Construction

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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

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    $21,635,000 Non-Recourse Ground-Up Construction Loan for 35 Unit Condominium to 80% of Cost

    July 31, 2017

    Transaction Description
    George Smith Partners placed the ground-up development loan of 35 “For Sale” Los Angeles residential units over a 2,000 square foot retail unit. Offering convenient mass-transit and surface street access to employment centers in the Valley and minutes to downtown Los Angeles, this sub-market witnessed double-digit price growth year-over-year since 2011; yet housing is still significantly constrained by availability. Walking distance to a number of “hip” restaurants, entertainment, and boutique retail has made this area a weekend destination for many Los Angelinos. Sized to 80% of total cost, the two-year term allows for two-6 month options to extend and is priced at 10% for this non-recourse debt.

    Challenges
    No construction had been completed in this sub-market since the residential down-turn; unit sales comparables do not exist. A significant amount of grading is necessary to create the pedestal. Our General Contractor lacked this level of grading experience. The Sponsor is not an American citizen and lacks real or liquid assets here in the U.S. Hard costs increased while under due diligence.

    Solution
    Recent downtown Los Angeles unit sales far outpriced our Sponsor’s proforma. The ease of downtown access and less urban density permitted our underwriter to accept out-of-market sale comps in their valuation. A sizable reserve is held by the lender until all grading is completed and the pedestal is poured. Once the subject is above-grade, funds will be released and allocated to the balance of the development. Our Sponsor’s vested interest, capital contribution, and retention of a local developer supported this request regardless of where his assets are held. GSP worked with the capital provider to increase loan proceeds in lock-step with an additional equity contribution to address increased hard costs.

    Rate: 10%
    Term: 2 Years + two-6 Month Options
    Loan to Cost: 80%
    Fee: 1.0%
    Recourse: Completion Guarantee from an Off-Shore Investor

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    $35,000,000 Senior Construction Loan for Hotel Woodlark, a 150 Key Boutique Hotel in Portland, Oregon

    July 5, 2017

    George Smith Partners facilitated financing for the repositioning of a historical hotel and re-development of the adjacent office building into a boutique, center city, hospitality destination. The asset is situated on a half city block in Downtown Portland. GSP was able to leverage the Sponsor’s track record and identify the key indicators that establish Portland as a burgeoning region, as well as use statistics to evidence the demand for a hotel of this caliber. Additionally, GSP was able to assist the client in negotiating favorable lending fees.

    Rate: LIBOR + 675
    Term: 37 months with one 11-mont and one 12-month extension
    Amortization: Interest-only during the initial loan term.
    Loan to Cost: 60%
    Loan Fee: 1.0%

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    $16,250,000 Ground-Up Construction Loan Fixed for Seven Years at 4.0%

    June 14, 2017

    George Smith Partners facilitated the seven-year fixed-rate construction loan for the ground-up development of 60 Los Angeles “For Rent” housing units.  As part of this capitalization, GSP placed the land acquisition debt in 2015.  Sized to 75% of actual development costs, this institutional capital provider will fund all draw requests at the 4.0% rate that was locked at application.  Interest is paid as drawn; there is no negative arbitrage.  The ten-year term negates the need to process a mini-perm upon Certificate of Occupancy and removes future interest rate risk.  The recourse loan is fixed for seven years at 4.0% and floats at 275 over LIBOR for the remainder of the ten-year term.  Prepayment steps down; 2,2,1,1 open.

    Rate: 4.0% fixed
    Term: Ten Years Fixed for Seven Years
    Amortization: IO During Construction; 27.5 Years thereafter
    Loan to Cost: 75%
    Prepayment: 2,2,1,1
    Loan Fee: 1.0%
    Guaranty: Recourse

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    $53,900,000: $42.6MM “Non-Recourse” Construction + $11.3MM Preferred Equity Financing for 228-Unit Multifamily Development

    April 26, 2017

    Transaction Description:
    George Smith Partners secured a $42,600,000 non-recourse senior construction loan along with $11,300,000 preferred equity placement to develop a 228-unit Class A multifamily property in Orange County, CA.

    Challenges:
    The sponsorship required a non-recourse solution at an appropriate leverage to achieve the entire project’s capitalization during a time when many lenders were pulling back on construction financing in general and reducing leverage if able to lend at all.

    Solution:
    GSP utilized its significant experience and deep relationships with active capital providers to secure the non-recourse construction financing. GSP was also able to secure preferred equity in lieu of sponsorship bringing in additional equity which allowed the transaction to be appropriately capitalized for the developer to hit their pro forma return on equity.

    Rate & Terms: Confidential

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    $2,150,000 Senior Construction Financing for a 5 Unit Small-Lot Subdivision Project in North Hollywood, California

    April 19, 2017

    Transaction Description

    George Smith Partners successfully structured the ground-up construction debt for a 5 unit small-lot subdivision project near the North Hollywood Arts District. Sized to 70% of cost, the 18 month loan (with six-month extension option) is priced at PRIME + 0.75% with a 5.25% floor rate.

    The Project consists of large three story units (1,750 SF+), with attached two-car garages and open floor plans. Product of this quality is in high demand in the area, but the small-lot format is new to the North Hollywood area. It was incumbent on GSP to support the value with market data and new construction. GSP identified a local construction lender with an understanding of the Los Angeles market, and an appetite for small-lot product.

