LOS ANGELES-An institutional quality developer has secured $70 million for the cash-out refinance of Piero II Apartments, a 335-unit multifamily complex in Downtown Los Angeles. The funds will be used to pay for $65 million of construction debt.
The property owner sought interest-only financing with a floating rate and no interest derivative requirements, which is unusual. In the end, they were able to secure a non-recourse loan through an offshore bank at a LIBOR+155 with a five-year interest-only term.
“While floating rate loans usually carry lower interest rates than fixed and are generally available in the current market most borrowers are apprehensive to take on a loan without a fixed interest rate due to the risk of future payment increases,” says Gary M. Tenzer, principal and managing director at George Smith Partners, who secured the loan on behalf of the property owner.
Located at609 St. Paul Avenue, the property was completed in the fall of 2011. It is currently 95% occupied, and offers tenants panoramic views of the Los Angeles skyline. “This property benefits from a growing demand for multifamily rental housing in the flourishing downtown market,” says Tenzer. “Businesses are now gravitating to this iconic part of Los Angeles, resulting in an increased need for rental housing.”
Tenzer’s point is illustrated by the high-volume of multifamily development underway currently in the downtown market: more the 5,000 market-rate units are currently under construction. At the recent Opportunity Knocks conference in Downtown Los Angeles, investors expressed continued confidence in the market for the coming years.