A closed Caldrion loan, shown under its project code name. The borrower and sponsor are not named. Terms are as of closing; returns are our underwriting targets, not realized results.
Real estate bridge (lease-up) · $30.5M · 68% LTC / 64% LTV · S+675
At a glance
| Asset | 248-unit garden-style apartments built in 1996, University City submarket |
| Sponsor | Regional operator with about 2,800 units under management |
| Loan | $30.5M commitment: $26.3M funded at close, $4.2M future funding |
| Leverage | 67.8% LTC · 64.1% as-is LTV · 62.9% as-stabilized LTV |
| Term | 24 months plus two 6-month extensions |
| Pricing | S+675 with a 3.00% floor (≈10.50%); 1.25% origination; 0.50% exit fee |
| Sourced and timeline | Debt broker (fee protected); term sheet day 6, closed day 34 |
The situation
The sponsor bought the property in 2023 for $33.0M with a regional bank’s acquisition-and-renovation loan, then $26.5M drawn. The plan was to fully renovate units (quartz counters, vinyl plank floors, in-unit washer/dryers, smart locks) and raise rents by about $265 a month.
186 of the 248 units were finished and leasing at that premium, so the plan worked. The problem was timing. Renovation downtime overlapped with a wave of new Charlotte supply, and occupancy fell to 78%. In-place NOI of about $1.65M no longer met the bank’s 1.25x debt service coverage covenant. Maturity was 60 days away. The bank was shrinking its commercial real estate book and would only extend for six months in exchange for a $4M paydown the sponsor didn’t have.
Sources and uses
| Uses | $M | Sources | $M |
|---|---|---|---|
| Repay bank loan | 26.5 | Caldrion loan | 30.5 |
| Finish 62 units ($1.74M), amenities and exterior ($2.46M) | 4.2 | Sponsor new equity | 2.5 |
| Interest reserve | 1.6 | ||
| Fees and closing costs | 0.7 | ||
| Total | 33.0 | Total | 33.0 |
Total cost basis is about $45.0M, so the sponsor has roughly $14.5M of cash equity behind our loan.
Structure
- Renovation money is released in 10-unit batches after a third-party inspection. Amenity and exterior work is drawn against invoices, with 10% retainage.
- The interest reserve covers the NOI shortfall for about 18 months while occupancy rebuilds.
- Sponsor principals signed completion and carry guaranties, backed by $20M net worth and $3M liquidity covenants. Otherwise the loan is non-recourse apart from standard bad-acts carve-outs.
- The sponsor bought a 24-month SOFR cap at 4.50%.
- Each extension requires at least 88% occupancy, at least a 7.25% debt yield, and a 0.25% fee.
- Cash management springs into place if occupancy is below 82% at month 12.
Risks and mitigants
| Risk | Mitigant |
|---|---|
| New supply slows lease-up | Renovated units already prove the rent premium; interest reserve and carry guaranty; a loan basis of $123K per unit, far below new-construction cost (over $250K per unit) |
| Renovation overruns | Fixed-price unit contracts; batches funded only when complete |
| Rate spike | SOFR cap |
| Agency take-out falls through | Extension options; Caldrion owns and operates real estate and could run the property |
Exit and returns, as underwritten
At 93% occupancy and an average rent of about $1,525, NOI reaches roughly $2.64M. At a 5.45% cap rate that implies a value of about $48.5M. A Fannie Mae or Freddie Mac loan at 65% LTV (about $31.5M) repays us around month 20, when the debt yield is about 8.7%. Target: roughly an 11.5% gross IRR.
Downside
If values fall 20% to about $38.8M, the loan is at 79% of value, and the sponsor’s $14.5M of cash equity still absorbs the first losses.
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This case study is provided for information only. It is not an offer of securities or investment advice, and targeted results do not indicate future results.