Deal at a Glance
| Loan Amount | $8,750,000 |
| Property | Multi-tenant industrial property |
| Location | Central Los Angeles Arts District, California |
| Transaction | Refinance |
| Lender | a bank |
| Rate | 5.42% fixed for 5 years (locked May 2023) |
| Amortization | 30 years |
| Term | 5 years (maturing July 2028) |
| Maximum LTV | 60% of as-is value |
| Minimum DCR | 1.20x, reviewed annually |
| Prepayment Penalty | 5%/4%/3%/2%/1%, reducible to 4%/3%/2%/1%/0% with a $2M deposit relationship |
| Loan Fee | 0.50%, plus 0.25% rate lock fee and 0.75% refundable rate lock deposit |
| Collateral | First deed of trust, assignment of rents, first-position UCC-1 |
| Guaranty | Joint and several, individual guarantors plus any 25%+ owners |
| Closed | Q2 2023 |
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 brought us a family ownership group holding a multi-tenant industrial property in the Central LA Arts District. The ownership wanted a bank lender to refinance into a long-term fixed rate while retaining flexibility on prepayment, and structuring the loan around a genuine banking relationship rather than a purely transactional refinance was central to getting the best available pricing. Commercial Lending Solutions specializes in industrial and permanent financing for investors across Los Angeles and California.
Industrial properties in the Arts District corridor of Los Angeles carry strong underlying demand from creative, light-industrial, and last-mile logistics tenants, and a bank willing to underwrite a long fixed-rate term against that tenant mix at a conservative leverage point made this refinance straightforward to place.
What Made It Hard
- Choosing between a 3-year and 5-year rate structure. A bank's term sheet offered two distinct paths, a 3-year Treasury-indexed option and a 5-year Treasury-indexed option, each with its own rate, prepayment schedule, and relationship-discount terms, requiring a real analysis of which structure better matched the ownership's hold period.
- Locking a moving Treasury-indexed rate. With the rate tied to the prevailing Treasury yield plus a fixed spread, the ownership had to commit to a rate lock, paying both a fee and a refundable deposit, at the right moment to capture favorable pricing before the underlying index moved further.
- Full tenant estoppel and compliance verification. The bank required estoppel certificates from every tenant plus evidence of full compliance with the city's parking requirements before approving the loan, adding real diligence work on a property with multiple independent tenancies.
"Chasing the lowest headline rate would have missed the real value here. The deposit relationship discount on prepayment was worth more to this ownership than a few basis points."
How We Ran the Process
Trevor Damyan, a California-licensed real estate broker (DRE #02244836), placed the refinance at 5.42% fixed with a bank, with the approved term sheet dated December 20, 2022 and the rate locked May 2, 2023:
- $8,750,000, subject to a maximum 60% loan-to-value of the as-is appraised value and a minimum 1.20x debt coverage ratio based on the appraisal's cash flow
- A 5-year fixed rate locked at 5.42% (quoted as the 5-year Treasury plus a 1.95% spread), selected over the alternative 3-year Treasury-indexed option offered in the same term sheet
- A 30-year amortization schedule with monthly principal and interest payments and one balloon payment due at the July 2028 maturity
- A 60-day rate lock secured with a 0.25% rate lock fee and a 0.75% refundable rate lock deposit, both returnable if the bank didn't approve the loan on the proposed terms
- A prepayment penalty of 5%/4%/3%/2%/1% across the five-year term, reducible to 4%/3%/2%/1%/0% if the borrower established a deposit relationship with the bank carrying a minimum $2,000,000 balance
- A 1.20x debt coverage covenant subject to annual review, requiring the borrower to hold a bank-controlled deposit balance equal to six months of loan payments within 30 days of any notice that the ratio had fallen out of compliance
- A first deed of trust, assignment of rents, and first-position UCC-1 filing on the collateral property, plus joint and several guaranties from the individual guarantors and any owner holding 25% or more of the borrowing entity
- Full tenant estoppel certificates required from every tenant prior to approval, along with evidence of the property's compliance with the city's parking requirements
- A 0.50% loan fee, plus a $10,000 processing fee deposit credited toward the loan fee upon approval, and standard third-party costs for appraisal, Phase I environmental review, and seismic risk assessment
The refinance closed on the five-year option, giving the ownership group a fixed-rate facility with a real, achievable path to a lower prepayment penalty schedule through the bank's deposit relationship program.
Why We Won This One
Comparing the bank's 3-year and 5-year structures side by side, rather than defaulting to whichever option quoted the lower headline rate, is what got this ownership group the right fit. The 5-year option's slightly higher rate came with meaningfully more prepayment flexibility once the deposit relationship discount kicked in, a tradeoff that mattered more to this ownership's actual holding strategy than shaving a few basis points off the rate.
Timing the rate lock against the moving Treasury index also mattered here. Locking at 5.42% on May 2, 2023, one day after an earlier version of the same term sheet had quoted 5.56%, captured a meaningfully better rate simply by not rushing the lock decision before market conditions settled.
Is This Structure Right for Your Deal?
If you're refinancing an industrial property and can support a real deposit relationship with your lender, a bank offering relationship-based prepayment discounts can be worth more over the life of the loan than a marginally lower headline rate. We arrange industrial property financing and permanent loans 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 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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