May 16, 2018
George Smith Partners successfully closed a construction take-out and bridge refinance for a 213-key boutique lifestyle hotel located in the Southwest. The proceeds were used to refinance costlier construction financing, including a mezzanine facility. The loan featured an earnout of additional proceeds as well as a capital improvements budget. The hotel recently opened and thus significant operating history was not available. Additionally, the in-depth rehabilitation elevated the exterior corridor hotel to a new market segment which brought with it unique challenges.
GSP’s mandate was to source a lender who not only had the ability to execute in a timely fashion, but one who recognized the value in the excellent location and strategic positioning of the Hotel. The selected lender needed to have a deep understanding of all aspects of the deal, from a millennial-focused customer demographic, to the significant food and beverage component reflected in the Hotel’s two restaurants and secret whisky bar.
The selected lender was able to recognize the unique value proposition of the property and the strong sponsorship involved in the project.
March 21, 2018
George Smith Partners arranged $33,000,000 of construction financing for a mixed-use project located in the Southwest. The project is set to include 165 micro-unit apartments, 20,000 square feet of retail, and 43,000 square feet of office space. The apartments comprise a majority of the income, but it was very hard to obtain quality comps given the lack of micro-unit inventory in the market. GSP identified a lender that was able to get comfortable with the micro-unit concept even with a lack of comparable properties. The Lender was also comfortable giving the Sponsor credit for an increase in the value of the land since acquisition, eliminating the need for any new cash at closing. The non-recourse loan is sized to 80% of total cost (including the appreciation in the land) and is priced at LIBOR + 8.75%. The financing carries an 18-month term with three, 6-month extensions.
$21,025,000 75% LTV, Non-Recourse Predevelopment Financing for a Land Parcel Adjacent to a Southern California University
March 14, 2018
GSP arranged the $21,025,000 ($175/Land SF), non-recourse first mortgage from a debt fund for the acquisition of an infill 2.76-acre land parcel located adjacent to a major Southern California university. The acquisition loan will be taken out with a construction loan upon receipt of entitlements for a large-scale student housing redevelopment. GSP worked with borrower and lender to tailor a unique loan structure that provides financing during the entitlement period via an interest and carry reserve. The lender was able to provide a high-leverage loan on an unentitled parcel that provides no cash flow due to the project’s streamlined “by right” entitlement process, experienced sponsorship, and strong market fundamentals. Sized to 75% of as-is value, the acquisition loan priced at 7.25% over One-Month LIBOR for the 24-month loan duration.
$45,000,000 Bridge Loan – Construction Refinance for a 131-Key Luxury Lifestyle Hotel in San Francisco
March 14, 2018
George Smith Partners successfully closed a construction take-out and bridge refinance for a 131-key luxury/lifestyle hotel located in the heart of the trendy Mid-Market neighborhood of San Francisco. The proceeds were used to refinance costlier construction financing, including a large mezzanine facility. The loan featured an interest reserve, T&I reserve, and a working capital reserve. Additionally, the existing capital stack included Historical and New Market Tax Credits, and EB-5 Capital – adding to the overall complexity of the Transaction.
GSP’s mandate was to source a lender who not only had the existing wherewithal to understand the complex existing capital stack, but also one who would recognize the value in the unique and strategic positioning of the Hotel. From non-traditional lodging options, to significant Food and Beverage offerings, the Hotel stands out from the traditional hotel offering by spanning over multiple lodging markets: luxury and lifestyle. The seasoned Sponsorship group has a proven track record of developing and operating hotels of similar caliber.
The selected lender was able to recognize the unique positioning of the property’s offering and the strong sponsorship involved in the project.
All Terms Confidential
February 28, 2018
George Smith Partners placed the take-out of a build-to-suit single-tenant GSA office in a tertiary Southern California market. The ten year term loan matches the investment grade credit lease term. There are no tenant “outs” during the initial term for this gross lease. Fixed for five years at 4.5%, the loan will reset year six at the five-year CMT, floored at the current start rate. Amortized over 30 years and sized to 70% of stabilized value, our Sponsor was able to recoup a portion of his cash equity. There are no TI/LC reserves taken until the beginning of the sixth year and no prepayment penalty at any time.
