INSIDE THE DEAL: Property Demonstrates How Bridge Loans Can Work in this Market

By Keat Foong, Executive EditorHayward, Calif.—It is still possible to obtain bridge financing for value-added deals, at least towards the end of last year. And it helps if the property is located in a high-barrier-to-entry, if suburban, market. Mesa West Capital, Los Angeles, provided a $6 million loan for the acquisition and turnaround of Dorchester House Apartments, originally an undercapitalized property needing capital infusion. The property is located in built-out Hayward, Calif., one of the larger suburbs of the San Francisco Bay Area. Mark Zytko, principal at Mesa West, said that the San Francisco Bay are is a “very strong rental market” and that the asset is in “an established infill location.” “We are confident in the facelift and unit improvements and that the property will achieve rent increases to bring it competitive with the neighboring properties.” In fact, what gave Mesa West, which specializes in providing bridge loans, particular confidence in the transaction was the fact that a similar property across the street with a similar vintage was also upgraded three years ago and achieved far higher rents. Zytco noted that rents at the property across the street are about $1,200, while Dorchecter House Apartments’ average $1,000 currently. The developers is putting about $20,000 per unit into the property in substantial renovations. Zytco says that rent increases of about 10-15 percent could be achieved. The property’s original occupancy level was 91 percent, but that of comparable apartments in the neighborhood is up to 100 percent, Zytco said. [Editor’s Note: For table containing essential details about loan and property, please check back tomorrow after 12pm EST.]