    Rate: PRIME + 0.75% (5.25% floor)
    Term: 18 Months
    LTC: 70.0%
    Recourse
    Lender Fee: 1.00%

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    $13,000,000 Los Angeles Ground-Up 59 Unit Multifamily Construction w/ Take-Out Fixed @ 3.20% at Commitment

    March 22, 2017

    Transaction Description

    George Smith Partners successfully structured the ground-up construction debt for a mixed-use 59 unit multifamily Los Angeles rental project that will include 2,000 square feet of ground floor retail. GSP identified a regional construction lender with a very unique construction & permanent loan in one package; the first five years are fixed @ 3.20%, inclusive of the construction phase. Interest is only paid on funds as drawn; there is no negative arbitrage for this fixed rate construction loan. The ten year term was sized to 63% of actual cost and Phase 1 of the loan will be interest only funded through a reserve until stabilized, which is estimated to be 30 months from ground-breaking. Upon lease-up, the loan automatically converts (Phase 2) to a mini-perm for the remainder of the five year at the same fixed rate at 3.20%, amortized over 27.5 years. Upon expiration of the initial five year term, the loan will float at 250 basis points over LIBOR for the remainder of the ten year term. Repayment guarantees burn down to 50% of the outstanding loan balance upon Certificate of Occupancy and drops to zero after the second year of stabilization. There are no additional fees or resizing tests at loan conversion from construction to mini-perm. Prepayment steps down: 2/2/1/1, with no prepayment penalty after the fourth year.

     

    Rate: 5 Years Fixed @ 3.20%; then LIBOR+2.50%:
    Term: 120 Months (Construction & Perm)
    Lender Fee: 1%
    LTC: 63.0%
    Prepayment Penalty: 2,2,1,1,open
    Recourse: Burning down to 50% at C of O and zero after the 2nd year

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    $63,400,000 Ground-up Non-Recourse Mixed-use Construction Financing to 83% of Total Cost

    March 1, 2017

    Transaction Description: George Smith Partners successfully arranged the combined $63,400,000, 83% of total cost, non-recourse, construction financing for a 312 unit, 19 story high-rise, Class-A Multifamily over retail project in the downtown area of a major Southwestern MSA. The subject property will be located near major universities, offices, restaurants, and a growing arts district. This project represents one of the highest quality, most amenitized, and dynamic rental projects in this region.

    Challenge: The Sponsor requested high leverage, non-recourse, construction financing on an asset class that at the time, and in this market, was a non-starter for most capital providers. The Sponsor had limited experience in the development of this specific asset class and was seeking leverage at a level that was a challenge for a single lender to get comfortable with.

    Solution: GSP was able to demonstrate the compelling economics at the project level by showing the pent-up demand for this project type in this specific market, highlighting the barriers to entry with limited available land, and the singular quality of the location with proximity to places of employment, graduate level education, and a light rail line. The capital providers who stepped up, understood the value of this location, the cost basis and the Sponsor’s ability to deliver a product that is superior to competing properties in the market. The senior lender and third party mezzanine lender did not have an existing inter-creditor agreement in place prior to this transaction, but successfully structured an agreement. The final borrowing structure involved multiple entity-level-only guarantors for the limited guaranties that were required. GSP also assisted with two separate interest rate caps provided by a third party rate cap provider and placed with two separate institutions to protect from anticipated floating rates.

    Rate: Terms are confidential
    LTC: 83%
    Term: 3 Years Plus 1 Year Extension
    Amortization: Interest Only
    Recourse: Non-Recourse

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    $9,520,000 Ground-Up Condominium Construction Financing to 80% Cost

    November 30, 2016

    Transaction Description:

    George Smith Partners structured senior construction debt for 22 luxury condominium units in the Pico/Robertson area of Los Angeles, two miles south of Beverly Hills. Our Sponsor has extensive experience with residential construction in Los Angeles, but recent trends in the construction lending market have placed downward pressure on Loan-To-Cost constraints. “For Sale” product has been especially impacted by revised underwriting criteria. Supportive market data and product demand verified the value of this project. Our healthy Sponsor armed with a pipeline of future transactions allowed us to secure 80% of actual cost financing at an institutional interest rate.  Priced at LIBOR + 3.15%, the two year term is supported by a personal repayment guarantee.

    Rate: LIBOR + 3.15%
    Term: 24 Months
    Lender Fee: 0.60%
    LTC: 80%
    Recourse

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    $10,700,000 Los Angeles Multifamily Construction Financing to 77% of Cost

    November 15, 2016

    George Smith Partners successfully placed the ground-up construction debt of 49 Class-A apartment rental units in the San Fernando Valley, Los Angeles. Sized to 77% of actual costs, this construction loan will also fund the development of 1,300 square feet of ground-floor retail for residents and the local community. Despite ample development experience in this market, most lenders were unwilling to reach beyond 70% of cost. A strong lender relationship, cobbled with supportive market data and a meaningful repayment guarantee, allowed us to secure 77% of actual cost while maintaining an institutional rate without the use of sub-debt. Priced at LIBOR + 2.95%, the two year term is floored at 3.25%.

    Rate: LIBOR + 2.95%
    Term: 24 Months
    Lender Fee: 0.75%
    LTC: 77.0%
    Recourse

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    $9,450,000 Ground-Up Condominium Construction Financing to 80% Cost

    November 9, 2016

    George Smith Partners structured senior construction debt for 21 luxury condominium units in the Pico/Robertson area of Los Angeles, two miles south of Beverly Hills. Our Sponsor has extensive experience with residential construction in Los Angeles, but recent trends in the construction lending market have placed downward pressure on Loan-To-Cost constraints. “For Sale” product has been especially impacted by revised underwriting criteria. Supportive market data and product demand verified the value of this project. Our healthy Sponsor armed with a pipeline of future transactions allowed us to secure 80% of actual cost financing at an institutional interest rate. Priced at LIBOR + 3.15%, the two year term is supported by a personal repayment guarantee.

    Rate: LIBOR + 3.15%
    Term: 24 Months
    Lender Fee: 0.60%
    LTC: 80%
    Recourse