Opus Bank’s Structured Finance division provides a $4,950,000 loan to finance the renovation of an 88-unit multifamily property in Carmichael, CA.
Opus Bank (“Opus”) provided a $4,950,000 loan to finance the renovation of an 88-unit multifamily property in Northern California. The clients are professional real estate investors with experience executing value-add business plans in both Northern and Southern California. Due to the property’s overall condition and prior management, the rents were below the submarket. Based on traditional lender underwriting, the requisite equity required to complete the acquisition would have resulted in diluted returns.
The clients identified a conveniently located property that needed minimal exterior improvements but required interior renovations to effectively compete in the submarket. The hard cost budget to improve the property totaled $568,000 with $308,000 devoted to renovating the unit interiors. The property did not have break-even debt coverage going in, so an interest reserve was established to fund any shortfalls. A Tenancy in Common borrowing structure was necessary to preserve two of the three clients’ exchange positions.
The mortgage broker engaged for this assignment was aware of Opus’ bridge lending program and knew it would fit the clients’ needs. Proceeds were based on as-renovated rents, and the loan was structured with soft and hard cost holdbacks as well as contingency amounts. The total loan amount of $4,950,000 represented 83% of the purchase price and 73% of total project costs. At closing, Opus funded $4,300,000 with subsequent advances made monthly as needed.