Value-Add Multifamily Repositioning
Bridge-to-permanent execution for a 96-unit apartment renovation in suburban Maryland.
Deal Overview
| Property | 96-unit garden-style apartment community |
| Location | Prince George's County, Maryland |
| Strategy | Value-add acquisition and repositioning |
| Total Capitalization | $8.2M |
| Timeline | 18 months (acquisition to permanent refinance) |
The Situation
A Maryland-based real estate sponsor identified a 1980s-vintage apartment community that had suffered from years of deferred maintenance and below-market management. Occupancy had fallen to 78%, and rents were 20-25% below comparable renovated properties in the submarket.
The sponsor saw an opportunity: acquire at a discount to replacement cost, renovate unit interiors and common areas, improve operations, and stabilize at market rents before refinancing into long-term agency debt.
The challenge: The property's current condition and occupancy disqualified it from conventional or agency financing. The sponsor needed bridge capital that could fund both acquisition and renovation, with a clear path to permanent takeout.
The Challenges
Below-stabilization occupancy
78% occupied, below the 90% threshold required by most permanent lenders
Significant capital needs
$1.4M renovation budget for unit upgrades, common area improvements, and deferred maintenance
Compressed timeline
Seller required 30-day close; conventional financing couldn't execute in time
Recourse sensitivity
Sponsor preferred non-recourse or limited recourse structure
Our Approach
Brookmont structured a two-phase capital strategy:
Phase 1: Bridge Acquisition + Renovation
- 24-month bridge loan with 6-month extension option
- 80% of purchase price + 100% of renovation budget
- Interest-only payments with interest reserve
- Limited recourse with standard carve-outs
Phase 2: Agency Permanent Refinance
- Fannie Mae permanent loan upon stabilization
- Target 75% LTV on stabilized value
- 10-year fixed rate, 30-year amortization
- Full non-recourse
The Capital Structure
Bridge Financing (Acquisition + Renovation)
| Purchase Price | $6,200,000 |
| Renovation Budget | $1,400,000 |
| Closing Costs & Reserves | $600,000 |
| Total Project Cost | $8,200,000 |
| Bridge Loan | $6,400,000 | 78% |
| Sponsor Equity | $1,800,000 | 22% |
Permanent Refinance (Post-Stabilization)
| Metric | At Acquisition | At Stabilization |
|---|---|---|
| Occupancy | 78% | 94% |
| Average Rent | $1,050/unit | $1,340/unit |
| NOI | $385,000 | $624,000 |
| Appraised Value | $6,200,000 | $8,350,000 |
Agency Loan Terms
$6,260,000 (75% LTV)
5.85% fixed
10 years
30 years
Non-recourse
The Execution
Months 1-2: Acquisition
- Closed bridge financing in 23 days
- Took possession and initiated property management transition
Months 2-8: Renovation
- Completed interior renovations on 60 units (kitchens, baths, flooring, fixtures)
- Upgraded common areas, landscaping, and exterior paint
- Addressed deferred maintenance items
Months 6-14: Lease-Up
- Increased occupancy from 78% to 94%
- Raised average rents 28% on renovated units
- Improved online reputation and marketing
Month 16: Permanent Refinance
- Ordered new appraisal reflecting stabilized operations
- Appraised value: $8.35M (35% above acquisition)
- Closed Fannie Mae permanent loan
- Returned 100% of sponsor equity + $460K profit distribution
The Outcome
The sponsor now owns a stabilized, cash-flowing asset with no remaining equity at risk, generating passive income while the property continues to appreciate.
Key Takeaways
1. Bridge-to-permanent strategy works
For value-add deals, bridge financing provides the flexibility to execute renovations and stabilize before locking in long-term debt at favorable terms.
2. Renovation scope drives returns
The $1.4M investment generated $2.15M in value creation—a 1.5x return on renovation capital.
3. Occupancy is the unlock
Moving from 78% to 94% occupancy was as important as rent growth in achieving stabilization.
4. Timeline matters
Completing the business plan in 16 months minimized bridge loan carry costs and accelerated equity returns.
This case study represents a representative transaction. Specific details have been modified to protect client confidentiality.