The application was executed prior to obtaining the Certificate of Occupancy. Additional off-sites mandated by the local municipality added to the development costs and cash equity contribution. State mandated living wage requirements adds an accounting delay that must be signed-off by the State prior to being able to secure lien releases from sub-contractors. Indexes moved against the Borrower, increasing his cost of capital.
Post loan commitment, our portfolio capital provider agreed to increase proceeds by $100,000 to recapitalize our Sponsor for a portion of his cost over-runs. The lender also agreed to a partial set-aside/hold-back until the notice to file mechanics liens had expired. The high construction quality and investment grade credit rated tenant incentivized our portfolio capital provider to hold the applied-for rate through the index run-up.
$3,265,000 Cash-Out Permanent Financing on a Newly Constructed Apartment Community in St. Louis City, Missouri
February 21, 2018
GSP successfully placed $3,265,000 in permanent debt to take out a construction loan on a newly built mixed-use property located in the heart of St. Louis City. The non-recourse, 75% leverage loan has a fixed coupon of 4.49% for the duration of the seven-year term. The financing provided significant cash out to the borrower and maximized cash flow via two years of interest only payments prior to converting to 30-year amortization. GSP leveraged its lender relationships to achieve the most competitive loan terms for the borrower which included structuring multiple pricing and loan-to-value exceptions.
$43,000,000 104% LTC Non-Recourse Construction Financing for Two Large Retail Buildings in the Pacific Northwest
February 21, 2018
George Smith Partners successfully arranged $43,000,000 in non-recourse construction financing for two large single tenant retail buildings in the Pacific Northwest. The two buildings are part of a power center and will each house a national tenant with strong credit and a long-term lease. The blended cost of capital for the two non-recourse loans was fixed at 3.88%, and comprised over 100% LTC. This allowed leverage on the entire shopping center to reach approximately 80% LTC. The term of the loans are 25 and 30 years with 27.4 and 33.1 year amortizations respectively.
This being a challenging market for retail construction financing, traditional lenders could not reach the necessary leverage to finance the high construction costs of Retail Phase 1. Construction costs in Retail Phase 1 were disproportionately high as the onsite and offsite infrastructure work were built out for all future phases of a greater mixed-use development. The two large national credit tenants took up the majority of Retail Phase 1’s GLA. As major anchors of the center, these two tenants will be paying substantially lower rents than the inline retailers thus dragging the NOI of the property down causing further issues with the project’s yield.
Traditional lenders were constrained by Retail Phase 1’s high construction costs and low yields. George Smith Partners realized the best structure for this project was to bifurcate the center and finance the two large national credit tenant buildings separately from the inline space. GSP was able to identify non-traditional bond investors to make highly leveraged, inexpensive, non-recourse construction loans on the two large national credit tenant buildings. By separating the two larger buildings with lower rents from the inline space of Retail Phase 1, a traditional lender could then aggressively lend on the inline space of Retail Phase 1 because of the higher yields from the inline space. This is a result of a smaller concentration of GLA and substantially higher rents.
February 7, 2018
George Smith Partners arranged $3,700,000 in construction financing to develop 15,860 square feet of retail and office in Old Town Temecula, California. The developer plans to lease the ground and second floor with retail tenants and reserve the 3rd floor for office tenants. The challenges of the financing included the use of EB-5 equity in a spec development within a tertiary market. Our Sponsor desired financing without pre-leasing requirements to take advantage of the demand for this dynamic location during construction. Significant market interest from prospective tenants proved the thesis to the capital provider on a speculative basis.
January 31, 2018
George Smith Partners placed an $11,000,000 non-recourse construction loan for the ground up development of 40 multi-family units in the Conejo Valley sub-market of Los Angeles County. The area has high barriers to entry for new product in regards to entitlements and design review, and took several years to gain all necessary approvals. As a result this project will be the first new development that has broken ground in the sub-market since 2004. Equipped with sub-2% market vacancy, GSP secured a non-recourse loan with an institutional capital provider at leverage of 75% LTC and priced at LIBOR + 375. The loan also provides for extension options and has no prepayment penalty.
January 16, 2018
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.
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.
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.
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
$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.