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.