Bridge

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    $5,100,000 Non-Recourse Bridge to Reposition an Industrial Building to Creative Office for a Single, Non-Credit Tenant

    June 21, 2017

    George Smith Partners arranged $5,100,000 of non-recourse, bridge financing to complete the conversion of a 26,000 square foot, 100% vacant, 1920’s vintage, industrial building into creative office space in a major Southwestern city. The property is well-located near a central business district and is 100% preleased to a single, non-credit-rated tenant. Although not investment-grade, GSP was able to source a Capital Provider comfortable with the tenant’s financial history and business operations. The sponsor acquired the property with cash and proceeds will be used to complete the conversion, taking advantage of the growing creative office market.

    Term: 24 Months + Two 12 mo. Extensions
    Rate: Confidential
    Amortization: Interest Only
    LTC: 74%
    Guaranty: Non-Recourse

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    $14,048,000 Cash-Out Bridge Loan for Six Mid-Construction Luxury Waterfront SFRs in Florida

    May 31, 2017

    Transaction Description:
    George Smith Partners secured a total of $14,048,000 cash-out bridge financing for six mid-construction luxury waterfront single family residences in Naples, Florida. The sponsor self-funded the developments to date and sought to use the proceeds to finish construction and recapitalize for other projects.

    Challenge:
    Our sponsor requested maximum loan proceeds in order to pay off an existing bridge loan that was leveraged at an average of 50-60% LTC, finish the construction, and provide cash-out for other similar developments. Many lenders were not comfortable providing a bridge loan to refinance another bridge loan and reluctant to provide cash-out before the projects were complete. In addition, luxury home development was deemed risky due to its vulnerability in a market downturn.

    Solution:
    GSP identified a private capital source who was comfortable with the incomplete projects and understood the upside potential at completion. Our Sponsor’s considerable development track record and financial strength further encouraged the lender not to shy away from the challenges. Sized to an average of 70-75% of total cost and 45-55% of as-complete value, the 12-month loan is interest only with no prepayment penalty or yield maintenance.

    Rate: 10%
    Term: 12 Months + Two 3 Month Extension
    Amortization: Interest Only
    LTC: 70-75%
    Guaranty: Recourse
    Prepayment Penalty: None

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    $9,000,000 Bridge Loan for 110 Unit SRO Downtown

    May 17, 2017

    Transaction Description:
    Bryan Shaffer successfully placed the $9,000,000 bridge loan for a 110 unit Single Resident Occupant (SRO) apartment building in Downtown Los Angeles.  The loan allowed for the renovation and lease up of a 1920’s vintage building.

    Challenge:
    Prior to engaging George Smith Partners, the borrower attempted to finance this asset with multiple capital providers, but was unsuccessful due to its SRO use.  SROs are essentially studio apartments with a sink and kitchenette, but provide residents with shared bath and kitchen privileges.  The lack of kitchens and full baths in the units, along with past operating issues of Hotel SROs, makes them challenging to finance.  The borrower also required a return of capital given his length of ownership, management, and continued maintenance of the asset which is typically a challenge on un-stabilized assets.

    Solution:
    GSP used its extensive market expertise and lender relationships to identify a Southern California based lender with unique bridge loan programs that would allow the un-stabilized project to execute business plan.  With an in-depth understanding of this product type and the downtown market, GSP secured a loan for 70% of the current value plus 70% of planned improvements during the loan.

    Term: 5 Years
    Amortization: 30 Years
    Rate: 4.75%
    Prepayment Penalty: No Prepay
    LTV: 70%
    Origination Fee: ½ Point
    Guaranty: Recourse

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    70% Leverage Non-Recourse Refinance of a 65% Occupied Office Complex with Single Tenant Concentration and Rollover Risk at Loan Maturity

    May 3, 2017

    GSP arranged $16,510,000 in non-recourse first mortgage financing from a national debt fund on a 65% occupied Class A office complex in North San Diego County, California.  A credit tenant with a 2022 lease expiration accounts for over 90% of current property income and the vacancy is mostly comprised of a single 26,000 square foot contiguous space.

    GSP marketed the transaction by filtering out vacant spaces that were not competitive with the subject property and highlighted the lack of large customizable available spaces in the market which the subject property possessed.  GSP sourced a lender familiar with the local office inventory and recognized the leasing potential of a large customizable floor plate in a market with increasing demand for corporate headquarter space.

    In order to maximize Sponsor cash flow, the loan is structured as interest only with a three year initial term and two one-year extension options. To mitigate rollover risk at loan maturity, a cash flow sweep commences if the existing credit tenant does not exercise an early lease renewal by month 30 of the loan term. $14,750,000 in loan proceeds funded at closing with an additional $1,760,000 funding for lease-up related tenant improvements and leasing commissions to be disbursed prior to month 24 of the loan.  Interest on the future funding is not charged until the earlier of disbursement of proceeds or month 24 of the loan.  The first mortgage debt priced over one-month LIBOR and required a LIBOR cap with a 3.00% strike price for the initial term.

