Construction Loan / Line of Credit after Tenants Vacate

[Anonymous]

4 years, 11 months ago #2762

I’m looking at an acquisition where I have a single tenant building with 4 years left on the lease. However, when the tenant vacates, I’ll spend significant capex on the building to bring it back to market and put a new tenant in at market rates. The lender I’m talking to is willing to give me a bridge option with a construction loan (about $2.5mm) starting in year 4. Then, in year 6, I’ll refinance this out with long-term debt. What’s the best way to model this without showing a capital call from the GP/LP for this $2.5mm? I tried modeling it with Junior / Mezz debt starting in month 48 for the $2.5mm, but that didn’t work either. I can’t really use the development model, because I’m buying the building at a 10 cap and get that cash flow for the next 4 years.

Thoughts?

Thanks!

Ozzie

[Spencer Burton]

4 years, 11 months ago #3308

Ozzie,

The All-in-One doesn’t specifically contemplate this situation, but you might try using the ‘Junior/Mezz Debt module (Perm. Debt tab) together with the ‘Senior Debt (Refinance)’ module. The Junior/Mezz Debt could be renamed ‘Bridge Loan’ and set to fund in year 4. The Senior Debt (Refinance)’ could then takeout the bridge loan in year 6. The bridge loan would fund all at once as it’s currently modeled, but you could manually manipulate the module to work with your situation.

Best of luck!

Spencer