February 15, 2017
George Smith Partners arranged a $2,700,000 cash-out refinance bridge loan on an unflagged boutique hotel in Sacramento, California. The Borrower approached GSP seeking a financing solution from a lender that could close quickly, provide capital to renovate, and bridge until stabilization. GSP identified a lender who was comfortable lending on an unflagged hotel in the middle of renovations and located in a secondary market. During due diligence, an unpaid occupancy tax from the prior owner was discovered. With the prior ownership unable to pay the tax, the county placed a lien against the property, even though it was under new ownership with no relation to the prior owners. This created a setback for closing, as title could not be cleared until the tax, interest, and fees were paid in full. The borrower weighed the cost of litigating to fight the liens, but chose to pay off the liens which allowed the lender to close on time. Sized to 50% of cost, the interest only loan has an 18 month term to allow for full stabilization of the property and has no prepayment penalty. The loan is priced at 7.90% for the first twelve months and 8.30% thereafter, for the remainder of the term.
$2,500,000 Cash-Out Refinance Private Money Loan at a 7% Fixed Rate for a Luxury Single Family Fix and Flip Property Closed in 5 Business Days
January 18, 2017
George Smith Partners arranged a $2,500,000 cash-out refinance loan at a 7% fixed on a free and clear luxury 7,200 square foot single family residence located in Laguna Beach, California. The sponsor recently purchased the property for $3,465,000 all-cash at an auction and sought a cash-out refinance loan to close on another acquisition opportunity, but was sensitive to pricing and terms. GSP identified a specialty lender that could lend aggressively on the asset and close quickly. Sized to 72.5% of purchase price and 65% of as-complete value, the 9-month loan is interest only with no prepayment penalty or yield maintenance. GSP identified a lender that understood the submarket and that the sponsor was experienced enough to rehabilitate the property in a timely fashion to either sell or lease as a rental. GSP underscored the sponsor’s track record and significant remaining equity in the property after the cash-out at closing. This ultimately allowed the lender to get comfortable with the significant cash out and to not require an interest reserve, even though the property has no cash flow. The lender allowed the sponsor to fund an estimated $125,000 in repairs out-of-pocket versus a hold back due to the sponsor’s financial strength and track record of execution. The loan funded in 5 business days with an exceptionally low rate and lender fee for quick close private money execution.
Rate: 7% Fixed
LTV: 72.5% As-Is / 65% As-Complete
Term: 9 Months
Amortization: Interest Only
Prepayment Penalty: None
Lender Fee: 1%
- Advisors: Zachary Streit
October 15, 2015
Transaction Description: George Smith Partners arranged the take-out financing of a high-yielding private money loan. Structured as an interest only bridge financing for a 70 unit apartment complex, the non-recourse loan is fixed at 5.81% for two years. Located in the Western US, the mid-1980’s vintage subject was over 95% occupied at funding. This financing replaced high-rate financing from a mid-2014 acquisition.
Challenge: The property’s operating history since acquisition had been inconsistent as the Borrower replaced an underperforming management company during his restructuring. The new management improved occupancy and collections but lacked stabilized history to qualify for an agency loan for an out of state Borrower.
Solution: GSP identified a non-recourse bridge lender provided an agency-to-perm option. The fixed rate loan is pre-payable after 12 months and will roll into a long-term agency execution once a stabilized track record is documented.