     

    Rate: Confidential
    Term:
    Three years plus two 12-month extensions
    Amortization:
    Interest Only (initial term and extensions)
    Max Loan to Value:
    70% Initial, 65% stabilized
    Prepayment:
    15 months spread maintenance, open thereafter
    Lender Fee:
    1.00%
    Guaranty:
    Non-Recourse

     

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    $5,500,000 Acquisition Bridge Loan for a 70% occupied Los Angeles Office

    April 26, 2017

    Transaction Description:
    George Smith Partners arranged $5,500,000 in acquisition proceeds on a 15,122 square foot Los Angeles office building. Floating at Prime + 0.5%, the 3 year loan is interest only for 18 months before amortizing over 25 years for the balance of the term. Sized to 65% of the purchase price, there is no prepayment penalty for this loan.

    Challenges:
    Despite the prime location, the subject had somewhat aged interiors and exteriors and was just 70% occupied when our Sponsor executed the purchase contract.  The income was below break-even debt coverage on the proposed loan. Most of the in-place tenants were paying well below market rent. One tenant was under a month to month lease and several others were facing lease roll in the next six months. On-site property management was charging an above market rate. Actual historical cash flow was well below potential.

    Solution:
    GSP researched comparable rent and competitive operating data that proved out our Sponsor’s pro forma rents and business plan. Our Sponsor’s considerable success adding value to similar office properties over the past several years supported the business plan for the loan request. An aggressive lease campaign was initiated during due diligence, securing letters of intent from multiple tenants that would bring occupancy to 95%. A small debt service reserve was structured until the tenants took occupancy to cover all operating loss and mortgage expenses in the short interim.

    Term: 3 years
    Rate: Prime + 0.5%
    Amortization: 18 months IO; 25 years thereafter
    Prepayment Penalty: None
    LTC: 65% maximum
    Origination Fees: 0.5%
    Recourse

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    $11,845,000 Non-Recourse Acquisition and Reposition Financing up to 75% of Cost on a Non-Cash Flowing Retail Property in Los Angeles

    April 19, 2017

    George Smith Partners arranged an $11,845,000 first mortgage on a value-add retail property with no cash flow located along the main retail corridor of one of the hippest neighborhoods in Los Angeles. The national balance sheet lender provided a non-recourse loan to up to 75% of total project cost including 100% of future capital expenditure funds to gut renovate the asset and convert the property to high-end retail plus an addition of four apartment units. Due to the lack of cash flow, the lender structured a 20-month interest and carry reserve to cover debt service during the reposition period. Over 50% to total loan proceeds are allocated for future funding. Interest is not charged on funds until drawn.

    Rate: 30-Day LIBOR + 6.00%
    Term: Three years plus two 12-month extensions
    Amortization: 24 months interest only; 25-year amortization thereafter
    Max Loan to Cost: 75%
    Prepayment: 15-month lockout; open thereafter subject to 1.00% exit fee
    Guaranty: Non-recourse
    Lender Fee: 1.00%

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    $1,253,000 Acquisition Bridge Loan at a 4.50% rate

    April 12, 2017

    Transaction Description
    George Smith Partners arranged a $1,253,000 bridge loan for the acquisition of an 8-unit, value-add multifamily property in Long Beach, California. 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% with no prepayment penalty. Interest is not charged on the hold back until funds are drawn and the lender fee was 0.5%. The property is located in an area of Long Beach that is within a growth corridor, but has yet to gentrify.  The sponsor’s plan includes noticing all below market leases in a fairly short window. By emphasizing the sponsor’s track record of re-positioning similar properties as well as current market rents and occupancy, GSP was able to assist the lender in gaining comfort with the market. The loan was structured with an interest reserve to mitigate the property’s weak cash flow during the renovation period. The loan closed in 45 days from start of application.

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

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    $7,600,000 Bridge Loan on 50% Occupied Class C Multifamily

    April 3, 2017

    George Smith Partners secured $7,600,000 non-recourse bridge financing for a 50% occupied class C multifamily property in a secondary market located in the Southwest.   Proceeds included $2,127,000 for renovation on dilapidated units and capital expenditures as well as an interest reserve.  The sponsor acquired the property with no reliable operating history utilizing a seller carry back note.  Many of the tenants were late on their rent at the time of acquisition.  The sponsor systematically put in place stricter underwriting for tenant qualification and value engineered a renovation budget.  Most lenders were unable to understand the business plan, despite the sub-market being at 94% occupancy and the sponsor’s recent rentals already hitting pro forma with very light unit turn expenses.  GSP identified a lender with extensive knowledge of multifamily re-positioning and became comfortable with the pro forma cash flow and stabilized value.  In addition, the lender has capacity to offer a fixed rate permanent loan at stabilization to mitigate refinance risk.

