November 22, 2017
George Smith Partners arranged the 65% of cost reposition and conversion financing of a historic building to a 96-key upscale boutique hotel in Seattle, Washington. A 75-year ground lease was recently renegotiated to make debt financing more palatable. The capital structure implemented a historic tax credit funding to facilitate the property reposition and conversion of use. GSP underwrote the monetized value of the ground lease to articulate the gross lease payments were below the actual cost of what the land acquisition would have been to the project: IE; it is less expensive to lease the land rather than acquire in an arms-length transaction. Terms of the 65% loan-to-cost non-recourse loan are confidential.
$50,000,000 Non-Recourse Construction Loan to Develop Los Angeles International Airport Dual Branded Hyatt Hotel
November 8, 2017
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.
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.
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.
October 25, 2017
George Smith Partners placed $3,710,000 financing on a 79-unit limited service hotel in the Southwestern United States. Constructed in 2010 by our Sponsor, all loan proceeds were used to refinance the existing debt and cover closing costs. GSP identified a lender who was comfortable with the borrower’s strength and understood the economics of the transaction. During underwriting, the appraisal came in at a value more conservative than expected. Our capital source agreed to advance a short term commercial loan of $200,000 at Prime plus 1.25%, self-amortized over 5 years to avoid the need for additional cash equity infusion from our Sponsor. Fixed for 5 years at 5.25%, the senior loan floats for two years at Prime plus 1.25% for the seven-year term.
Rate: 5.25% fixed for 5 years, Prime plus 1.25% thereafter/ Prime plus 1.25%
Term: 7 years, fixed for 5 years / 5 years
Amortization: 25 years / 5 years
Prepayment: 5% 4% 3% 2% 1%
Lender Fee: 0.50%
- Advisors: Ameet Chagan
October 18, 2017
George Smith Partners successfully placed the refinance on the flagship 317 room Pendry Hotel in the historic Gaslamp quarter of downtown San Diego. The Hotel and the brand were launched in early 2017 as the new luxury hotel brand operated under the Montage platform. Pendry fills the void between service-oriented luxury hotels and design-oriented boutique hotels. In 2014, GSP successfully placed the construction financing. Proceeds from this refinance were used to repay that facility.
GSP’s mandate was to source a lender who would recognize the value in the unique attributes for this Hotel, including its unique Food & Beverage offerings. While there were numerous financing providers who were interested in this opportunity, our client ultimately selected a national debt fund that understood the strength in the asset, the strong capabilities of the Sponsor and market demand of both business and leisure travelers who will frequent the property over the coming years.
$13,740,000 Non-Recourse Acquisition Bridge Loan of Land Parcels For a Future $200,000,000 Mixed-Use Hotel Development Project; 5-Day Close
September 27, 2017
George Smith Partners successfully placed a $13,740,000 acquisition bridge loan to acquire two land parcels and refinance three adjacent land parcels for a large mixed use hotel and condo development site in the heart of the Koreatown district of Los Angeles. With the final components of the land assemblage completed, the $200,000,000 mixed used development project is scheduled to break ground in March of 2018. Our Sponsor’s initial business plan was to build the mixed use project on three parcels of land previously held in his portfolio. The opportunity to acquire two adjacent parcels will allow him to double the total buildable square footage of the project. Fixed for 12 months, the non-recourse loan does not carry any prepayment penalty and closed in 5 days.
It was crucial to identify a lender who could close quickly, provide leverage, and waive any prepayment penalty. Due to the upcoming March 2018 groundbreaking, existing tenants on the current 3 parcel assemblage were all on short term leases with discounted rents. As a result, in place cash flow had been compressed and limited the ability for institutional lenders to get comfortable with the property and provide meaningful proceeds. Additionally, a fast close was necessary to take advantage of a seller discount.
GSP identified an unconventional lender who focused on the future value of the five parcel assemblage and shovel ready development site rather than the current value based on in-place NOI. This capital provider closed the loan in 5 days, allowing the Sponsor to achieve a significant discount on the purchase price. The capital provider also waived all prepayment penalties, assuring the Sponsor would preserve significant capital once the subsequent construction loan is placed within the next few months.
$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.
