Opus Bank’s Structured Finance division provides a $6,000,000 bridge loan for the acquisition and renovation of a 30 unit apartment building located in Castro Valley, CA
Overview of Transaction
- Professional real estate investors with experience in executing value-add business plans in both Northern and Southern California had recently sold a property and were looking to exchange into a new property while maintaining their Tenant-in-Common (TIC) borrowing structure.
- The clients identified a conveniently located property that needed little to no exterior improvements, but required significant interior renovations. Due to the property condition and prior management, the subject’s rents lagged the submarket.
- Additionally, based on traditional lender underwriting, the clients’ exchange proceeds would not have been sufficient to complete the acquisition.
Significance of Transaction
- The investors own other properties and have hands-on experience in the immediate area. This helped them to estimate that a $450,000 capital renovation budget would be sufficient to bring the subject property to market. The $15,000 per unit renovation plan included replacing the kitchen cabinets, countertops, appliances, as well as new paint and carpet.
Opus Bank's Role
- The mortgage broker, a repeat source of business for Opus Bank, knew that the bank’s bridge lending program was a perfect fit for the clients’ needs. Loan proceeds were based on as-renovated rents and the loan was structured with interest reserves and capital renovation holdbacks as well as contingency amounts. The total loan amount of $6,000,000 was 77% of the purchase price. At closing, Opus Bank funded $5,500,000 with future advances to be made monthly as units were renovated. When fully funded the total loan amount will represent 72% of total project costs.