November 6, 2014
Transaction Description: George Smith Partners successfully placed the financing to construct a nine-unit luxury condominium project in a very desirable Studio City, California location. The Sponsor purchased the land, currently improved with a single family residence, in 2011 and began the entitlement process. Sized to 75% of actual cost, the 12-month term is priced at 11.5% plus a three point lender origination fee. Challenge: Despite the Sponsor being an experienced developer with years of experience, litigation following the housing crisis in 2008 placing significant strain on the ability to source construction capital for “For-Sale” units. A city provision in the entitlements offered a very tight time-frame when construction could begin. Solution: Market research supported the Borrowers’ business plan and exit sale prices. A private non-institutional capital source was identified for a quick-close and certainty of execution as applied for. Rate: 11.5% Term: 12 Months Amort: Interest Only LTC: 75% Recourse Lender Fee: 3% Advisors: David Rifkind, Jonathan Lee, Adam Candler
September 20, 2014
9 – 17 – 2014
Transaction Description: GSP successfully placed the $1,430,000 refinance of a 13,754 square foot family owned Day Care Facility what was operating under a Chapter 11 bankruptcy. The Day Care Facility serves 140 students from kindergarten to 4th grade. Sized to 65% LTV, the 8.99% coupon is fixed for the 12 month term. Challenge: The Borrower was in default with debt service payments and was unable to refinance the asset due to contingencies with its business partner. Our Sponsor filed Chapter 11 bankruptcy in an attempt to negotiate a mutually beneficial resolution. Sufficient proceeds were needed to pay off the existing loan, buy out a shareholder and cover outstanding property taxes. Solution: GSP identified a capital provider who was comfortable with the on-going operating cash flow and agreed to fund the transaction out of bankruptcy. This proposal was ultimately approved by the court. Rate: 8.99% Fixed Term: 12 Months w/two-6 Month Ext Amort: Interest Only LTV: 65% Prepayment: 6 Months Yield Maintenance Recourse Advisor: Gilda Rivera
July 24, 2014
7 – 23 – 2014
Transaction Description: GSP placed $6,279,000 of non-recourse financing to complete the construction of a 35,000 square foot medical office building space in Decatur, Georgia. The client was not a seasoned real estate developer but savvy enough to identify an immediate opportunity in a burgeoning market. The building was only partially completed and required additional construction financing to bring the asset to Certificate of Occupancy. Multiple lenders were not comfortable due to the sponsor being a relatively unseasoned developer and stepping into a partially completed construction project with a new general contractor. The Borrower was unable to provide a repayment guarantee due to a recent bankruptcy, open tax liens and pending litigation. Sensitive to initial lender deposits, the Borrower had previously been under application to a private lender who lacked discretionary capital and utilized the deposit as a profit center, without providing services. GSP procured market rate comps and supporting documentation to confirm market strength and provided an unsolicited LOI for a sale of the subject prior to obtaining the CofO. Sponsor capacity was substantiated by his ability to bring the asset to its’ current level of completion, retain a new GC and pre-lease 100% of the 35,000 square feet to multiple tenants. GSP called on their relationship sources to identify discretionary capital motived by funding loans over collecting one-off fees. The one-year, non-recourse floating rate term is priced at 10.5% and does not require a prepayment penalty. Rate: 10.5% Term: One Year Amort: Interest Only Prepayment: None Non-recourse Advisors: Gilda Rivera, Salar Royaei
July 3, 2014
7 – 2 – 2014
Transaction Description: Raffi Sarkissian successfully placed the acquisition debt for the purchase of a 20,000 square foot single-tenant industrial building in the San Fernando Valley of Los Angeles. The tenant/buyer is a foreign national who will occupy and operate from this location, but has yet to initiate any business here in the States. The capital provider became comfortable with the business plan of feeding existing overseas operations from this location. The vanilla industrial use in a strong market added comfort to the loan execution. Rate: 8.5% Term: 3 Years Amort: Interest Only Prepayment: None Recourse Advisors: Raffi Sarkissian, Tylene Turner, Manuk Boyajian
April 17, 2014
4 – 16 – 14 Transaction Description: George Smith Partners placed a land acquisition and infrastructure construction loan secured by 165 acres of a master planned community in Albuquerque, New Mexico. The collateral allows for over 1,100 apartment units, almost 600 single family residences, plus some commercial development. The Sponsor will develop residential lots and sell them to national and regional homebuilders. Financing included an initial funding to repay the existing lender and other expenses plus a secondary facility to fund future construction of residential lots and infrastructure. The two year term was limited to 65% of current value but was 87% of the actual acquisition price. Financing also allows for a full interest reserve and funding of 65% of new construction costs going forward. Fixed at 12.5%, the loan carries a 30 day interest prepayment penalty. Challenge: Financing this project offered several challenges. Since the last real estate cycle, unimproved residential land has fallen out of favor because it is a non-cash flowing asset and takes considerable time to monetize, posing considerable risk to a lender. Next, the Sponsor was involved with complex negotiations for a discounted payoff to the existing lender and restructuring payments to bondholders. Finally, Albuquerque is considered a tertiary market and, therefore, it is not a popular target location for many lenders and investors. Together, these