Bram and Allison Higgins, assistant vice president at Smith,arranged the nonrecourse, 36-month bridge loan, at Libor plus3.05%. Bram notes that despite the reluctance of many lenders,Smith found a lender that would provide a low-rate loan at 77% ofcost.
The lender funded below a break-even debt coverage ratio with aninterest reserve to cover the cash-flow shortfall. For thereposition period, George Smith Partners structured a $400,000 debtservice reserve.
The borrower plans to complete extensive renovations, as well asimplement an aggressive management program to bring rents up tocurrent market levels. The renovation is estimated to cost $1million.
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