100-Unit Multifamily Bridge Loan

Deal Summary

The Situation

An experienced multifamily operator acquired a 100-unit apartment community that needed operational improvements and selective unit upgrades to reach market rents. The property was a garden-style complex built in the early 1990s with a mix of one, two, and three bedroom units. Occupancy sat at approximately 82%, and the in-place rents were 15% to 20% below comparable properties in the submarket that had been recently renovated. The existing ownership had deferred capital improvements on unit interiors, common areas, and exterior landscaping, which suppressed both occupancy and rental rates. The borrower's business plan called for a targeted renovation of approximately 60 units, upgraded amenity spaces, improved curb appeal, and a rebranding effort to reposition the property within its competitive set.

The Challenge

The property's current net operating income did not support permanent agency financing at a loan amount that made the acquisition viable. The trailing twelve months of income reflected below-market rents and elevated vacancy, creating a gap between the property's current performance and its stabilized potential. The borrower needed bridge capital to fund the acquisition, carry the property through the renovation period, and execute a 12 to 18 month stabilization plan before refinancing into long-term agency or conventional debt. The property also had deferred maintenance on several building systems including roofing on two buildings and HVAC units across the older sections, adding to the upfront capital requirements.

The Structure

CapitalAx arranged a $4,800,000 bridge loan through a private lender with interest-only payments during the renovation period, a dedicated renovation reserve that disbursed funds as unit turns were completed, and flexible prepayment terms that allowed the borrower to refinance as early as month nine if stabilization targets were reached ahead of schedule. The loan-to-purchase price gave the borrower leverage to preserve working capital for operating expenses and renovation costs beyond the reserve. The private lender's willingness to underwrite to the stabilized value rather than the trailing income was the key to making the deal economics work.

The Solution

CapitalAx prepared a detailed unit renovation scope with per-unit budgets for each floor plan type, a rent comparable analysis showing the achievable rents for renovated units in the submarket, and a month-by-month stabilization timeline with projected occupancy and revenue milestones. The package also included a capital expenditure schedule for the deferred maintenance items, contractor bids for roofing and HVAC work, and the borrower's track record on three prior value-add multifamily projects with similar unit counts and renovation scopes. The private lender reviewed the materials and issued a term sheet within five business days.

The Outcome

The borrower executed the business plan ahead of schedule, completing unit renovations on the first 40 units within six months and leasing them at rents 18% above the prior in-place rates. Occupancy climbed from 82% to over 93% during the stabilization period. Effective gross income increased by approximately 25%, and the property's improved NOI positioned it for a conventional or agency refinance at a significantly improved valuation. The borrower retained full ownership of a repositioned asset generating materially stronger cash flow than at acquisition.