South Florida Brokers Get Creative With Financing Deals

MIAMI—Many closings come down to the wire, and some even have twists and turns as they do. Lately, creative deal-making strategies are taking center stage in South Florida.

Bilzin Sumberg's Adam Lustig represented Isram Residential Monterey Lakes LLC in connection with the acquisition of the Monterey Lakes Apartments, a 324-unit complex in Largo. The asset traded for $23.4 million. As part of the closing, the Bilzin Sumberg team helped secure a $15.8-million loan from Grandbridge Real Estate Capital through its Freddie Mac program. Seems straightforward on the surface—but it wasn't.

"The seller's documents provided that the loan could be paid off only on the first day of the month, period," says Lustig, a partner in the firm's real estate group. "There was no flexibility of closing on the second or the third. We had to have all funds from the buyer and the lender funded into escrow with the title company by no later than 10 a.m. on the first."

As a result of this restriction, the team had to work swiftly to have all documents finalized and executed, as well as the borrower and lender's funds disbursed to the title company to ensure the payoff deadline was met. Lustig says it was literally a race against time.

"Ultimately, we convinced the lender to wire the funds the afternoon before, and our client did the same thing," Lustig says. "Our client paid an extra day's interest on the money for being wired a day early, which wasn't an insignificant sum. But in the grand scheme of the deal, it was the best approach I could think of where we could guarantee we would avoid technical default on the agreement."

In another unusual transaction, Gateway Centre in Lighthouse Point, FL, secured $6.4 million in discounted payoff financing. The refinance deal has several twists and turns that signal how the capital markets have shifted. Terms of the fiveyear facility include a 75% loan-to-value ratio, 25-year amortization schedule and a Libor-based floating interest rate. BankUnited financed about 95% of the DPO, whereas many lenders would lend only about 80% of it, says Charles Penan, director of Miami-based Aztec Group, which arranged the financing.

The property was acquired several years ago with an acquisition loan from the now-defunct Washington Mutual Bank. "The loan was sold several times," explains Penan. "JP Morgan sold all the notes in one pool, and Gateway Centre was 100% performing. Gateway got about a 10% discount off the face value of the note to close on the sale by the end of the year."