Deal at a Glance
| Loan Amount | $8,500,000 |
| Property | Multi-tenant creative office / commercial campus |
| Location | Sherman Oaks, California (San Fernando Valley, Los Angeles) |
| Transaction | Cash-out refinance (payoff of incumbent credit union) |
| Lender Type | Long Beach-based relationship bank, balance sheet execution |
| Rate | 3.85% fixed years 1-7, then 10-Year Treasury + 2.50% fixed years 8-10, 3.85% floor |
| Term / Amortization | 10 years / 25-year amortization (approx. $44,426.82 monthly P&I) |
| Leverage | Lesser of 55% of appraised value or 1.25x DSCR sizing |
| Prepayment | None |
| Fees | No loan fee; approx. $500 documentation fee |
| Closed | Funded May 12, 2022; closed May 13, 2022 |
The Deal That Walked in the Door
We are Commercial Lending Solutions, a commercial mortgage brokerage based in Los Angeles, California (CA), and this one closed practically in our backyard. Commercial Lending Solutions specializes in cash-out refinancing and relationship bank placements for commercial property owners across Los Angeles and Southern California. The clients: a Los Angeles family ownership group, based in Hollywood, who own a multi-tenant creative office property on one of Sherman Oaks' main commercial boulevards, in the heart of the San Fernando Valley's media corridor. The building runs as a small campus: production companies, a payroll services firm, a rooftop wireless antenna lease with a national carrier, and a mix of smaller suite tenants.
The property carried roughly $7.15 million of credit union debt, and the owners wanted two things: a lower long-term fixed rate while the window was still open in early 2022, and meaningful cash out of $8,500,000 to redeploy into their other real estate. The complication is that "creative office with a rent roll full of production tenants" is not the easy sell to a credit committee that a drugstore with a corporate lease is. The income is real, but it comes from room rental agreements, short-term production leases, and an antenna license, and every one of those line items invites questions.
What Made It Hard
- A granular, unconventional rent roll. Production company tenants and room rental agreements read as volatility to most underwriters, even when collections are spotless. We had to package three years of income statements (2019, 2020, and 2021) showing the property earned through the pandemic.
- Cash out on top of a big payoff. Asking for $8.5 million against a $7.15 million payoff means the bank is writing a check for more than a million dollars of the owners' equity back to them. Banks scrutinize cash-out dollars far harder than acquisition dollars.
- Estoppels from small tenants. The bank required tenant estoppel certificates and full executed leases with every amendment. Chasing signatures from a half-dozen small operators is unglamorous work that kills closings when it starts late. We started it in week one.
- A rate market starting to move. The proposal letter was issued March 10, 2022, days before the Federal Reserve began its hiking cycle. The 60-day rate lock from signature was the whole ballgame.
"A creative office rent roll full of production tenants scares off underwriters who only know net leases. Once we broke the income down deal by deal and showed three years of collections through the pandemic, the bank saw exactly what we saw: a stable, well-run property."
How We Ran the Process
Trevor Damyan, a California-licensed real estate broker (CA DRE 02244836), placed this loan with a regional bank after we determined that low-leverage, strong-sponsor deals like this belong with Southern California relationship banks. The winning proposal came from a century-old Long Beach-based bank whose commercial real estate appetite we know well. Their letter arrived March 10, 2022, the clients signed March 11, and the 60-day rate lock started running. The structure we negotiated:
- $8,500,000, capped at 55% of appraised value and sized to a minimum 1.25x debt service coverage ratio
- 3.85% fixed for the first seven years, then resetting to a fixed rate at the prevailing 10-Year Treasury plus 2.50% for years eight through ten, with a 3.85% floor
- 10-year term, 25-year amortization, monthly principal and interest of approximately $44,426.82
- No loan fee and no prepayment penalty, only an approximately $500 documentation fee, a 1/10% plus $500 processing and escrow charge, and third-party costs (the appraisal and environmental review ran $7,185, collected up front and reconciled at closing)
- Deposit relationship encouraged, not mandated, a meaningfully softer ask than the hard operating-account covenants most relationship banks demand
Diligence moved fast because we made it move fast. The appraisal was ordered immediately and delivered in early April. Estoppel certificates, including the national wireless carrier's, were signed by mid-April. The credit union payoff demand came in at $7,147,791.11 plus accrued interest, and the loan funded May 12, 2022, with closing the following day. After the payoff, title, and costs, more than $1.2 million wired back to the owners.
Why We Won This One
Timing won this deal. Rates began climbing within weeks of our term sheet, and a borrower who had waited until summer 2022 would have paid materially more, if a bank would have quoted the cash-out at all. The lesson we give every owner sitting on cheap-looking equity: the best time to negotiate a refinance is when you do not need one, because that is when lenders compete for you.
Structure mattered too. A 3.85% fixed rate for seven years with zero prepayment penalty is a rare combination; fixed-rate bank money almost always carries a declining prepay schedule. Because we came in at 55% leverage with a sponsor whose global financials were airtight, we had the negotiating room to strip the penalty entirely, which left the owners free to sell or refinance the moment a better opportunity appeared. And by front-running every diligence item, the appraisal, the environmental questionnaire, the leases, and the estoppels, we compressed signature-to-funding to about sixty days and kept the rate lock intact.
Is This Structure Right for Your Deal?
If you own a stabilized commercial property in Los Angeles or anywhere in California and want to convert trapped equity into working capital without giving up a low fixed rate, this is exactly the deal we run every week. We arrange permanent loans, owner-occupied commercial loans, and bridge loans from a network of more than 1,000 capital sources, including the relationship banks that will still write no-fee, no-prepay paper for the right sponsor.
Apply for refinancing or call us at 310.708.0690 to talk through your property.
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 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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