     

    Rate: LIBOR+5.50%
    Amortization: Interest Only
    LTV: 65% LTV
    Term: 24 months
    Lender Fee: 1%

     

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    $8,200,000 Quick Close Financing at 90% Loan to Cost on Un-Anchored Strip Retail Center

    April 3, 2017

    Transaction Description:
    George Smith Partners secured a $8,200,000 private money bridge loan to enable the renovation and re-tenanting of an un-anchored retail shopping center in Orange County, CA. The loan included over $1,500,000 of cash out to the sponsor at closing as well as $600,000 for future tenant improvements and renovations.

    Challenges:
    The sponsors requested maximum cash-out proceeds that dissuaded many capital providers. Additionally, several tenants were in the process of significantly upgrading their spaces and had unfinished renovations in place. Finally, the project had unsettled legal issues with one of the major tenants.

    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.

    Rate: LIBOR + 8% (Capped at 9%)
    Amortization: Interest Only
    LTC: 90% Loan to Cost / 75% Loan to Value
    Term: One Year Term With (2) – One Year Options

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    $19,500,000 Acquisition and Reposition Financing with Low 5.00% Going-In Debt Yield on a Multifamily Property in Seattle, Washington

    March 28, 2017

    George Smith Partners arranged a $19,500,000 first mortgage on the acquisition of a value-add multifamily asset located within one of Seattle’s trendiest neighborhoods.  The national balance sheet lender provided a non-recourse loan to 70% of total project cost including 100% of future capital expenditure funds to refresh the property’s exterior, interiors including living and common area spaces, and convert 13 furnished extended stay style “executive suites” to market-rate apartments.  Interest expense is not incurred on future funding until drawn.  Cash flow is maximized as the loan is interest only during the initial three-year term and priced at 4.50% over 30-Day LIBOR.  Due to low going-in cash flow, the lender structured an interest reserve to cover debt service during the reposition period.

    Rate: 30-Day LIBOR + 4.50%
    Term: 36 months plus two 12-month extensions
    Amortization: 36 months interest only; 30-year amortization thereafter
    Loan to Cost: 70%
    Prepayment: 18-month lockout; open thereafter subject to 0.50% exit fee
    Guaranty: Non-recourse
    Lender Fee: 1.00%

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    $2,250,000 Bridge Loan for Spec Luxury Waterfront Single Family Residence in Florida

    March 8, 2017

    Transaction Description:
    George Smith Partners secured a $2,250,000 bridge loan for the 70% completed spec luxury waterfront single family residence in Naples, Florida. The sponsors self-funded the development and sought to use the proceeds to recapitalize for other projects.

    Challenge:
    The Sponsor requested maximum cash-out proceeds that dissuaded many capital providers from considering the request given the luxury home’s vulnerability in a market downturn and overall development risk. Most lenders were not comfortable going over 60% loan to cost.

    Solution:
    GSP identified a private capital source who was comfortable with the incomplete project and understood the upside potential at completion. Our Sponsor’s considerable development track record and financial strength further encouraged the capital provider not to shy away from the high dollars per square foot. Sized to 75% of total cost and 53% of as-complete value, the 12-month loan is interest only with no prepayment penalty or yield maintenance.

    Rate: 11%
    LTC: 70%
    Term: 12 Months + Two 3 Month Extension
    Amortization: Interest Only
    Recourse
    Prepayment Penalty: None

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    $7,150,000 Acquisition Bridge Loan for 29-unit Multifamily Property in Pasadena, California

    March 1, 2017

    Transaction Description:
    George Smith Partners secured $7,150,000 for the purchase of a 29-unit multifamily property in Pasadena, California. Sized to 65% of purchase, the 5-year loan was priced at a floating rate of Prime plus 0.50%, with a floor rate of 4.25%. The loan has 2 years of interest only payments with a 30-year amortization schedule following thereafter. GSP closed the loan less than 30 days after the application was filed.

    Challenge:
    The Sponsor acquired the property as part of a 1031 exchange and had 40 days to meet the exchange window. Despite the short timeline, the borrower wanted to secure bank pricing and was reluctant to consider non-bank lenders. In addition, the property was operating with units at below-market rents, despite the building’s location in a non-rent controlled area. Thus, in-place cash flow was not enough sufficient to satisfy traditional underwriting criteria for many potential bank lenders.

    Solution:
    GSP sourced a bank that provided proceeds of 65% of purchase price. The selected lender was known to have certainty of execution and a quick close process. Our team was able to provide both rent and sales comps showing the huge amount of income upside in the property and demonstrating how the seller had not efficiently captured the value of the asset. The lender was able to overcome the low going-in DCR by requiring a payment reserve of $400,000, which will be released once the property’s DCR reaches 1.25. GSP also emphasized the sponsor’s recent success in increasing income and NOI at another multifamily property in a nearby market. By creating a sense of urgency among all parties, GSP was able to complete the transaction within the buyer’s short timeframe and close the deal just a few days before the expiration of the 1031 exchange.

    Rate: Prime + 0.50%; 4.25% Floor
    LTV: 65% of Purchase Price
    Term: 5 Years
    Amortization: 2 Years Interest Only Followed by 30 Year Amortization
    Recourse
    Prepayment Penalty: None