Bridge

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    80% Loan to Cost Bridge Loan for New/Vacant Skilled Nursing Facility in Pacific Southwest

    May 9, 2018

    Transaction Description:
    George Smith Partners arranged the $6,500,000 in bridge financing for a Skilled Nursing Facility in the Pacific Southwest. The bridge loan took out a construction loan GSP had previously placed on the same project and was necessary to provide capital to the sponsor. The sponsor needed capital to begin operations of the facility as well as to secure the required approvals to house Medicare patients. Fixed for 10 years at 6.75%, the bridge loan represented 80% of the property’s cost and is recourse. The loan amortizes over 30 years and holds a 5,4,3,2,1 prepayment penalty.

    Challenges:
    The building had no existing cash flow, and conventional lenders could not get comfortable with the unique use of the property. Additionally, while the sponsor was very experienced as an operator of Skilled Nursing Facilities, this was his first development project. Furthermore, the only way the sponsor could finish the project, start operations, and secure the necessary approvals was if this bridge loan provided all of the required capital to do so. Every aspect of building and opening the facility was not only incredibly capital intensive, but also required government approval.

    Solution:
    With an expertise in financing Senior Housing, George Smith Partners understood the importance of proving the strength of the operator of the Skilled Nursing Facility and carefully demonstrated this particular operator’s track record and abilities to interested lenders. GSP ultimately identified a community development lender that we have a very strong relationship with, who was comfortable with the niche use of the property. By proving the stabilized value of the property to the lender, GSP was able to push leverage to provide the sponsor the necessary capital for finishing construction, for starting operations, and for gaining the necessary approvals.

    Rate: 6.75%
    LTV: 80%
    Term: 5 years
    Amortization: 30 years
    Guarantee: Recourse to the entity
    Prepayment Penalty: 3,2,1

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    $41,000,000 Bridge Loan – High-Leverage Acquisition Financing for a 71k SF Office Complex in Northern California

    April 25, 2018

    Challenge: The Sponsor required a highly leveraged structure to assure accretive equity returns. The 71,000 SF office building, while located in one of the best office markets in the country was being acquired as the largest asset in the sponsor’s portfolio from an institutional seller. Additionally, from the time escrow opened the financing was required to close in 60-days or less.

    Solution: George Smith Partners successfully closed a bridge financing facility by canvassing the market for the appropriate lender who not only understood the market, but also recognized the strength of the asset within that market. This allowed us to push towards 85% leverage. From the time we started the capital marketing effort, we were in application in approximately 3-weeks and closed within the short escrow period. This assured a smooth acquisition for our client with a very sophisticated seller.

    Rate: Libor + 5.62%
    LTV: 85% As-Is
    Term: 24 Months
    Amortization: Interest Only
    Recourse: None
    Lender Fee: 1%

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    Acquisition Bridge Loan for a Value Added 10 Unit Multifamily Property in Inglewood, CA

    April 18, 2018

    George Smith Partners arranged acquisition bridge financing for a 10 unit value-add multifamily property in Inglewood, California. Despite the property’s location in Inglewood’s gentrifying northwest corridor, the lender’s appraisal value and cash flow underwriting came in below the sponsor’s proforma, which would have resulted in lower loan proceeds that could have jeopardized the transaction. To assist the lender in getting comfortable with the sponsor’s requested loan amount, George Smith Partners provided market rent and sales comparables supporting the requested loan proceeds and leveraged it’s strong relationship with the lender to ultimately get proceeds up to an acceptable level.

    Sized to 65% of total project cost, the loan includes 100% of future funding for property renovation, which includes a full gut renovation of unit interiors and an exterior upgrade. The two year bridge loan is interest only and floats at Prime plus 0.5% (5.25% today) with no prepayment penalty. Interest is not charged on the holdback until funds, and the loan was structured with an interest reserve to mitigate the property’s weak cash flow during the renovation period. The lender fee was a low 0.5.

