[IMGCAP(2)]Both of the loans were GSE deals, and both wereunusual in a number of respects. On the $5 million loan, theborrower still had the original HUD loan from 39 years ago,carrying a $50,000 balance, and Aryeh needed to negotiate with HUDso that the agency would drop its customary 150-day loan-payoffprocess. On the $27.8 million deal, the borrower had only threemonths of stabilized operating history on the properties ratherthan the full year that many lenders typically require.

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Aryeh explains that HUD typically requires 150 days to process aloan payoff for a Section Eight affordable property like the Resedacomplex because the federal agency has a number of concerns that itwants to address before authorizing the payoff―such asensuring that the property remains affordable. But the borrowerdidn't have time to wait for 150 days because Aryeh had locked inthe interest rate for 75 days and the loan needed to close withinthat time. "We had meetings with HUD until they dropped the 150-dayrequirement and we funded the loan," Aryeh says. "I was able toconvince HUD to go forward with an earlier payoff date so that wewere able to take advantage of the low rates that were available tous at the time."

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With only a $50,000 balance on the original HUD loan, theborrower took $4.5 million cash out and plans to use the proceedsto acquire more investment real estate, Aryeh says. He notes that aletter of intent was issued within five business days and the ratewas locked within 30 days of application.

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The owner of the three complexes financed by the $27.8 millionloan, which include one property in West Hollywood and two in WestLos Angeles, also took cash out. "Most lenders were not willing toentertain loan proposals either because of the lack of rentalhistory or the high rents," Aryeh says. He explains that theproperties have only been stabilized since September and that rentsaverage $3,800 for the units, most of which average about 1,600square feet with three bedrooms and three baths.

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However, the buildings are all in strong markets that have verylow vacancies. Aryeh demonstrated to the lender that the high rentsare justified because the units are all brand-new, built to luxurycondo specs and with no comparable product nearby. Also, theoperator, a former condo developer who has shifted to operatingapartments, has managed apartment units for more than 30 years witha history of strong occupancy in addition to his condo developmentexperience.

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