According to CBRE Capital Markets, the newly formed joint venture of Kor and Buchanan, called BSP/KOR, sought a high-leverage fixed-rate loan to finance plans to spend approximately $15,000 per unit to renovate the building which includes ground-floor retail. BSP/KOR acquired the Pegasus from a KOR/Lubert-Adler partnership.

Brian Eisendrath, Troy Tegeler and Bethany Bailey of CBRE Capital 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, with Freddie Mac providing the funding. CBRE Capital Markets is one of the top Freddie Mac seller-servicers, with more than $1.4 billion funded through the first half of 2008.

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

The Pegasus, a former office building, is one of the earliest buildings to be redeveloped through the City of Los Angeles Adaptive Reuse Ordinance. To keep up with the market, BSP/KOR will be renovating the common areas, the exterior and the units over the next 36 months.