Bridge

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    $4,500,000 Acquisition Bridge Financing for the Condominium Conversion of a Historically Designated Trophy West Hollywood Apartment Building

    August 16, 2017

    Transaction Description:
    George Smith Partners arranged $4.5 million in bridge financing for the acquisition and condominium conversion of Patio del Moro, a seven-unit, historically designated trophy apartment property located in the heart of West Hollywood just one block south of the Sunset Strip. The sponsor’s business plan contemplates converting the apartment property built by famed developers Arthur and Nina Zwebell in their signature Spanish Courtyard style into a condominium complex and selling off units individually as condominiums to end users. This transaction was structured with a $3,500,000 initial advance and a $1,000,000 holdback with no negative arbitrage for condominium conversion fees, property rehab and interest reserve. Sized to 64% of total cost, the bridge loan is interest only and floats at Prime plus 0.5% for its 18-month term. The loan carries no prepayment penalty. Partial releases are subject to a 125% of par pay down and are not subject to a full cash flow sweep. The lender fee was a low 35 basis points.

    Challenges:
    West Hollywood is among the most challenging submarkets for re-entitlement in all of Southern California. Moreover, the property is historically designated, adding an additional layer of required approval, and is under-parked based on current condominium parking requirements. The project is also one of the first condominium conversions to occur since the Great Recession, so there is no recent precedent to fall back on. Finally, the project’s total cost is estimated at $7,000,000 equating to a high basis of $1,000,000 per door.

    Solution:
    George Smith Partners compiled a sales survey demonstrating robust demand for high priced condominiums in West Hollywood and surrounding areas, including recent sales in other Zwebell projects that were condominium converted over a decade ago. Moreover, George Smith Partners also highlighted the sponsor’s significant condominium conversion and real estate investment experience outside of Southern California. By demonstrating these items and leveraging its extensive capital markets relationships, George Smith Partners was able to identify a low cost capital provider that was comfortable with the deal’s entitlement risk and high basis per door.

    Rate: Prime +.50% (4.75% Today)
    Amort: Interest Only
    Term: 18 Months with one 6 Month Extension for a 0.15% Lender Fee
    LTC: 64%
    Partial Release Provision: 125% of Par
    Prepayment Penalty: None
    Lender Fee: 0.35%
    Guaranty: Recourse

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    80% Loan-to-Value, $11,250,000 Refinance of a 44% Occupied Retail Center Shadow Anchored by an Independent Grocery Chain

    August 16, 2017

    Transaction Description:
    GSP successfully placed $11,250,000 in non-recourse, floating-rate bridge debt on a 44% occupied, but 97% leased, 1960’s vintage Salt Lake City metro multi-tenant retail property. Although the property was only 44% physically occupied at loan application as a result of a planned re-tenanting program, the borrower recently executed two leases with large-format retailers that will bring occupancy to 97%. GSP identified a lender comfortable with the story behind the property’s 1) low physical occupancy at time of application, 2) grocery shadow anchor, 3) temporary tenants paying below-market rent during transition period, and 4) lack of supporting sale comps for the market. The short-term bridge loan was sized to 80% of as-is value, 75% of stable value, and included future funding to cover 100% of lease-up costs with interest not paid on unfunded proceeds until drawn.

    Rate: 30-Day LIBOR + 4.75%
    Term: 24-month initial term plus two 12-month extension options
    Amort: Interest only (initial term)
    LTV: 80% as-is, 75% as-stable
    Prepayment: 15-month spread maintenance
    Lender Fee: 1%
    Guaranty: Non-Recourse

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    $4,000,000 Non-Recourse Acquisition Loan for Bel Air SFR Fix and Flip Closed in 5 Days

    August 9, 2017

    Transaction Description
    George Smith Partners secured a $4,000,000 non-recourse acquisition loan to purchase a partially developed SFR project in Bel Air. The spec house development project had halted, and the previous developer was forced to sell the project. Our sponsor became involved in a competitive bid process and needed a quick close loan to purchase the property. George Smith Partners was able to identify a private money lender who not only closed in 5 days, but also gave the sponsor the necessary proceeds to take down the property. The interest only loan is priced at 7.99% and represents 50% of the property’s current value. The loan has a 1-year term with a 1-year extension option and no prepayment penalty.

