Transaction
Description: The Madison Group (TMG) facilitated the
$2,169,000 refinance of a 30-unit apartment complex in Provo Utah. The rehab of
the property had only recently been completed and the income was finally
stabilized. The borrower received a loan at 69% loan to value which met their
needs for payoff underlying debt used for enhancing the property. The loan is fixed for 30 years with an
amortization of 30 years. The borrower received a rate of 5.25%. The loan does
not adjust - it is fully fixed for 30 years. This met his financial goals to
hold the asset for the long term, to enjoy the cash flow, and to be able to
pass on to his estate without ever having to refinance. The loan is assumable
in the case that the borrower or estate decides to sell the asset in the future
Challenges: The
borrower wanted to take advantage of the current low rates even though the
property was only recently stabilized and underwriting needed to rely on future
income. The borrower could have chosen lower rates on shorter term and shorter
amortization loans, but was concentrated on a 30 year fixed product. This took
some creative underwriting to be able to rely on future income and manage the
debt service cover. As the property was dated prior to rehab, special care was
necessary to understand the upgrades and the new in-place rent.
“Matching up the borrowers needs in a product
that is available for the property are not always easy, said Jeff Meierhofer of
The Madison Group who headed up the origination team. “But we have experience
with the lender and the borrower and we were able to meet his long-term
financial goals.”