Construction

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    $4,000,000 80% Construction Financing for Senior Care Facility

    January 16, 2018

    Transaction Description:

    George Smith Partners successfully arranged the $4,000,000 construction financing for a senior home care facility in Northern California. The complex will function as an assisted living facility and is comprised of four contiguous houses accommodating six patients each. California Law states that any care facilities accommodating six patients or less do not require a license to operate. By building four contiguous smaller facilities, the sponsors will realize a greater upside, while still abiding by California regulations. Fixed for two years at 6.5%, the 80% of cost interest only loan will convert to a 5-year mini-perm with a fixed rate of 5.5% and a 30-year amortization. There is no prepayment penalty.

    Challenges:

    To obtain the required leverage to complete the project, it was critical to demonstrate the stabilized value of the property as a commercial care facility rather than as four single family residences. The Sponsors decided to build smaller contiguous care facilities because the California law does not require a license for operations. While this regulation substantially accelerated and simplified the predevelopment process, it also made financing the project significantly more difficult. Conventional lenders could not become comfortable with this subset class of an operationally dependent and niche asset. Because of the complex asset type, the Sponsors requested a mini-perm structure where they had a guaranteed takeout of the construction loan.

    Solution:

    GSP identified a capital source to underwrite the project’s stabilized value as a commercial care facility rather than as four single family residences. In order to provide additional comfort to the Borrower, GSP structured the term to have an automatic mini-perm feature upon stabilization. The tremendous upside in the project, with no prepayment penalty ensured the Sponsors the ability to capture the upside and maintain flexibility.

    Rate: 6.5% to 5.5% at Stabilization
    LTC: 80%
    Term: 2 Years Construction 5 years Mini Perm
    Amortization: Interest Only during Construction, 30 year amortization thereafter
    Guarantee: Recourse
    Prepayment Penalty: None

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    $15,150,000 Financing at 70% Loan to Cost for Beverly Hills SFR Estate Construction

    January 16, 2018

    GSP successfully placed $15,150,000 in first mortgage financing for the construction of a shovel-ready luxury single-family residence in Beverly Hills. The loan funds up to 70% of lender-approved costs and the interest rate floats at 1-Month LIBOR plus 6.2644% (7.50% at closing). The 18-month initial term has two three-month extension options with a 0.375% fee payable per extension, with Interest Only payments during the life of the loan. Lender made one third of the 2.25% loan origination fee due at payoff in order to increase upfront Sponsor funds and offered the potential for Sponsor to take on mezzanine debt at closing subject to minimum equity hurdles. The Canadian Sponsor provided a completion guarantee and a repayment guarantee capped at $5,000,000.

    Rate: 7.50% at closing (1 Month LIBOR + 6.2644%)
    Term: 18 Months
    Amortization: Interest Only
    LTC: 70% of lender approved costs
    Guarantee: Completion Guaranty; Repayment Guaranty capped at $5,000,000
    Lender Fee: 1.5% at closing and 0.75% at payoff

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    $13,850,000 Ground-Up Condominium Construction Financing to 87% actual LTC (75% LTC with imputed equity)

    December 20, 2017

    George Smith Partners successfully structured senior construction debt for a 29-unit condominium development in the Pico-Robertson neighborhood of Los Angeles. GSP targeted a capital provider who was not only knowledgeable about the location and marketplace, but also comfortable with the Sponsor’s experience and ability to execute the construction project. GSP was able to use the land lift in the entitlements to achieve imputed equity, making the loan 87% of actual cost and 75% LTC using appraised land value. Priced at LIBOR + 3.15%, the two-year term offers two 6 month extensions.

    Rate: 30 day LIBOR + 315
    Term: 24 months plus two 6-month extensions
    Amortization: Interest only
    LTC: 87% (75% with imputed equity)
    LTV: 70%
    Prepayment: None

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    $10,000,000 Cash-Out Refinance on a Single Tenant Class A Utah Office Building

    December 13, 2017

    George Smith Partners secured $10,000,000 for the cash-out refinance of a newly constructed Class A single-tenant office building located in Pleasant Grove, Utah. Our Sponsor required a cash-out refinance to pay-off a maturing construction loan for a non-investment grade privately owned tenant. With strong sponsorship and an experienced real estate investor, GSP identified a lender who was is comfortable with 65% loan to value. Fixed for ten years at 4.4%, the loan amortizes for the 25-year term and no prepayment penalty.