     

     

    Rate: 7.99%
    Term: 1 year with a 1 year extension option
    Amortization: Interest Only
    Guaranty: Non-Recourse
    Prepayment Penalty: None
    LTV: 50%

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    $12,000,000 Non-Recourse Acquisition Bridge Financing on a 1970’s 300-Unit Workforce Multi-Family Property in the Pacific Southwest

    August 9, 2017

    Transaction Description
    GSP successfully arranged $12,000,000 in first mortgage debt for the acquisition and reposition of a 300-unit workforce multifamily asset in the Pacific Southwest. The national balance sheet lender provided a non-recourse loan up to 70% of total project cost that includes funding 100% of future planned expenses (approximately $3,500,000) to upgrade the property’s common area amenities and interiors and implement a green and energy saving initiative. 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. Additionally, lender structured an interest reserve to cover a debt service shortfall during the peak reposition period.

    Rate: 30-Day LIBOR + 5.15%
    Term: 36 months plus two 12-month extensions
    Amortization: 36 months interest only; 30-year amortization thereafter
    Loan to Cost: 70%
    Prepayment: 18-month minimum interest with a 0.5% exit fee thereafter
    Guaranty: Non-recourse
    Lender Fee: 1.00%

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    $3,500,000 Acquisition Bridge Financing for a Waterfront Newport Beach Multifamily Property Closed in 5 Business Days at a 7.00% Fixed Rate

    July 26, 2017

    George Smith Partners arranged $3,500,000 in quick-close acquisition bridge financing for a waterfront Newport Beach multifamily property.  The sponsor approached GSP with an extremely tight closing time frame and a property with one down unit. The sponsor valued certainty of execution above all else, so he could close on the property in short order. GSP identified a non-bank lender with a long history of providing quick close bridge execution, familiar with the location and comfortable with the property’s weak in place cash flow.  Sized to 65% of purchase with no hold back requirement for interest reserve or capital expenditures, the loan carries a 9-month term, interest only payments at a 7.00% fixed rate and no prepayment penalty.  The loan also includes two 3 month extensions and a 1.5% lender fee.

     

    Rate: 7% fixed
    Term: 9 months
    Amortization: Interest Only
    Loan to Cost: 65%
    Guarantee: Recourse
    Lender Fee: 1.5%

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    $12,000,000 Non-Recourse Acquisition Bridge Financing on a 1970’s 300-Unit Workforce Multi-Family Property in the Pacific Southwest

    July 26, 2017

    GSP successfully arranged $12,000,000 in first mortgage debt for the acquisition and reposition of a 300-unit workforce multifamily asset in the Pacific Southwest. The national balance sheet lender provided a non-recourse loan up to 70% of total project cost that includes funding 100% of future planned expenses (approximately $3,500,000) to upgrade the property’s common area amenities and interiors and implement a green and energy saving initiative.  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.  Additionally, lender structured an interest reserve to cover a debt service shortfall during the peak reposition period.

    Rate: 30-Day LIBOR + 5.15%
    Term: 36 months plus two 12-month extensions
    Amortization: 36 months interest only; 30-year amortization thereafter
    Loan to Cost: 70%
    Prepayment: 18-month minimum interest with a 0.5% exit fee thereafter
    Guaranty: Non-recourse
    Lender Fee: 1.00%

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    80% LTV Land Acquisition Financing at a 9.00% Fixed Rate for a Future Multifamily Development Site in Mid-City Los Angeles

    July 19, 2017

    George Smith Partners arranged 80% LTV land acquisition financing for a future multifamily development site in the Mid-City neighborhood of Los Angeles, California.  The sponsor, a non-resident non-citizen, sought maximum proceeds for the land acquisition and had a 30-day closing time frame from initial contact, which was impractical for many lenders.  Certainty of execution was critical as an extension to the purchase contract was not obtainable.  GSP identified a non-bank lender with a long history of providing quick close bridge execution and who was familiar with the location and comfortable with the land basis.  The loan was sized to 80% of value with no hold back requirement for interest reserve or capital expenditures.

    Rate: 9.00% Fixed
    Term: 12 Months with four 3 month extensions
    Amortization: Interest Only
    LTV: 80%
    Prepayment Penalty: None
    Guaranty: Recourse
    Origination Fee: 2%

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    75% of Cost Acquisition and Re-position Financing on a 1960’s 36-Unit Multifamily Property in Long Beach, California

    July 19, 2017

    George Smith Partners arranged $7,400,000 in non-recourse bridge financing from a national balance sheet lender for the acquisition and re-position of a 36-unit, 1960’s multifamily asset located within one block of Long Beach’s trendiest neighborhoods. The 75% of total project cost loan includes $1,300,000 ($36,000/unit) of future capital expenditures for unit and property upgrades and there is no interest charged on unused allocated capital expenditure funds.