    Rate: Prime + 0.5% (5.25% today)
    LTC / LTV: 65% / 65%, including 100% of future funding and interest reserve
    Term: 2 Years
    Amortization: Interest Only
    Recourse: Full Recourse
    Prepayment Penalty: None
    Lender Fee: 0.5%

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    $6,129,000 84.3% of Acquisition for a To-Be-Vacated Seattle Multifamily – Closed in Two Weeks

    April 18, 2018

    George Smith Partners placed 84.3% of purchase for the acquisition of a 23-unit Seattle multifamily built in 1915. This is inclusive of a 100% bank funded interest reserve. A six-month escrow allowed the seller to vacate units at lease-roll, netting a 48% occupancy at close. Our Sponsor, a foreign national, will vacate the remaining units while processing permits and execute a major rehabilitation of the property, including the addition of new rentable square footage. This rehab will be funded by a future construction loan and not this acquisition loan. To optimize pricing, two loans were structured in an A/B format where the A piece was funded by a regional bank and allowed the B piece to record a second Deed of Trust. The blended cost of capital calculates to 7.76% fixed for the initial 12-month term. Debt service is paid from a fully bank funded reserve account. A limited repayment guarantee was required from the Borrower. Closing executed two weeks from posting the application deposit, inclusive of a bank-ordered MAI appraisal and property condition inspection.

    Rate: 7.76% Fixed – Blended
    Term: 12 Months
    Options: Two – 6-Month Options
    Guarantee: Limited Recourse
    Prepayment: Open after Six Months
    Fee: 1.5% Combined

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    $18,032,000 Non-Recourse Acquisition/Bridge Loan Secured by Orange County Office Portfolio

    April 11, 2018

    George Smith Partners successfully arranged non-recourse, floating-rate bridge debt on an 85%+ occupied but under performing portfolio of multi-tenant office properties located in Orange County. The portfolio includes four newly acquired office properties and the retiring of a loan encumbering a fifth office property owned by the client. Proceeds of the loan will be used to reposition all of the properties through the implementation of a strategic renovation and leasing program. In addition, the terms of the loan provide the partnership with the autonomy to execute its value-add strategy as well as the flexibility to distribute operating cash flow along with net sales proceeds resulting from the sale of properties thereby maximizing the portfolio-level returns.

    Rate: 3.75% + 1-Month LIBOR
    Term: 3 Years + 2, 1-Year Extension Options
    Amortization: Interest-Only During Initial Term, 30-Year Amortization Schedule During Extension Period
    LTC/LTV: 66% of cost/53% as-stabilized value
    Prepayment: 15-month spread maintenance
    Guarantee: Non-Recourse

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    $16,900,000 Bridge Financing to Acquire & Renovate a 50,000 sf, 7-Story Office Building in Downtown Los Angeles

    April 4, 2018

    George Smith Partners secured $16,900,000 in bridge financing to acquire and renovate a 7-story office building (first floor retail) in the Jewelry District and historic core of Downtown Los Angeles. The property was originally built in 1913 with open floor plates and is perfectly designed for a conversion to creative office. Even though the project is well-located in the path of DTLA development, some challenges included a lack of both Sponsor experience and credit tenant preleasing. Moreover, being a purchase transaction added additional pressure to close without delays. GSP sourced a Capital Provider to get comfortable with the Sponsor’s team, business plan execution ability, and guarantor of the main leaseholder. While the original financing request estimated a 35% prelease, the Sponsor was able to obtain 60% preleasing by loan funding.

    Rate: Libor + 505
    Term: 36 months
    Amortization: IO
    Loan-to-Cost: 69% LTC
    Guarantee: Non-Recourse

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    $9,200,000 5-Day Close at 85% Loan to Cost on Unanchored Strip Retail Center

    March 14, 2018

    Transaction Description:
    George Smith Partners secured a $9,200,000 private money bridge loan to enable the renovation and re-tenanting of an unanchored retail shopping center in Orange County, California. The loan included $850,000 for future tenant improvements, renovations, and leasing commissions. The non-recourse interest only loan closed in 5 days.

