multifamily

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    $9,650,000 Purchase of 95-Unit Seattle Multifamily Property; Sized to 1.15 DCR on an Actual Mortgage Constant; 68% LTV

    March 13, 2019

    Transaction Description:

    George Smith Partners secured $9,650,000 in proceeds for the purchase of a 95-unit multifamily property located near Seattle. Proceeds were maximized by using a 1.15x Debt Coverage Ratio on the actual mortgage constant. The Seller’s historical P&Ls included many corporate and non-recurring expenses. GSP was able to separate out these expenses using the Seller’s general ledgers. Additionally, our team demonstrated the Sponsor’s successful track record bringing operating expenses in line with typical multifamily properties. As a result, the selected Lender was able to underwrite to a normalized expense ratio and provide 68% LTV on the purchase. Fixed at 4.50% for five years, the first three years are interest only before rolling into a 30 year amortization schedule for the 15 year term loan. The loan closed in about 45 days.

    Rate: 4.5% fixed for 5 years, then floating at 6M LIBOR + 3.25%
    Term: 15 years
    Amortization: 3 years Interest Only followed by 30 year amortization
    Prepayment Penalty: 3,2,1,0
    LTV: 68%
    DCR: 1.15x
    Guaranty: Non-Recourse

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    $12,000,000 High leveraged Permanent Multifamily Financing in Tulsa, OK

    February 20, 2019

    Transaction Description:
    George Smith Partners successfully arranged the permanent financing for a class C, 350-unit apartment complex located in Tulsa, Oklahoma. The Sponsor sought a permanent loan to refinance the Property after spending a million in upgrades. The Sponsor’s goal was to lock in a long-term, low interest rate in a rising interest rate environment as the building was close to reaching stabilized occupancy.

    Challenges:
    The Sponsor had turned around a rough non-performing property and was in the process of completing the lease-up. In addition, the Sponsor’s syndication structure made financing more complicated because of the small shares of ownership.

    Solution:
    GSP was able to prove to the Lender the Sponsor’s successful track record with similar properties, highlight the Property’s growing position in the market and the strong rent growth. Because GSP has completed so many other deals with syndicators, we were able to structure the loan so that both the Sponsor and Lender were comfortable.

    Rate: 4.5% Fixed
    Term: 7 Years
    Amortization: 30-Year Amortization
    LTV: 75%
    Guarantee: Recourse
    Prepayment Penalty: None

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    $8,025,000 Cash Out Refinance for a Portfolio of Multifamily Units in Los Angeles; Sized to 1.15 DCR on an Actual Mortgage Constant

    February 13, 2019

    Transaction Description:

    GSP secured $8,025,000 in proceeds for the cash out refinance of two adjacent multifamily properties totaling 59 units in Los Angeles. The loan is fixed for the first 7 years and offers 3 years of interest only payments. Due to market conditions at the time of application, the Borrower was able to fix the rate for a 7 year term while paying almost no premium compared to a 5 year term. Since acquisition, the Borrower has renovated and re-leased a significant number of units and added utility reimbursements. The selected Lender was able to give the Borrower maximum credit for the higher income at the Property. Final underwritten cash flow allowed for an increase in proceeds compared to the original term sheet. The loan closed in about 40 days despite the intervening holidays.

    Rate: 4.61% fixed for 7 years, then floating at 6M LIBOR + 2.75%
    Term: 15 years
    Amortization: 3 years Interest Only followed by 30 year amortization
    Prepayment Penalty: 5,4,3,2,1,0
    LTV: 65%
    DCR: 1.15x

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    $46,000,000 Non-Recourse Acquisition & Renovation Financing a 4-Property Apartment Portfolio in the DFW Metroplex

    February 13, 2019

    Transaction Description:
    George Smith Partners successfully arranged $46,000,000 of non-recourse, bridge financing to acquire and renovate a 4-property multifamily portfolio, consisting of 692-units, in the Dallas-Fort Worth Metroplex. Although the Properties were well occupied (97%), rents were below market because the Seller self-managed and the Property lacked recent common area renovations. The units were well maintained but dated and will benefit from Sponsors renovation plan.

