Dealmaker: Continental Partners Secures $38M for Multifamily
Continental Partners, Los Angeles, secured $38.1 million in financing for four transactions encompassing 12 Los Angeles multifamily properties.
Zalmi Klyne, Executive Vice President with Continental Partners, closed all four deals.
“Multifamily remains one of the most in-demand product types,” said Klyne. “But as the cycle matures, many lenders have become more conservative in their underwriting, especially in regions with high development pipelines. This is driving investors to emerging submarkets where oversupply in less of a concern.”
Klyne said multifamily investment activity in Los Angeles’s emerging submarkets is growing as residents and investors look for more cost-effective options close to urban centers. “All of these properties are all located in growing LA submarkets where demand is continuing to outpace supply,” he said.
The deals included $5.8 million in cash-out refinancing for a 41-unit property in south Los Angeles. The sponsor, a Los Angeles-based syndicator, bought the property eight months earlier and wanted to pay off preferred equity.
“Due to the sponsor’s minimal property ownership seasoning, most lenders would only lend up to 75 percent loan-to-cost,” Klyne said. “We were able to secure financing sized at 85 percent loan-to-cost and convince the lender to include all costs associated with the refinance, including loan fees, holding costs, syndication fees and closing costs.”
The three-year fixed-rate loan included a two-year interest-only period followed by a 30-year amortization. The loan priced at 3.50 percent for the first 36 months then 2.25 percent over the six-month LIBOR.
Klyne also arranged $8.7 million in cash-out refinancing through Fannie Mae’s Multifamily Green Financing program for two properties totaling 56 units in Los Angeles Westlake neighborhood.
“To ensure compliance with Fannie Mae’s Multifamily Green Financing, the sponsor was required to demonstrate 20 percent energy savings across the properties, which was achieved by installing energy-efficient appliances,” Klyne said. “Because the sponsor met these requirements, we were able to save the borrower 20 basis points on their initial rate and utilized 50 percent of the energy savings to increase the net operating income.”
The 10-year interest-only non-recourse loan priced at 3.88 percent.
In West Hollywood the firm arranged $9.9 million in cash-out refinancing for a 16-unit Class A multifamily community. Klyne noted the deal required some “finesse” due to the property’s small size. “Most lenders have a limit on the amount of loan dollars they provide per unit and per square foot,” he said. “Although this property exceeded most lender’s typical limits, we were able to secure the financing needed by getting the lender comfortable with the property’s luxury elements.”
The property received a seven-year fixed-rate loan at 4.06 percent.
Elsewhere in south Los Angeles, Klyne secured $13.6 million in acquisition and renovation financing for a 107-unit, eight-property portfolio of small multifamily assets. “Because the portfolio is comprised of multiple small properties located in emerging areas in the greater south Los Angeles submarket, it was challenging to source a lender for this deal,” Klyne said. He noted cross-collateralizing the properties overcame this challenge.
The three-year interest-only loan included a one-year extension option.