May 10, 2017
George Smith Partners secured $5,100,000 in proceeds for the refinance of a 66 key all-suite Best Western in Southern California. The loan was priced over the 10 year treasury. The rate was locked at application to eliminate interest rate risk. GSP was able to identify a balance sheet lender who would be able to fund prior to the client’s original loan maturity date, provide straight forward loan documents with no legal fees, and provide an efficient due diligence process. The lender was flexible with regard to ownership structure and future partnership buy-out provisions. The loan was approved in a timely manner and closed 45 days after signed application.
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.
October 22, 2015
Transaction Description: George Smith Partners arranged the $4,950,000 refinance of a 72 key limited service hotel in Central California. The borrower built the subject property in 2002 and was seeking new debt to replace his higher yielding coupon, yet requested a loan that would allow for future flexibility. There was a small return of equity funded through this refinance. Located in a high barrier to entry, the subject is surrounded by an abundance of walkable retail and restaurants. GSP identified a portfolio capital provider who understands hospitality and was comfortable with the historically consistent cash flow despite the secondary location. Fixed for five years at 3.85% before floating over Prime for the remaining two years, the 25 year amortized loan steps-down from 5%.
September 17, 2015
Transaction Description: George Smith Partners arranged financing that was structured with three credit facilities for the reposition refinance of an un-flagged hotel. The first credit facility was a recorded First Trust Deed that of $3,500,000 to satisfy the existing lienholder and cover additional partnership debt. Trailing cash flow history required the recordation of a Second Trust Deed from the same capital provider that funded $1,125,000 into a rehabilitation fund for capital upgrades. Additional funds were required to complete the Sponsor’s rehab plan so an unrecorded revolving working capital line for $375,000 was drafted to complete the capital project. Sized to 55% of value, recorded loan proceeds were limited by historical cash flow. The recourse loans are floating over Prime less 0.25% with a 3.75% floor for the 10 year term. The loan may be fixed via a SWAP vehicle at any time during the loan term. There is no prepayment penalty while the loan floats. The credit line revolver is priced at Prime plus 0.5% paid on balances as drawn for the two year term.
Rate: Prime minus 0.25%
Term: 10 Years
Amort: 25 Years
- Advisors: Private: Jesse Cruz
September 17, 2015
Transaction Description: George Smith Partners arranged construction financing for a 99-Room Hampton Inn Limited Service Hotel in the heart of Coastal California Wine Country. Uniquely situated off of Highway 101, our Sponsor purchased the land mid-2014 within a short drive of 60 operating vineyards. Set to open mid-2016, the hotel will feature a contemporary ranch design with wooden roofs and awnings. Guest rooms will feature refrigerators, microwaves, free high speed internet and 32” HDTV with free movie channels. Our Sponsor is an experienced hotel developer and owner, having built 9 hotels ground-up and performing major renovations on several others. GSP identified a non-bank lending source able to provide non-recourse, high leverage construction financing. Funded loan proceeds increased during the application process as construction costs were being finalized. Sized to 80% of costs and priced at LIBOR + 7.5%, the three year term offers 2 – one year extensions.
November 25, 2014
Transaction Description: Malcolm Davies successfully placed the 70% of cost financing for the development of a newly branded Southern California luxury hotel, subject to a 99 year ground lease. The Non-Recourse debt allowed the Sponsor to break ground on a project that had been in the works for many years. Terms of the Non-Recourse construction loan are confidential.
Challenge: Leasehold ownership is secured with a 99-year ground lease to a private land owner. The Developer required a Non-Recourse structure in a capital market that is now only reviewing hospitality construction. Over 50% of the hotel’s revenue will be generated from Food & Beverage.
Solution: GSP was able to underwrite the true value of the ground lease to articulate the gross lease payments were below the actual cost of what the land acquisition would have been to the project, ie it was less expensive to lease the land rather than acquire in an arms-length transaction. GSP sourced a lender who has extensive knowledge in the luxury hospitality market and was comfortable to provide the Non-Recourse financing. With a large F & B allocation, GSP documented like kind hotels in the market to assure that the project’s figures were indeed inline to the performance of the hotel.
- Advisors: Malcolm Davies