Using Financing to Drive Investor ROI

The closing of Sunset Views in 2021 marked the first time SSRE utilized a bridge loan from a debt fund for financing. In such a low cap rate environment, acquisition financing is often constrained by debt service coverage ratio (DSCR) covenants limiting any meaningful loan to value (LTV), thereby requiring a significant equity contribution, and reducing ROI.  Not content to settle for low LTV financing or expensive preferred equity, SSRE turned to interest-only bridge financing, which allowed for a high LTV at a low-interest rate due to the DSCR being underwritten using an interest-only without principal paydown. The low 20% equity down payment has enabled SSRE to enjoy outsized returns on equity which has only been amplified by the asset’s growth in NOI and appreciating value. SSRE estimates that Sunset Views will generate a YOY ROI of over 100%!