    Rate: 4.4%
    Term: 10 year fixed
    Amortization: 25 years
    LTV: 65%
    Prepayment: No prepayment penalty
    Guarantee: Recourse

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    West Los Angeles SFR Acquisition and Construction/Reposition Financing

    December 6, 2017

    George Smith Partners placed the 70% loan-to-cost acquisition and construction financing for a speculative single family residence in West Los Angeles. The sponsor’s plan was to acquire an outdated single family property, and re-develop a 4,200 square foot luxury home. Although this was only the Sponsor’s second speculative single family residence, George Smith Partners was able to emphasize the project’s location and basis to ultimately achieve lender comfort with the requested leverage. Sized to 70% of total cost and 60% of as-completed value, the interest only loan will float at 1.00% over the WSJ Prime for 18 months.

    Rate: Prime + 1.00%
    Term: 18 Months
    LTC: 70%
    Lender Fees: 0.75%
    Guaranty: Recourse

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    $13,850,000 Ground-Up 29 Unit Los Angeles Rental to 75% of Cost

    December 6, 2017

    George Smith Partners secured the $13,850,000 ground-up development loan for a 29-unit multifamily rental property in the Pico-Robertson neighborhood of Los Angeles. GSP targeted a capital provider who was not only knowledgeable about the location and marketplace, but also comfortable with the Sponsor’s experience and ability to execute the construction project. GSP surveyed the project’s risks upfront with the capital provider and structured objective criteria that satisfied both the Sponsor and Lender. Sized to 75% of total costs, the 24 month recourse loan allows for two 6 month options and is priced at 30-day Libor + 3.15%.

    Rate: 30 day LIBOR + 315
    Term: 24 months plus two 6-month extensions
    LTC: 75%
    LTV: 70%
    Lender Fee: 0.60%
    Guarantee: Recourse
    Prepayment: None

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    $60,000,000 Woodland Hills Construction for 241-Units + 34,000 sf Retail

    December 6, 2017

    George Smith Partners arranged $60,000,000 of ground-up construction debt for a mixed-use, luxury multifamily development to build a 241-unit Woodland Hills apartment project that will include 34,139 square feet of retail. GSP sourced a lender comfortable with the Sponsor’s lack of experience, exposure issues and ability to execute on the development plan. This property is located within the Warner Center 2035 Plan, a development blueprint for Warner Center that emphasizes mixed-use and transit-oriented development, walkability, and sustainability. Sized to 70% of cost, the three year term has two – 12 month options that float at 250 basis points over LIBOR.

    Rate: L+250
    Term: 36 month term + Two, 12-month extensions
    LTC: 70%
    LTV: 60%
    Guarantee: Recourse

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    $3,150,000 Construction Loan Take-Out; 3.10% Fixed

    November 22, 2017

    George Smith Partners placed the construction loan take-out for a new 12-unit multifamily development in the Koreatown District of Los Angeles. At the time of funding, there was no operating history for the property as the Certificate of Occupancy had just been issued. Our Sponsor lacked 30 days of collections to prove out income. The permanent lender underwrote the rent roll in place in conjunction with proforma operating expenses to determine the underwritten Net Operating Income. Fixed for five years at 3.10%, the ten year term will float at LIBOR plus 275 years six through ten, amortized over 30 years. Sized to 65% of stabilized value and 80% of actual costs, prepayment steps down from 3% and is open after the third year.

