38 Unit + 3 Acres Financing

[Rob Dahlager]

I have a deal question - quick scenario.  Have an opportunity for a 38 unit prop that has 3+ acres for further development, which has received all approvals and rights to add an additional 28 units.  There is a private lender in place that has agreed to a second position at 5%, interest only and wants to keep that funding in place for another 10 years.  We need about another $2.25M for purchase and light rehab.  We expect to have a long term lease committment (5-7 yrs) for the entire complex prior to purchase.  

Our challenge is the financing. We cannot show reserves or sufficient assets, other than the property. Total expected appraisal value is about $4.4M. So we are looking for first position funding that is just over 50% LTV. We expect to secure long term financing within 18 months. Is it reasonable to expect to find a funding source in this situation? It is a fantastic property with great income, we just dont have much to start. Any ideas or guidance is appreciated.

[Jared Rine]

@Rob Dahlager...it sounds like you have a solid deal, but if you're basically expecting 100% LTC financing between a 1st position and 2nd position loan, it's likely not going to happen, no matter how good the deal is.  Lenders want skin in the game when doing value-add deals, even if they are lending at high leverage.  You can get away with less reserves/assets, b/c that can be accounted for on the private side.  If I'm misreading, please let me know or PM.  

If you guys are bringing in funds, this deal just needs to be in front of the right lender.  How are you obtaining long term lease commitments on the whole complex?  Is the long term leases also good for the other units to be developed?  Will these leases be at market rents?  Let me know.