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LOS ANGELES-The Los Angeles office of New York City-based Meridian Capital Group arranged $27 million in permanent financing for a 395-unit multifamily portfolio of 11 properties located primarily in Los Angeles County, with one property in Orange County. The non-recourse loan with Fannie Mae has a 5.6% fixed interest rate for 10 years.

The buildings are located in Inglewood, Buena Park, Garden Grove, Baldwin Park, Lawndale, Belleflower and Anaheim. Meridian managing director Alex J. Katz, who negotiated the loan with Meridian’s Shana Klisanin, characterizes the properties as “solid, Class B apartment complexes with a working-class tenant base.” He describes them as well maintained with stable tenancy rosters. The overall occupancy level is approximately 95%, and rents are in line with market rates for the individual submarkets.

According to Katz, the deal was unusually complex because the owners are a diverse collection of tenant-in-common buyers who have owned the properties for at least 10 years. “Given that underwriting criteria is getting tighter, many lenders have become exceedingly cautious about proceeding under the TIC structure,” he explains. “You basically have as your beneficial borrower any number of people without significant real estate experience. Where you would normally have a single go-to person for any guarantees, it becomes trickier who takes the liability on their shoulders.”

Most lenders faced with a similar scenario, he continues, would have required a change in ownership structure to a “more palatable and approvable” format. Even lenders who do lend on TIC structures, he adds, generally don’t permit more than five TIC members, but in this case the number was far greater. “There were multiple properties in the portfolio that exceeded that number,” he remarks.

Though reluctant, Fannie Mae was willing to proceed because the original loan was already on its books. The original loan had initially been closed with a national portfolio lender, but the bank later sold it to Fannie Mae. “Since the agency had clearly accepted the original structure and it had been in place and performing, we were able to convince them to go forward with the new loan,” Katz tells GlobeSt.com.

According to the Meridian executive, the borrowers wanted a new loan because the original had a floating rate and they were worried that current economic conditions might cause that rate to rise significantly in coming years. “The borrowers were enjoying a relatively low floating rate, but they chose to lock in a still relatively low fixed rate for a long period,” he says.

Though the new loan is for a larger amount, Katz says the amount is only incremental. “This was not a massive cashout,” he says. “And they didn’t need money for improvements because there are no repairs required other than traditional ongoing maintenance.”

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