not only will this save the borrowers over $160k a year in cost of capital (for the next 10 years), but it becomes a true win/win for both the landlord and tenants (and the environment).
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