Fident Capital secured $4.975MM of permanent financing for the Moss Apartments, a recently renovated 16-unit property in the Chula Vista submarket of San Diego. The successful closing allowed the buyer to refinance out of a more expensive bridge loan that was rapidly becoming due. The borrower is a repeat Fident client and experienced local owner-operator with a portfolio of properties across the San Diego area. The lender was a regional bank, who provided the borrower with non-recourse, fixed-rate financing for a 7-year term at 60% LTV on appraised value.
Challenges associated with closing this financing included difficulty getting to the borrower’s full ask due to loan proceeds that were constrained by net operating income and debt service coverage ratios. Fident performed a forensic analysis of the property’s operating statements to identify inconsistencies over time in revenue and operating expenses and determine the most advantageous way to present the property’s financials to potential lenders. Changes in the property management company, the renegotiation of contracts such as property insurance that drastically affect monthly cash flow, and the rollover of several tenant leases during the marketing period created additional inconsistencies around the building’s financial performance that Fident helped to navigate and explain as we presented the loan to various banks and private lenders.
The rising interest rate environment contributed to a further squeeze on loan proceeds. Fident was able to help negotiate both a rate lock and a subsequent rate lock extension so that the borrower team could assemble all necessary documentation and keep the loan close on track according to the original lender term sheet. Another challenge was the lack of directly comparable product in the area; the subject property is comprised of 16 townhouse-style units with two levels of living space over private parking garages. This unique configuration and its effect on per unit value required considerable explanation to the lending community. Despite these challenges, Fident was able to procure long-term financing that will provide the project with reduced debt service payments, at a fixed cost, for the next seven years. Fident was able to use our deep knowledge of the strong multifamily market in Chula Vista – which has enjoyed 12.4% year-over-year rent growth and sub-2% vacancy – to attract plenty of capital to the opportunity and produce multiple lender bids. Fident has closed several other financings with the lender that won the deal, and used this productive working relationship to advance the winning quote and help sell it to the bank’s lending committee. We are pleased to have helped this client with their refinance of the property’s debt and hope that our efforts will be accretive to the project’s performance for many years to come.