    The loan is structured with an increasing exit fee in lieu of an upfront lender origination fee to minimize upfront costs and incentivize the Borrower to execute the business plan in a timely manner. However, the three-year initial term protects the Borrower from impending maturity in the event that the renovation takes longer than projected.  After an initial 12 month spread maintenance period, the exit fee is 1.33% for months 13 through 24, increasing to 1.66% for months 25 through 30 and 2.00% for months 31 through 36.

    Borrower cash flow is maximized as the loan is interest only during the initial three-year term.  The interest reserve covers debt service shortfalls during the re-position period.

    Rate: 30-Day LIBOR + 5.00%
    Term: 3-years plus two 12-month extensions
    Amortization: 3-years interest only; 30-year amortization thereafter
    Loan to Cost: 75%
    Prepayment: 12-month yield maintenance; open thereafter subject to 1.33% exit fee through month 24, 1.66% exit fee through month 30 and 2.00% thereafter
    Guaranty: Non-recourse
    Lender Fee: 0.00%

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    5 Day Close $3,000,000 Non-Recourse Bridge Loan on Fire Damaged Downtown LA Retail Property

    July 12, 2017

    Transaction Description
    George Smith Partners secured a $3,000,000 non-recourse bridge loan to demolish and begin the redevelopment of a fire damaged retail building on a prime corner in Downtown Los Angeles. After the fire, the sponsor decided to demolish and rezone the property. The long term plan is to redevelop the property into a mixed use building with ground floor retail, office, and condos. GSP used its experience and relationships to identify a private money 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. The lender was able to close in 5 days. The interest only loan is priced at 7.99% and represents 55% of the property’s current value. The loan has a 1-year term with a 1-year extension option and no prepayment penalty.

    Rate: 7.99%
    Term: 1 Year with a 1 Year Extension
    Amortization: Interest Only
    Guaranty: Non-Recourse
    Prepayment Penalty: None
    LTV: 55%

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    $26,500,000 Multifamily Non-Recourse Refinance & Cash Neutral Purchase

    July 12, 2017

    Transaction Description
    George Smith Partners secured $26,500,000 in proceeds for the refinance of a 163-unit mixed-use multifamily and retail property in Hollywood, CA along with the simultaneous purchase of the adjacent 9-unit multifamily rental. With the merging of the two assets, the two parcels would be combined and managed as one to establish economies of scale. The non-recourse loan floats at 30 day LIBOR + 4.25% for a period of three years; and offers two additional one year extensions. Sized to 80% of value and 80% of cost, the loan was structured with $24,600,000 in initial funding and $1,900,000 in hold-backs for capital renovations. No additional cash equity was required for the new acquisition of the adjacent 9-units – this transaction was cash neutral to the Borrower. Funding occurred in 30 days from the date of the term sheet.

    Challenges
    A number of challenges were encountered when discussing the transaction with capital sources. Our Sponsor had acquired the 163-unit property two years prior with bridge financing. Several lenders were hesitant to repay this loan with another bridge loan, yet offer the requested loan proceeds for the new acquisition. The off-market acquisition was problematic to comp out for the appraiser as a stand-alone execution. An earthquake risk assessment (PML) report mandated the purchase of earthquake coverage for the new purchase. A tight timing parameter on the Purchase & Sale Agreement mandated a quick response.

    Solution
    GSP documented the success of the current operations and the Sponsor’s ability to dramatically improve the net cash flow on the larger 163-unit property since that acquisition. This proven track record convinced our capital provider of the merits and future upside potential to support the replacement of the current bridge debt with a new bridge loan. A detailed operating budget post-merger sharing common space and amenities and reduced per-unit operating expenses allowed the appraiser to substantiate his valuation of both parcels. Capital improvement funds were reserved and allocated to complete an earthquake retrofit. Our Sponsor was granted one year to complete the retrofit to avoid the expensive cost of the insurance. Earthquake coverage was not a condition to fund. An all-hands expedited process facilitated the 30-day close requirement of the Purchase & Sale Agreement.

    Rate: One month LIBOR + 4.25%
    Term: 3 Years with two 1 Year Extension
    Amortization: Interest Only
    Prepayment Penalty: 15 months
    LTV: 80%
    LTC: 80%
    Origination Fee: 0.825%
    Exit Fee: 0.25%
    DCR: 1.0
    Guaranty: Non-Recourse

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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