A 59-unit multifamily property in Brentwood has received a $50.25 million loan. The loan was for a Santa Monica-based WS Communities property known as Luxe Villas.
Of the $50.25 million, $45 million was a senior loan and $5.25 million was a preferred equity investment.
Santa Monica-based Gortikov Capital secured the three-year, floating-rate senior bridge loan, which came from Ready Capital, a debt fund based in New York. Gortikov Capital, meanwhile, provided the preferred equity.
Some of the money will be used to renovate unit interiors and common areas of the Luxe Villas, which was built in 2006. The property has furnished and unfurnished one- and two-bedroom units.
Bryan Gortikov, president of Gortikov Capital, represented the borrower.
“The property is vacant and they (the owners) were seeing what rents had done recently in the market,” Gortikov said. “The building was only built 15 years ago or so but it was vacated and seeing what rents were doing, they saw an opportunity to almost rebuild the interiors of the building and modernize.”
He added that “the math made sense” for WS Communities to take out the loan and update the property.
Securing the financing, however, was not without its difficulties.
“In any deal in a market like Brentwood or Santa Monica with tight cap rates, there’s always a cash flow issue,” Gortikov said. “The issue here is while the equity may be here and the value may be here, how do you justify a loan this size to refinance and capitalize all costs while still justifying the exit debt strategy and exit debt yields? By what rents have been doing, we were able to do so.”