challenges presented a formidable task to sourcing a financing partner. Solution: GSP immediately commenced on a targeted marketing effort to well-suited financial partners and sourced a capital provider who was not only knowledgeable about the location and marketplace, but also comfortable with 1) the investor’s expertise consisting of 35 years of land development and homebuilding experience including more than 20 years in Albuquerque; 2) a land basis that was the lowest in the marketplace; 3) level of guarantee (full recourse); and 4) a business plan that included already executed homebuilder contracts for residential lot purchases. GSP vetted the risk exposure upfront with the new capital provider and worked to structure objective criteria to satisfy the Sponsor and Lender. Rate: 12.5% Term: 24 Monthsw/extension Amort: Interest Only LTV: 65% Prepayment: 30 Days of Interest Recourse Lender Fee: 3 Points Advisor: Loren Bedolla
April 3, 2014
4 – 2 – 2014 Transaction Description: GSP successfully placed the $4,500,000 non-recourse acquisition loan for the purchase of a 41,000 square feet commercial office building located in Oakland, California. The property is currently being utilized and serves as the main campus for a local Charter School. Our Sponsor manages the school which has 650 students ranging from kindergarten to eighth grade. The school lease to the prior real estate owner was about to expire and the financing sourced by George Smith Partners allowed the tenant to take advantage and exercise their option to acquire the property. A second trust deed was recorded at closing bringing the total debt allocation to 73% of cost. The interest only, non-recourse loan closed in three weeks from application to funding. Challenge: The Borrower had been under contract to acquire the property for over 4 months and received several loan rejections as most lenders are not comfortable financing charter schools. Pending litigation threatened the future of the charter and thus the viability to service the debt. Timing became critical as the Seller received other higher bids. A portion of the buyers’ capital was in the form of a recorded second trust deed, typically a prohibition in the debt markets due to “cram-down” should the asset get moved into bankruptcy. Solution: GSP identified a reliable private equity capital provider who understood the pending lawsuit and is comfortable with the Sponsors’ business plan and the ultimate exit strategy. A higher than anticipated valuation (as confirmed by the sellers’ additional bids) added more comfort to the senior lender; ie allowing a recorded second trust deed, etc. The entire financing process took three weeks to fund and maintain the escrow.
March 20, 2014
3 – 19 – 14 Transaction Description: Bryan Shaffer successfully structured a recorded 2nd mortgage for an Owner/User Sponsor on a San Francisco industrial building. The cash-out proceeds were used for a much needed equity infusion into the business operations. The holder of the $6,000,000 Senior note agreed to allow the 2nd Trust Deed. The one-year term loan self-services through a lender funded interest reserve. Challenge: With less than two weeks to execute, the Sponsor required capital to rescue his business. It was cost prohibitive to retire the senior lender and very few capital providers will provide second mortgage debt. Solution: GSP quickly identified a private capital provider who understood the San Francisco Industrial Market and did not require further market support. The flat decision making process helped expedite the closing to meet the two week time-line from introduction to close. Rate: 14% Term: 1 Year + 1 Year Option Amort: IO-Funded through Interest Reserve LTV: 87% Advisor: Bryan Shaffer
March 13, 2014
3 – 12 – 14 Transaction Description: GSP successfully placed the 100% note acquisition financing for a single tenant owner/user distressed asset that was in bankruptcy. The prior senior note was retired and replaced with a new capital structure at close. The Borrower was placed in default by original lender and the deed of trust was sold through an auction company to a third party who forced the Borrower to file BK or lose his equity in the 1985 vintage West Covina office building. The two year term loan is priced at 9.99% and is Interest Only. Lender legal fees were capped at $6,500. Challenge: The originating institutional lender sold the note to a third party at the first indication of non-performance without consideration to the equity in their collateral. The third party had no intention of working out a repayment program and was pursuing judicial foreclosure to gain access to the asset. Without many options, the Sponsor proceeded to file bankruptcy to save his equity. The court did not look favorably at the distressed situation and chances of the bankruptcy standing were slim. Solution: Due to the type of asset, age and location, George Smith Partners secured financing to pay off both the first and second deed of trust and have the bankruptcy dismissed. Both the first and second lien holders were paid in full without any discount. Certainty of execution was vital since the court was ready to grant a release from stay if the lender could not fund on time.
February 20, 2014
2 – 19 – 2014 Transaction Description: GSP successfully arranged the cash-out refinance of an 80,000 square foot warehouse in Vernon, California. The Los Angeles based owner/user owns several separate buildings where they manufacture, assemble, and ship their product globally. The recent economic downturn netted losses posted to the company financials during the last several years and their bank was unwilling to extend additional credit. No warm-body was available to provide for a repayment guarantee. GSP identified a fund that was comfortable providing a return of equity based on the value of their real estate. Proceeds from the non-recourse loan will be used by the Company for expanding their operations lines as corporate sales have picked up throughout the United States.