Multifamily Cash-out Refinance

• Capital Source: Bank
• Purpose of Loan: Cash-Out Refinance
• Loan Amount: $6,000,000
• LTV: 48%
• Rate: 4.75%
• Term: 10 Years
• Amortization: 30 Years
• Prepayment: Stepdown
• Recourse: Full Recourse

Transaction Details:

Tower Capital recently arranged a $6,000,000 loan to refinance a 62-unit multifamily property located in Phoenix, Arizona. The 10-year loan term provides the borrower with a 4.75% rate, fixed for the first five years, and then adjusts semi-annually based upon the 6-Month SOFR index plus 3.25%. The loan also contains a borrower-friendly stepdown prepayment structure to offer some flexibility for a future disposition of the asset. The loan proceeds were used to pay off the existing acquisition loan of $3.5 million, recoup roughly $1.5 million spent on capital improvements, and provide cash back to the borrower for future investment opportunities.

The property, located south of Camelback Mountain, is close to an abundant mix of restaurants, retail, and daily-need amenities and provides residents with plentiful opportunities to visit nearby neighborhoods such as Old Town Scottsdale, Downtown Phoenix, Biltmore, and Downtown Tempe. The unit mix consists of 32 studios, 28 one-bedroom units, and 2 two-bedroom units. Current ownership has made significant improvements since acquiring the property in June 2019, including replacement of major HVAC, mechanical, and plumbing systems, along with completely renovating most of the unit interiors.

Tower Capital was able to successfully source the financing on behalf of the borrower in an extremely critical timeframe due to the Federal Reserve raising rates in a dramatic fashion during the closing period for the loan.  Additional economic uncertainty has caused many lenders to become more conservative on cash out refinances so it was critical for the Tower Capital team to demonstrate the value creation during the borrower’s ownership tenure. Tower Capital was able to generate a competitive lending environment which ultimately delivered the best pricing and terms for the borrower based upon their investment objectives for this particular asset.