    Rate: 3.10% Fixed for Five Years
    Term: 10 Years
    Amortization: 30 Years
    LTV: 65%
    Prepay: 3,2,1, open
    Loan Fee: 0.5%

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    $50,000,000 Non-Recourse Construction Loan to Develop Los Angeles International Airport Dual Branded Hyatt Hotel

    November 8, 2017

    Transaction Description:
    George Smith Partners arranged $50,000,000 in non-recourse senior construction financing for the adaptive reuse of a 1960s vintage office tower one block from LAX in Los Angeles into a dual-branded Hyatt Hotel. The Sponsor’s business plan is to convert the existing 13 story 250,000 square foot office building into a 401 key Hyatt House and Hyatt Place hotel that features a trendy Mid-Century inspired urban design. The completed project, which will feature both select service and extended stay products, will capitalize on the LAX hotel submarket’s historically high occupancy rates and strong demand drivers. Sized to 50% of total project cost, the interest only loan will float at a spread of 425 basis points over 1 month LIBOR for 3 years and carries two 1-year extension options.

    Challenges:
    It was crucial to find a lender who was comfortable with hotel construction financing at this point in the cycle, a significant tranche of EB-5 financing, an unsubordinated ground lease and a parking agreement with an adjacent parking garage owner. As the Sponsor’s required bank execution, it was critical that the transaction was structured to comply with High Volatility Commercial Real Estate (“HVCRE”) banking regulation.

    Solution:
    GSP sourced a lender with extensive experience in ground-up hospitality transactions and with a favorable view of the supply constrained LAX submarket. GSP demonstrated the Sponsor’s attractive basis in the asset, the submarket’s resilient occupancy rates and average daily rates, and the project’s appealing design relative to the submarket’s dated competitive set, which ultimately allowed the capital provider to get comfortable with the transaction. GSP also assisted in structuring the transaction to ensure HVCRE compliance.

    Rate: 1 Month LIBOR + 4.25%
    Term: 3 + 1 + 1
    Amortization: Interest Only
    LTC: 50%
    Guarantee: Non-Recourse

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    Speculative West Los Angeles SFR Acquisition and Construction/Reposition Financing

    September 20, 2017

    George Smith Partners placed the 77.5% loan-to-cost acquisition and construction financing for a speculative single family residence in West Los Angeles.  The loan was structured to include $471,000 for future funding, transforming the 1,100 square foot 3-bedroom/1-bathroom residence into a 2,500 square foot main house featuring 4-bedrooms/5-bathrooms and a 500 square foot detached guest house.  Fixed at 9.25% for 12 months, the loan offers two extension periods.

    Rate: 9.25% Fixed
    Term: 12 Months plus Two 3-Month Extensions at 0.5% each.
    Amortization: Interest Only
    LTC: 77.50%
    Guarantee: Recourse

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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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    $15,300,000 Non-Recourse Multifamily Construction Loan for a 97-unit apartment community in Chula Vista, California

    July 31, 2017

    Transaction Description
    George Smith Partners secured $15,300,000 in ground up senior construction financing for a to-be built 97-unit apartment community in Chula Vista, CA. The Sponsor was seeking capital to cover all hard costs, in addition to some soft costs, for the project. The subject, which is directly west of the Interstate 805 Freeway and roughly three miles east of the Interstate 5 Freeway, will be built using a “stone creek” concept to match the ascetics of the surrounding environment. In addition to the luxurious ambiance, the project will include lush amenities. A park will be dedicated to the project with barbeque and picnic areas. There is a protected creek running through the land which will be enhanced to embellish the “Stone Creek” concept. The financing structure secured by George Smith Partners allowed the Sponsor to complete the ground up development in one phase.

    Challenges
    The main challenge encountered in the capital markets was the scope of the project in relationship to the Sponsorship group’s track record. Many capital providers were concerned that the ground up component of the project required a Sponsorship group with more experience in the field.

    Solution
    George Smith Partners used its extensive capital market relationships, knowledge, and resources in order to identify the right capital for the project. Once the right lender was identified, GSP addressed the lender’s concerns surrounding the scope of the project by demonstrating the strength of the General Contractor.

    Rate: 30-day LIBOR+ 4.80%,
    Term: 30 months with Two (2) separate consecutive six (6) month extensions
    Amortization: Interest Only for initial term
    LTV: 60%
    LTC: 65%
    Origination Fee: 1.00%
    Exit Fee: None
    Guaranty: Non-Recourse with completion guaranty