Dealmaker: Continental Partners Secures $29M for California Multifamily

Continental Partners, Los Angeles, secured $29.4 million for four Los Angeles multifamily properties.

Zalmi Klyne, Director with Continental Partners, arranged all four deals. “While multifamily remains a desirable asset class, a number of factors have emerged that are making it more challenging now than before to secure competitive financing,” he said. “With rising interest rates and a record number of new deliveries in the Los Angeles market, lenders across the board are being more conservative when it comes to underwriting multifamily assets.”

The deals included $8.4 million in ground-up construction financing for a 47-unit multifamily development in the Westlake submarket.

Klyne negotiated a competitive structure by convincing the lender to underwrite the loan based on the appraised value of the proposed project rather than the purchase price of the land. The 24-month interest-only loan was sized to 65 percent of cost and priced at prime plus 1 percent.

Continental Partners also arranged $6.6 million to refinance two adjacent apartment buildings totaling 88 units in the Westlake neighborhood. The sponsor purchased the property in 2013 and invested in “significant” renovations to stabilize the asset, Klyne said.

The sponsor requested a permanent loan to refinance the asset and cash-out 100 percent of the initial equity. “Given the cash-out component, some lenders were concerned that the sponsor would have no equity in the deal post-close,” Klyne said. “By demonstrating the remarkable increase in value and net operating income since acquisition, we were able to source a lender who was willing to underwrite a loan that would meet the borrower’s cash-out requirements.”

The 10-year fixed-rate loan included a three-year interest-only period followed by a 30-year amortization schedule. The non-recourse loan priced at 4.32 percent.

In Los Angeles’ East Hollywood submarket Klyne secured $4.7 million for a 49-unit multifamily property. The sponsor requested a fixed-rate loan to purchase renovate the value-add community. Continental sourced a five-year fixed-rate loan with a one-year interest-only period followed by a 30-year amortization. The non-recourse loan priced at 3.75 percent.

Klyne also secured $9.7 million in permanent financing for Ten38 Lofts, a 32-unit property in Los Angeles’s Koreatown submarket. He said the private multifamily investor sponsor requested a permanent loan to refinance an existing construction loan.

“Despite the compelling design and immediate value of this property, concerns regarding potential oversupply and projected vacancies in this submarket presented an initial challenge,” Klyne said, noting that Continental provided several comps to justify market demand and net absorption for luxury units in the area. At application, the property was 75 percent occupied; at closing, it was nearly fully leased at 95 percent occupancy.

The 10-year fixed-rate loan has a two-year interest-only period and a 30-year amortization schedule. The non-recourse loan priced at 4.69 percent with a 1.25x debt-service coverage ratio.