    Challenges:
    This financing was unique because it had four different multifamily properties within one single portfolio. While there were efficiencies in working with one lender, each property was evaluated on its own merits and diligence had to be collected accordingly. We marketed the attributes of each Property and the sub-markets. Two of the properties are located in Irving, one in Grand Prairie and one near Fort Worth. Each market has different economic demand drivers (example: Irving is home to several major corporate headquarters including Exxon and McKeeson). Moreover, the Lender required an minimum capital investment of $6000 per unit (slightly higher than the Sponsor’s original budget) and GSP worked with the Lender to coordinate the information for securitization. There was a timing aspect in order to securitize the portfolio properly.

    Solutions:
    George Smith Partners worked with the Sponsor to increase their renovation budget and worked with the Lender to increase leverage accordingly. This retained the Sponsors original equity participation and should result in better returns. We closed the four loans nearly simultaneously (3 loans closed on a single day).

    Rate: L+350-400 (Property-Dependent)
    Term: 3 Years + Two, 1-Year Extensions
    Amortization: Interest Only
    LTC: 80% LTC
    Prepayment: 18 Months Yield Maintenance
    Guarantee: Non-Recourse

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    $4,075,000 for Purchase of 38 Unit Seattle Multifamily Property; Sized to 1.2 DCR on an Actual Mortgage Constant

    February 6, 2019

    George Smith Partners secured $4,075,000 in proceeds for the purchase of a 38-unit multifamily property located near Seattle. Proceeds were maximized by using a 1.20x Debt Coverage Ratio on the actual mortgage constant. The loan has an open prepay after 2 years, an unusual feature for a non-bank loan. In order to maximize underwritten cash flow, the selected lender was able to separate out regular operating expenses from capital expenditures in the historical P&Ls. Final underwritten cash flow allowed for proceeds of about $300,000 higher than the original loan application. Although the Property has tuck under parking, the Lender was able to pre-screen the Property to eliminate the need for earthquake insurance. Fixed at 4.70% for 5 years, the first two years are interest only before rolling into a 30 year amortization schedule for the 20 year term loan.

    Rate: 4.70% fixed for 5 years, then floating at 6M LIBOR + 3.25%
    Term: 20 years
    Amortization: 2 years Interest Only followed by 30 year amortization
    Prepayment Penalty: 3,1,0
    LTV: 65%
    DCR: 1.20x
    Guarantee: Non-Recourse

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    $39,300,000 Forward Rate Lock Permanent Financing of a 154-Unit Luxury Multifamily Property in Ventura, CA

    February 6, 2019

    Transaction Description:
    George Smith Partners successfully arranged the permanent financing for a newly constructed luxury 154-unit apartment complex located in Downtown Ventura, one mile from the Pacific Ocean. The Sponsor sought a permanent loan to refinance the construction loan. The Sponsor’s goal was to lock in a long-term, low interest rate in a rising interest rate environment prior to the building reaching stabilized occupancy.

    Challenges:
    There was significant lease up risk for the permanent lender, as the Property had not yet stabilized with less than a month of operating history at the time of loan underwriting.

    Solution:
    GSP was able to make the Lender comfortable by highlighting the Sponsor’s successful track record, the Property’s strong position in the market with few comparables available, the Property’s excellent location, and the prospects for strong rent growth. GSP secured an early rate lock at a low 1.47% spread over the 10 Year Treasury for a 16 year fixed rate loan term. Sized to 60% of value, the non-recourse financing includes 2 years of interest only payments, which enhances the cash flow during the early years of the loan. The loan closed in 30 days.