    Challenges:
    The renovation of the shopping center had experienced significant construction cost overruns and needed another $850,000 for completion. Several tenants were in the process of significantly upgrading their spaces and had unfinished renovations in place. The sponsors also needed to close the loan within a 2-week time frame.

    Solution:
    GSP used its experience and relationships to identify a lender who could understand the greater value of the project and was able to demonstrate both the inherent value of the property due to its extraordinary location as well as the future value of the project as completed. As a result, the lender became comfortable with the loan’s basis per square foot and closed the loan in 5 days.

    Rate: 7.90%
    Term: One Year Term With (2) – One Year Options
    Amortization: Interest Only
    LTC: 85% Loan to Cost / 70% Loan to Value
    Guarantee: Non-Recourse

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    $4,500,000 85% Loan to Cost Bridge Financing for Buildout of 30-Unit Vacant Apartment Building in Downtown LA

    February 28, 2018

    Transaction Description:
    George Smith Partners secured a $4,500,000 private money bridge loan to enable the renovation and buildout of a vacant 30-unit apartment building in the downtown neighborhood of Los Angeles, CA. The building was already in the process of being renovated, but the sponsors needed an additional $1,400,000 to finish renovations of the property. The non-recourse interest-only loan holds a fixed rate of 7.90%

    Challenges:
    The apartment building had significant structural damage and had become a red tagged building by the City. Subsequently, the building had been placed in REAP (Rent Escrow Account Program). Additionally, renovations were only 65% finished, but the project needed another $1,400,000 for completion as all funds from the prior project financing had been spent. The building had been sitting vacant with zero cash flow for several years.

    Solution:
    GSP used its experience and relationships to identify a private local lender who could understand the stabilized/sale value of the project and not be turned away by the lack of in place cash flow. This lender was very comfortable with the Downtown Los Angeles market and was the most aggressive with proceeds. Because of the lender’s comfort with the stabilized/sale value, the local market, and the sponsor’s basis in the property, the lender satisfied all requested terms and closed in 5 days.

    Rate: 7.90%
    Term: One Year Term With A One Year Extension Option
    Amortization: Interest Only
    LTC: 85% Loan to Cost / 70% Loan to Value
    Guarantee: Non-Recourse

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    $7,100,000 Acquisition Bridge Loan for Near-Vacant Los Angeles Multifamily Property; 70% of Cost

    February 28, 2018

    Transaction Description:
    GSP secured $7,100,000 for the purchase of a near-vacant, 30-unit multifamily property in Los Angeles. The loan is structured with an initial funding of $5,970,000 with additional holdbacks of $1,130,000 in reserves. The loan floats at Prime + 0.25% with a floor of 4.75% and has two years of interest only payments. The purchaser is planning an eighteen-month renovation of the property that includes the addition of eight new units.

    Challenges:
    At the time the purchase and sale agreement was signed the property had only two units rented. Although the sponsor had extensive experience with ground-up construction of warehouse space, they had only completed one renovation of a multifamily property. The sponsor’s proforma rents were at a premium to un-renovated units in the submarket causing some lenders to stress their underwritten rents. The property was also mistakenly flagged under the LA Soft Story Retrofit ordinance even though the City had already issued a Certificate of Compliance.

    Solution:
    GSP was able to source a lender comfortable with the limited cash flow during the renovation period by emphasizing the strength of the submarket and the enormous value-add potential of the property. Rental comps for newly renovated units in the area were provided along with the borrower’s very large per-unit renovation budget. This data showed that the borrower’s rent projections are well supported by the market. A detailed budget and architectural plans were effective at securing comfort with the borrower’s capability to meet the business plan. GSP called the City and they provided the Certificate of Compliance, which led to the removal from the Soft Story list. The acquisition loan closed in 40 days from application.

