What does a 24-month interest-only period followed by partial amortization look like?

This $12,619,000 loan carried 24 months of interest-only payments at 7.65%, then switched to 59 monthly principal-and-interest payments of $91,235.48 at the same rate, before a final balloon payment of the remaining balance at maturity, giving the borrower two years of maximized cash flow before amortization began.

How does a step-down prepayment penalty work on a 7-year commercial loan?

This loan charged a declining prepayment fee: 3% of any amount prepaid in year one, 2% in year two, and 1% in year three, with no penalty after that, giving the borrower increasing flexibility to sell or refinance the longer they held the loan.

What triggers a change-in-ownership default on a limited partnership borrower?

This loan's default provisions specifically flagged the resignation or expulsion of any general partner holding a 25% or greater ownership interest in the borrowing partnership as an event of default, protecting the lender's original underwriting of who actually controls the entity.

Why do commercial notes include a due-on-sale clause?

A due-on-sale clause lets the lender call the full loan balance immediately due if the property is sold or transferred without consent. This loan's deed of trust included that provision, covering any sale, assignment, or conveyance of an interest in the real property, whether voluntary or involuntary.

How is interest calculated on a 365/365 basis versus 365/360?

A 365/365 method (366 in leap years) spreads the stated annual rate over the actual days in the calendar year, which produces a slightly lower effective rate than a 365/360 method that assumes a 360-day year. This loan used the 365/365 method, a detail worth noting when comparing lender quotes.

Case Study: $12.6M Credit Union Refinance for a Cahuenga Pass Property in Los Angeles

Deal at a Glance

Loan Amount	$12,619,000
Property	Commercial property
Location	Cahuenga Pass, Los Angeles, California
Transaction	Refinance
Lender	a Ventura County-based credit union
Rate	7.65% fixed
Interest-Only Period	24 months
Amortizing Period	59 monthly P&I payments of $91,235.48
Maturity	7 years (August 2031 balloon, estimated $11,924,919.83)
Interest Calculation	365/365 simple interest (366 in leap years)
Prepayment Penalty	Step-down: 3% Year 1, 2% Year 2, 1% Year 3, none after
Default Rate	18.00% per annum
Change-of-Control Provision	Resignation/expulsion of any GP holding 25%+ ownership is an event of default
Collateral	First deed of trust, assignment of rents
Closed	August 13, 2024

The Deal That Walked in the Door

We are Commercial Lending Solutions, a commercial mortgage brokerage based in Los Angeles, California (CA), and this refinance came from a limited partnership ownership group whose property sits in the Cahuenga Pass, the corridor connecting Hollywood to the San Fernando Valley. The ownership needed a sizable refinance structured with real cash flow breathing room up front, rather than a note that started amortizing on day one. Commercial Lending Solutions specializes in credit union commercial refinancing for partnership and LLC-owned properties across California and nationwide.

The Cahuenga Pass corridor has long been a stable, well-located submarket bridging two of Los Angeles's major employment and residential centers, exactly the kind of asset a credit union commercial lending desk can underwrite confidently at scale.

What Made It Hard

Sizing a large loan with a partnership borrower. At $12,619,000, this was a substantial refinance for a limited partnership structure, requiring the lender to underwrite both the real estate and the general partner's ownership and control of the borrowing entity.
Structuring cash flow around a two-year interest-only runway. Rather than a fully amortizing note from day one, the loan needed to front-load interest-only payments for the first 24 months before shifting to amortization, requiring careful payment-schedule negotiation to get the transition right.
Protecting the lender's underwriting of entity control. Because the borrower was a limited partnership, the loan needed specific default provisions tied to any change in the general partner's ownership stake, not just the standard due-on-sale language for the real estate itself.

How We Ran the Process

Trevor Damyan, a California-licensed real estate broker (CA DRE 02244836), placed the refinance with a Ventura County-based credit union, closing on August 13, 2024:

$12,619,000 secured by a first deed of trust and an assignment of rents against the Cahuenga Pass property
7.65% fixed rate, computed on a 365/365 simple interest basis (366 days in leap years)
24 months of interest-only payments beginning September 25, 2024, followed by 59 monthly principal-and-interest payments of $91,235.48 beginning September 25, 2026
A balloon maturity on August 25, 2031, roughly seven years from closing, with an estimated final payment of $11,924,919.83 assuming all scheduled payments are made on time
A step-down prepayment fee: 3% of any amount prepaid in year one, 2% in year two, 1% in year three, and no penalty at all after the third year
An 18.00% default rate and a due-on-sale provision covering any sale, assignment, or transfer of an interest in the real property, voluntary or involuntary
A change-in-ownership default trigger specific to the partnership structure: the resignation or expulsion of any general partner holding a 25% or greater ownership interest in the borrower constitutes an event of default

The refinance closed on schedule, giving the ownership group a large, fixed-rate facility with two years of maximized cash flow before amortization began, and a full seven years before the balance came due.

"On a partnership-owned asset this size, the entity structure matters just as much as the real estate. Getting the general partner language right the first time saved us from renegotiating later."
, Trevor Damyan, Commercial Lending Solutions

Why We Won This One

The two-year interest-only structure is what made this refinance work for the ownership group's cash flow, rather than accepting a note that began amortizing immediately, negotiating a real interest-only runway up front freed up capital during the early hold period while still giving the lender a fully amortizing path to eventual payoff.

Getting the partnership-specific default language right was equally important on a loan this size. A generic due-on-sale clause protects a lender against a change in real estate ownership, but a limited partnership borrower needs its own change-in-control provisions tied to the general partner's actual ownership stake, exactly the kind of detail that has to be negotiated correctly the first time on a facility this large.

Is This Structure Right for Your Deal?

If your property is held through a partnership or LLC and you need a large refinance with real interest-only runway, a credit union commercial lending relationship can deliver both scale and flexibility. We arrange permanent loans and owner-occupied and investment commercial financing from a network of more than 1,000 capital sources.

Apply for financing or call us at 310.708.0690 to talk through your refinance.

This is one of 32 closings we have arranged in Los Angeles County. Read about how we work as a Los Angeles commercial mortgage broker, see our Los Angeles commercial mortgage loans, or browse all 46 California closed deals.

Trevor Damyan

Commercial Mortgage Broker, Commercial Lending Solutions | CA DRE 02244836

Trevor Damyan is a commercial mortgage broker at Commercial Lending Solutions with a background in structured finance at CBRE and Marcus and Millichap Capital Corporation. He specializes in bridge loans, construction financing, SBA programs, DSCR loans, and complex capital structures for investors and developers across all 50 states.

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