    Rate: 1.47% spread over 10 YT
    Term: 192 months (16 Years)
    Amortization: 2 Years Interest Only; 30-Year Amortization Thereafter
    LTV: 60%
    Guarantee: Non-Recourse
    Prepayment Penalty: Yield Maintenance

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    $13,600,000 for the Acquisition and Reposition of 199-Units in Mesa, Arizona

    January 23, 2019

    Transaction Description:

    George Smith Partners arranged $13,600,000 of bridge acquisition financing for a 199-unit apartment complex located in Mesa, Arizona. The Property, which was built in 1970, features a pool, bbq area, and playground. The units range from studios to 3-bedrooms and are currently 97% occupied. The Sponsor plans to renovate the exterior area to improve the overall appeal of the Property and address some deferred maintenance . The 3-year loan is sized to 75% LTC and has an interest rate that floats at 3.45% above 1-Month LIBOR. The non-recourse financing has 24 months of yield maintenance and has a 1.0% origination and 0.5% exit fee.

    Rate: 30-Day LIBOR + 3.45%
    Term: 36 Months plus Two 12-Month Extensions
    Amortization: 36 Months Interest Only
    Loan to Cost: 75%
    Prepayment: 24-month spread maintenance; open thereafter
    Guarantee: Non-Recourse
    Lender Fee: 1.00%

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    $34,000,000 Dallas Multifamily Acquisition Fixed at 5.15% w/Full Term Interest Only

    January 23, 2019

    Transaction Description:

    George Smith Partners secured a $34,000,000 permanent loan for the acquisition of a 273 unit Class A multifamily property in Dallas, TX. The 10 year loan is priced at 5.15% and fixed for ten years, with full term interest only. The Borrower executed their purchase and sale agreement in October 2018 as part of a 1031 exchange. While in due diligence the cash flow declined due largely to new construction coming on-line. In addition property taxes were re-assessed at a higher rate. GSP worked with the lender as well as the rating agencies to demonstrate the historical occupancy (95%+) and mitigate the loss in net cash flow from the rise in operating costs. The borrower was able to rate lock at an all-in rate less than applied for, with full proceeds, during the last week of 2018. The transaction closed once business commenced in full in 2019.

    Rate: 5.15% fixed
    Term: 10 years
    Amortization: 10 years Interest Only
    Prepayment Penalty: Defeasance
    LTV: 65%
    DCR: 1.4x
    Debt Yield: 7.75%

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    $12,790,000 Multifamily Financing in Odessa, Texas

    January 9, 2019

    Transaction Description:
    George Smith Partners placed the first major four property/228 unit Multifamily portfolio financing in Odessa/Midland, Texas.  The non-recourse, fixed rate loan is priced at 5.8% fixed for 10 years at 75% LTV.

    Challenge:
    In 2013, Odessa was one of the fastest growing multifamily markets because of the oil/energy industry, even though it is one of the smaller MSAs in the country. In 2014 downward pressure on oil/natural gas caused a downturn in employment and real estate markets. Because of the market volatility only a limited number of lenders felt comfortable with the Odessa market. Before the rebound in 2018, apartment building values had fallen by over 20%.

    Solution:
    GSP highlighted market potential based on the rebound in housing and employment and was able to identify a capital provider who was comfortable with this tertiary market and its’ recent rebound. Because of GSP’s extensive market knowledge we were able to lock-in a rate of 5.80% fixed for 10 years. GSP did research in the oil market and the MSA of the subject property and was able to prove to the Lender the future stability of the properties’ cashflows.

    Rate:5.8%
    Term: 10 Years
    Amortization: 25 Years
    LTV: 75%
    Guarantee: Non-recourse with Yield Maintenance
    Lender Fee: None

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    Acquisition Bridge Financing for a Vacant 10 Unit Multifamily Property in the West Adams submarket of Los Angeles; 70% Loan to Cost at a 5.75% Rate

    December 19, 2018

    Transaction Description:

    George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in the West Adams submarket of Los Angeles. The 10 unit 1970s vintage property was being delivered vacant and with significant deferred maintenance. The Sponsor’s business plan was to optimize the unit mix by reconfiguring the mostly two-bedroom one-bathroom units into a majority two-bedroom two-bath units. This would maximize square footage by enclosing the tuck under parking, which also eliminates the need for a soft story retrofit. Sized to 70% of total project cost, the loan includes 100% of future funding for a full gut renovation of unit interiors and an exterior upgrade. The two year bridge loan is interest only and floats at Prime plus 0.5% (5.75% today) with no prepayment penalty. Interest is not charged on the holdback until funds are drawn. Although the Lender’s appraisal came in weak and could have resulted in lower loan proceeds, GSP was able to work with the Lender to demonstrate the strength of market sales and rent comps to preserve the loan amount agreed to in the term sheet. The Lender fee was negotiated down to 0.5%.

    Rate: Prime + 0.5%
    LTC / LTV: 70% / 65%, including 100% of future funding
    Term: 2 Years
    Amortization: Interest Only
    Prepayment Penalty: None
    Recourse: Full Recourse
    Lender Fee: 0.5%

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    $5,918,000 Cash-Out Multifamily Refinance Sized to 1.2 DCR on an Actual Mortgage Constant

    December 19, 2018

    Transaction Description:

    George Smith Partners secured $5,918,000 in proceeds for the cash-out refinance of a 48-unit multifamily property located in Los Angeles. The return of funds represents a majority recapitalization of Sponsor purchase equity prior to their unit upgrade investment. Fixed at 4.58% for 10 years, the loan will amortize over 30 years. Proceeds were coverage constrained, sized to a 1.20x Debt Coverage Ratio on the actual mortgage constant. The loan provides for a stepdown prepay from 5%.

    Challenges:

    Since their acquisition, the Sponsor renovated the majority of units. Historical P&Ls demonstrated a recent decrease in collections during months when several units were under renovation. Several capital providers lowered their proceeds projections due to concerns about the cash flow stability. Los Angeles’ compressed capitalization rates consistently limit loan proceeds below 60% of value due to debt coverage constraints. A majority of local and regional lenders utilize a stressed mortgage constant for sizing, limiting proceeds further.

    Solutions:

    GSP demonstrated that the Property is now stabilized as compared to the immediate market and renovations are substantially complete. GSP identified a lender who underwrote to the in-place rent roll and allocated additional credit for achieving higher income on renovated units. RUBs and proforma laundry revenue collections were utilized in their underwritten net cash flow. Loan proceeds were sized to the actual note rate and were not limited by a stress constant or the Sponsor’s cost basis. Despite a run up in indexes during due diligence, our Capital Provider held the original rate of 4.58% through the 55 day application process.

    Rate: 4.58% Fixed for 10 years
    Term: 10 years
    Amortization: 30 years
    Prepayment Penalty: 5,5,4,4,3,3,2,2,1,1
    LTV: 65%
    DCR: 1.20x

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    $9,300,000 Construction Loan, 80% LTC, L + 2.75%, 32 Unit Multi-Family Development, Los Angeles, CA

    December 12, 2018

    Transaction Description

    George Smith Partners secured $9,300,000 for the ground-up development of a 32-unit multifamily building in the Koreatown neighborhood of Los Angeles. The 5-story project will include a mix of 1 and 2 bedroom units with gated subterranean parking. Sized to 80% of actual costs, the 36-month term carries two – 1-year options and is priced at 2.75% over LIBOR.

    Our Sponsor requested maximum loan proceeds which would require the acceptance of imputed equity. George Smith Partners identified a Los Angeles based construction lender that understood the value that had been created with re-entitlements and permitting since the property was initially acquired four years ago. This capital provider agreed to value the land at current 2018 values as opposed to the acquisition price. The bank ordered appraisal valued the land at over 3x the Sponsor’s 2014 purchase price and imputed equity was utilized in calculating the Sponsor’s equity contribution. No additional funds were required at closing.

    Proceeds: $9,300,000
    Rate: LIBOR + 2.75%
    Term: 3+1+1
    LTC: 80% LTC
    Origination Fee: 0.75%
    Recourse: Yes