Tower Capital has arranged a $7,494,000 first mortgage for the construction of a full-service convenience store, restaurant, liquor store and fuel station located in Yreka, California. The recourse loan secured by a regional bank provides the borrower with 75% of the total project cost and includes a guarantee by the State of California. The first mortgage offers 18 months of interest only payments which then converts to a 15-year term with a 25-year amortization. The rate during construction is 6.5% then converts to the 5-yr CMT + 3.50% which is subject to change every 5 years. The prepayment penalty on the first mortgage was 5%, 4%, 3%, 2%, 1% with up to 20% of principal paid in any given year without penalty. The prepayment penalty will reset every 5 years and also includes a 6-month open period at the end of the term. The 2nd mortgage which was guaranteed by the State of California carries an 18-month interest only initial term followed by a fully amortizing 15-year term.
The challenge with this deal was finding a lender to go to a remote area of California and provide a 75% LTC construction loan for a special use property. Tower Capital utilized its deep network of lenders to secure the construction lender and provide the leverage the Sponsor was seeking.
