The Challenge
In this particular case, our client was looking to secure a new home but had not yet sold their existing property. The home they purchased was vacant and required some upgrades before they could lease it to a third-party tenant. Their existing property, located in San Jose, was also leased at the time. The situation presented multiple challenges: they needed to acquire the new property without having the funds from the sale of their current property, and they needed a lender who was familiar with a Reverse 1031 Exchange.

Many lenders shy away from these types of transactions due to the intermediary taking title to one of the properties. This added complexity requires a deep understanding of the tax code, as well as a lender who is flexible and experienced enough to manage the legal and financial intricacies.

Rubicon Mortgage Fund Steps In
Rubicon Mortgage Fund was able to step in where others hesitated. Our team is experienced with Reverse 1031 Exchanges, and we worked closely with the client and their financial advisors to structure a loan that allowed them to secure the new property before their existing home was sold. Our willingness to work with the intermediary that held the title to the new property provided the client with a smooth transaction process.

With the funds secured, the client was able to close on the new property and begin making the necessary upgrades to prepare it for leasing. This proactive approach allowed them to capitalize on the opportunity, without the pressure of rushing to sell their San Jose property.

Client Success and Feedback
The success of this Reverse 1031 Exchange highlights the flexibility and expertise that Rubicon Mortgage Fund brings to the table. By working with us, our client was able to achieve their investment goals with ease. In the client’s own words, it was “a beautiful process.”

They now have the new property ready for lease, while their San Jose property continues to generate rental income. This Reverse Exchange helped them unlock future revenue streams without the risk of losing out on a new opportunity.

Deal Overview

This recent refinance deal in Pleasanton, California, exemplifies Rubicon Mortgage Fund’s capacity to structure complex transactions that meet borrower needs while maintaining a prudent risk profile. The $11 million loan was secured for a 104,000-square-foot Class B office building at 50% occupancy. The borrowers, two brothers with substantial real estate holdings, approached us with a time-sensitive need: a $13 million loan due on the property.

Given the current instability in the office market, traditional lenders were hesitant to provide refinancing. This is where Rubicon Mortgage Fund’s flexibility and innovative approach came into play. We recognized the borrowers’ strength and the property’s potential, allowing us to craft a solution that addressed both the immediate refinancing need and the investment’s long-term viability.

The Borrowers: A Profile of Strength

At the heart of this deal are two brothers with a proven track record in real estate investment. Their portfolio demonstrates not only their expertise but also their financial strength. With substantial real estate holdings, these deep and strong borrowers bring a wealth of market knowledge and experience. Their high liquidity provides additional security to the loan, and their willingness to offer a personal guarantee underscores their commitment and confidence in the investment.

Rubicon’s Solution: A Multi-Faceted Approach

To meet the borrowers’ needs and mitigate risks, we structured a comprehensive financing package:

1. Primary Collateral: 104,000 SF Class B office building in Pleasanton, CA (currently 50% occupied); the lot is 7 acres of prime commercial property.

2. Additional Collateral: A 23,000 SF Multi-tenant industrial building in Burlingame was recently purchased for $11 million in cash. An additional $1 million in recent renovations and improvements were also put into the property.

3. Cash Contribution: Borrowers contributed an additional $2.4 million to the closing.

4. Personal Guarantee: The borrowers’ high net worth adds a layer of security and their personal belief in the deal.

5. Option for sale: The subject property in Pleasanton is currently optioned for redevelopment play for an amount well in excess to our loan.

The primary collateral is the 104,000-square-foot Class B office building in Pleasanton, CA. To strengthen the deal, we incorporated additional collateral in the form of a 23,000 SF multi-tenant industrial building valued at $11 million, with a further $1 million recently invested in renovations and improvements. This subject property, situated on 7 acres in a prime location, houses 27 tenants, providing a diverse and stable income stream.

Further enhancing the loan’s security, the borrowers contributed an additional $2.4 million in cash. The personal guarantee provided by the borrowers, backed by their high net worth, adds an extra layer of assurance to the transaction.

Critical Factors in Loan Approval

Several elements contributed to our confidence in this deal. The brothers’ extensive real estate experience and substantial holdings demonstrate their market understanding. Including the multi-tenant industrial building helps offset risks associated with the office property, while the prime locations of both properties enhance their long-term value proposition. Additionally, the office building is optioned with a local developer at a value significantly higher than our debt, indicating solid prospects.

Navigating Challenges, Delivering Solutions

This $11 million refinance deal exemplifies Rubicon Mortgage Fund’s ability to structure complex transactions that meet borrower needs while maintaining a prudent risk profile. In an era where traditional lenders are increasingly constrained, our flexible approach and deep understanding of the market allow us to step in and provide vital financing solutions.

For real estate investors facing similar challenges or seeking creative financing options, Rubicon Mortgage Fund stands ready to help. Our team of experts can craft tailored solutions that address your unique needs and market conditions.

Contact Rubicon Mortgage Fund today to explore how we can support your next real estate investment or refinancing project. Let us demonstrate how our innovative approach to lending can help you achieve your real estate investment goals, even in challenging market conditions.

The image featured above is the additional collateral industrial building in Burlingame, CA.