Important Facts About “Fractured” Condos

Botsford: “Experienced sponsors need to present a dual business plan and exit strategy that encompasses the existing rental units, while marketing some of the units for sale.”

NEWPORT BEACH, CA—The financing of “fractured” condominiums needs to be structured in a manner that gives the lender all of its normal underwriting sizing guidelines, while also providing the operator the flexibility to execute its business plan, mortgage-banking firm MetroGroup Realty Finance’s VP Scott Botsford tells GlobeSt.com.

There has long been a stigma surrounding these commercial condominiums—projects where only a portion of units were sold as originally intended and the remaining units leased due to slow sales, often brought on by a downturn in market conditions. As the economy recovery continues and the market remains strong, there has been an increased interest in acquiring these properties, but due to their complicated nature, financing can be difficult to secure, even for highly promising opportunities.