    Rate: Floating at Prime + 0.25% with a floor of 4.75%
    Term: 5 years
    Amortization: 2 years Interest Only followed by 30 Years
    Prepayment Penalty: None
    LTC: 70% of as-completed value
    Origination Fees: 0.5%

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    Acquisition Bridge Loan for a 7 Unit Multifamily Property in Inglewood, CA; 70% Loan to Cost at a 5% Rate

    February 14, 2018

    George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in Inglewood, California. The property is located one mile from the City of Champions development site and the revamped Forum. Sized to 70% of total project cost, the loan includes 100% of future funding for property renovation, which includes a full gut renovation of unit interiors and an exterior upgrade. The two-year bridge loan is interest only and floats at Prime plus 0.5% (5.00% today) with no prepayment penalty. Interest is not charged on the holdback until funds, and the loan was structured with an interest reserve to mitigate the property’s weak cash flow during the renovation period. The lender fee was 0.5%.

    Rate: Prime + 0.5%
    LTC / LTV: 70% / 65%, including 100% of future funding and interest reserve
    Term: 2 Years
    Amortization: Interest Only
    Recourse: Full Recourse
    Prepayment Penalty: None
    Lender Fee: 0.5%

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    $6,647,000 Non-Recourse Acquisition Bridge Financing for Self-Storage Facility; 80% of Cost

    January 24, 2018

    George Smith Partners arranged $6,647,000 of non-recourse financing for the acquisition and reposition of a 1,713-unit self-storage facility in the Pacific Southwest. The national balance sheet lender provided a non-recourse loan up to 80% of total project cost that includes funding 100% of future planned expenses (approximately $1,100,000) to upgrade the property’s roofs, parking lots, curb appeal, signage and down units. Interest expense is not incurred on the capital improvement funds until drawn. Borrower cash flow is maximized as the loan is interest only during the initial three-year term. The loan floats at 4.25% over one-month Libor and carries two one-year extension options.

    Rate: 1 Month LIBOR + 4.25%
    Term: 36 Months plus two 12-Month Extensions
    Amortization: Interest Only During Initial Term & Extensions
    LTC: 80%
    Prepayment: 12 Month Minimum Interest
    Guarantee: Non- Recourse
    Lender Fee: 1.00% In / 0.5% Out

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    $7,100,000 Acquisition Bridge Loan for Near-Vacant Los Angeles Multifamily Property; 70% of Cost

    January 10, 2018

    Transaction Description:

    GSP secured $7,100,000 for the purchase of a near-vacant 30-unit multifamily property in Los Angeles. The loan is structured as initial funding of $5,970,000 with additional holdbacks of $1,030,000 in reserves. The 5-year term loan floats at Prime + 0.25% with a floor of 4.75% and has two years of interest only payments before amortizing over 30 years. The purchaser is planning an 18-month renovation of the property that includes the addition of eight new units.

    Challenges:

    At the time the purchase and sale agreement was signed, the property had only two units rented. Although the sponsor had extensive experience with ground-up construction of warehouse space, they had only completed one renovation of a multifamily property. The sponsor’s proforma rents were at a premium to unrenovated units in the submarket, causing some lenders to stress their underwritten rents. The property was also mistakenly flagged under the LA Soft Story Retrofit ordinance even though the City had already issued a Certificate of Compliance.

    Solution:

    GSP was able to source a lender comfortable with the limited cash flow during the renovation period by emphasizing the strength of the submarket and the enormous value-add potential of the property. Rental comps for newly renovated units in the area were provided along with the borrower’s very large per-unit renovation budget. This data showed that the borrower’s rent projections are well supported by the market. A detailed budget and architectural plans were effective at securing comfort with the borrower’s capability to meet the business plan. GSP contacted the City and secured the Certificate of Compliance, which led to the removal from the Soft Story list. The acquisition loan closed in 40 days from application.

    Rate: Floating at Prime + 0.25% with a floor of 4.75%
    Term: 5 years
    Amortization: 2 years Interest Only followed by 30 Years
    LTC: 70% of as-completed value
    Origination Fees: 0.5%