An experienced multifamily investor acquired a 70+ unit property in University City with financing that covered 80% of the purchase price and 80% of the full renovation budget, underwritten to post-renovation income. The appraisal's after-repair value, based on market rents, came in more than $2MM above the total cost of the project.
The investor, an experienced multifamily operator, was acquiring a 70+ unit property in University City that needed a full renovation. The usual problem with a deal like this is the gap: a lender sizing the loan to in-place income funds the purchase but little of the renovation, and the sponsor carries the rest in cash.
GSM Commercial Capital arranged financing sized to the business plan instead. The loan covered 80% of the purchase price and 80% of the entire renovation budget, underwritten to the property's post-renovation income rather than its income on the day of closing.
The appraisal's after-repair value, based on market rents for the finished units, came in more than $2MM above the project's all-in cost, purchase price plus the full renovation. The renovation is still underway; that is the value the plan is designed to create, financed at 80% rather than funded from the investor's own capital.
Most of GSM's closings are 1–4 family rentals and small multifamily. Larger acquisitions like this one are structured the same way: the capital is matched to the plan for the building, not to a lender's default box.