According to CBRE Capital Markets, the newly formed jointventure of Kor and Buchanan, called BSP/KOR, sought a high-leveragefixed-rate loan to finance plans to spend approximately $15,000 perunit to renovate the building which includes ground-floor retail.BSP/KOR acquired the Pegasus from a KOR/Lubert-Adlerpartnership.

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Brian Eisendrath, Troy Tegeler and Bethany Bailey of CBRECapital Markets arranged the $78.3 million fixed loan at a 5.45%rate on a five-year interest only term on behalf of the owner, withFreddie Mac providing the funding. CBRE Capital Markets is one ofthe top Freddie Mac seller-servicers, with more than $1.4 billionfunded through the first half of 2008.

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CBRE Capital Markets was able to size the loan based on a 1.1interest-only debt coverage ratio and offer the sponsor flexibilityon the back end by allowing the loan to be paid off at par in yearsfour and five. Additionally, a $5 million renovation budget wasfunded and disbursed to the sponsor at closing, resulting in anincreased IRR to investors. The loan was committed and rate lockedin February 2008 with a six-month forward component.

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The Pegasus, a former office building, is one of the earliestbuildings to be redeveloped through the City of Los AngelesAdaptive Reuse Ordinance. To keep up with the market, BSP/KOR willbe renovating the common areas, the exterior and the units over thenext 36 months.

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