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RIVERSIDE, CA-The owner of a 192-unit apartment complex has closed on an $11 million refinancing that includes a rare $4 million cash-out in a deal arranged by Marcus & Millichap Capital Corp. The 10-year fixed-rate loan, at an interest rate of 5.99%, amortizes over 30 years and closed at a loan-to-value ratio of 62%.

Michael Derk, a vice president in the Long Beach office of Marcus & Millichap Capital Corp., who arranged the financing, tells GlobeSt.com that cash-outs like this one are “nearly impossible in this softening market.” This cash-out was possible, Derk explains, because of the strength and financial stability of the borrower.

Derk says that the refinancing illustrates how much lenders are focusing on borrowers rather than properties in their underwriting today. “When I get a deal today, I will underwrite the sponsor before I look at the property too closely,” he says. “You can get a weak property done with a strong sponsor, but you can’t get a strong property done with a weak sponsor.”

In this case, Derk says, the deal involved both a strong sponsor and a strong property. The apartment complex, at 5200 Chicago Ave. in Riverside, is called Canyon Crest and was 98% occupied at the time of the loan closing. It consists of a mix of one- and two-bedroom units in multiple buildings. The property, which was built in 1986, is owned by an Orange County-based private investor who has recently completed extensive renovations to the complex.

Derk notes that the refinancing of the Canyon Crest complex took place at a time of ever-tightening underwriting requirements by lenders, who are scrutinizing borrowers and properties much more closely than they were during the boom times before the downturn. “The lenders want to look at the sponsor very thoroughly and look at all of the historical operations before they make a decision,” he says.

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