ValueXpress obtained a $1,900,000 CMBS conduit loan to replace a $1,725,000 bridge loan that was obtained by ValueXpress in October 2017. The bridge loan was used to acquire a 13,652-square-feet mixed-use building located in Staten Island, New York. The building is 97% occupied and leased to a mix of local retail and office tenants.
“The original bridge loan transaction demonstrated our ability to provide financing solutions for our clients even when circumstances change at the last minute,” commented Dennis Suh, Senior Vice President of ValueXpress. “The bridge transaction was structured as a standard fixed-rate CMBS conduit loan, which is not readily available in the market for under $3 million. However, ValueXpress has a long-standing relationship with a small-balance CMBS lender that will write loans as small as $1 million for ValueXpress clients.”
During underwriting it was discovered that expense reimbursements were not being collected by the seller in accordance with the leases, and the loan did not meet minimum debt-service coverage requirements for a loan equal to 75% of the purchase price. “I petitioned the lender to fund the deal on a floating rate basis at full proceeds, and they agreed,” stated Dennis. “In return, I agreed to assist the buyer in setting up billing and collections, and once the buyer begins to receive reimbursements from the tenants, the lender had agreed to convert the loan to a 10-year fixed-rate loan.”
“The billing and collection systems were put in place during 2018 and the property cash flow increased as a result,” noted Suh. “Therefore, we were able to upsize the permanent CMBS loan to provide some return of equity to the property owner and close on the CMBS loan as scheduled.”