Rancho San Joaquin Financing Analysis

A sponsor is requesting acquisition financing for Rancho San Joaquin Apartment Homes in Irvine CA at 70% LTV. Based on the property's financials, what's the Day 1 DSCR and does this deal meet agency underwriting standards?

Sep 11

Purchase price / basis being financed

70% LTV Market Value

Rancho San Joaquin Apartment Homes_Credit_UW_2026-09-11_v1.xlsxAI Created

Excel·128 KB·Sep 11, 2026

Day-1 DSCR ≈ 1.02x — This Deal Doesn't Clear Agency Standards at 70% LTV

Rancho San Joaquin doesn't have a disclosed T12, so the coverage test below runs off the property's actual reported revenue and market-benchmarked expenses, capitalized at the current Los Angeles-CBSA multifamily cap rate — a standard lender-case build, not a sponsor pro forma.

Lender-case NOI comes in at $5.86M , which caps the as-is value at $112.96M ($5.86M ÷ 5.19% cap) — about $307K/unit. 70% of that is a $79.07M loan . At a blended agency rate of 6.11% (interpolated between Fannie Mae's 65% and 75% LTV quotes) , 30-year amortization, that debt service produces a Day-1 DSCR of 1.02x — against the standard agency amortizing floor of 1.25x. It also produces a debt yield of 7.41%, against the 9.5% floor . LTV alone (70.0%) clears the 75% agency max, but that's the only test that does.

Loan Request vs. Agency Underwriting Standards

Test	At 70% LTV Request	Agency Floor	Result
DSCR (amortizing)	1.02x1	1.25x min	Fails
Debt Yield	7.41%1	9.50% min	Fails
LTV	70.0%	75% max	Passes
Supportable Proceeds	$61.71M1	n/a	Binding constraint: Debt Yield Test

Why it breaks: debt yield, not DSCR, is the binding constraint — proceeds are capped independent of amortization. The math only clears at $61.7M, or roughly 54.6% LTV — an $17.4M gap to the $79.07M request . Amortizing longer or adding an IO period doesn't fix this; debt yield is a proceeds-only test.

Two things make this tighter than it first looks:

The NOI cushion to a bare 1.00x DSCR is only 1.8% — essentially no room for a rent or occupancy miss even at the sponsor's requested leverage.
Recovery at a 20% value decline is 83.9% of par , below the 90% threshold lenders typically want covered — a value correction here, not a wildly stressed one, puts the lender underwater on principal.

What would change this: cut proceeds to the ~$61.7M debt-yield-supportable level (54.6% LTV) and the deal clears comfortably — DSCR jumps well above 1.25x at that balance. Short of that, an interest-only period buys nothing against the debt yield floor, but a higher-basis appraisal that supports the sponsor's assumed value, or hard evidence of in-place rent understating true market rent at this property (South Irvine asking rents run ~26% above this asset's in-place average ), could move the needle on the NOI side.

Full detail — including the amortization schedule, refi-at-maturity gap, and prepayment/defeasance analysis — is in the attached workbook.