April 26, 2017
George Smith Partners arranged $5,500,000 in acquisition proceeds on a 15,122 square foot Los Angeles office building. Floating at Prime + 0.5%, the 3 year loan is interest only for 18 months before amortizing over 25 years for the balance of the term. Sized to 65% of the purchase price, there is no prepayment penalty for this loan.
Despite the prime location, the subject had somewhat aged interiors and exteriors and was just 70% occupied when our Sponsor executed the purchase contract. The income was below break-even debt coverage on the proposed loan. Most of the in-place tenants were paying well below market rent. One tenant was under a month to month lease and several others were facing lease roll in the next six months. On-site property management was charging an above market rate. Actual historical cash flow was well below potential.
GSP researched comparable rent and competitive operating data that proved out our Sponsor’s pro forma rents and business plan. Our Sponsor’s considerable success adding value to similar office properties over the past several years supported the business plan for the loan request. An aggressive lease campaign was initiated during due diligence, securing letters of intent from multiple tenants that would bring occupancy to 95%. A small debt service reserve was structured until the tenants took occupancy to cover all operating loss and mortgage expenses in the short interim.
$7,350,000 Non-Recourse Pre-Development Financing on a Predominantly Vacant West LA Office & Retail Building
March 28, 2017
George Smith Partners arranged a $7,350,000 non-recourse loan to 75% of appraised value from a national debt fund to finance the pre-development period of an existing 12,500 square foot, West Los Angeles office and retail building. Despite having very low occupancy, the lender was able to advance $588 per square foot after GSP demonstrated the superior location of the asset and experience of the Sponsor in development. The lender structured a 12-month interest and carry reserve as the Sponsor vacates the remaining in-place tenants in order to implement its business plan of eventually razing the existing improvements and building a new, high-end, multi-tenant retail building. Loan proceeds were priced at 9.50% fixed for the 18-month loan duration, and interest expense is not incurred on the interest and carry reserve until drawn.
February 15, 2017
George Smith Partners arranged $10,390,000 for the refinance of a stabilized office building in Bakersfield, California. The loan was put into application with a verbal commitment from the largest tenant to extend their lease for an additional four years. While in application for the loan, the tenant became non-responsive and it became clear that they were debating whether to extend. As a primary tenant, the extension was critical to the loan closing. GSP worked directly with the tenant and the leasing broker to understand the market and to structure the lease terms to work for the tenant, landlord, and the lender. The lease was executed in a matter of weeks which allowed the lender to fund and avoid an imminent balloon default on the existing loan.
February 1, 2017
George Smith Partners successfully arranged $73,000,000 in non-recourse, bridge financing for the conversion, renovation, and stabilization of the Seattle Design Center. The design center, comprised of two buildings in the Georgetown submarket of Seattle, Washington, historically served as a well-known destination for high-end home furnishings and design services. After acquiring the property in 2014, the Sponsor renovated the first 157,000 square-foot building. Upon completion, the Sponsor continued to operate the asset as the Seattle Design Center and consolidated the showroom/design tenants from the second building into the newly renovated building. Once the second building was vacated, the Sponsor began repositioning the 280,000 square-foot building from showroom space into creative office space. Upon completion, the building will have expansive 60,000 square-foot floorplates, exposed ceilings and concrete floors, glass walls for natural light, unobstructed views of downtown Seattle and Mt. Rainier, and full-service amenities, including an upscale fitness center and conference center. Pre-leased to 45% occupancy, Sponsor needed additional proceeds to complete the project. GSP identified a Lender who recognized the value of the project, supported by low supply and increasing market demand for creative office from tenants in the technology sector. Sized to 80%+ of total project costs, the $73,000,000 non-recourse loan was priced at LIBOR + 6.75% for a 24-month term with one, 12-month extension option. $49,000,000 of total proceeds was funded at closing with an additional $24,000,000 future funding allocated toward completion of the renovation, construction, tenant improvements and leasing commissions.
January 4, 2017
George Smith Partners successfully placed the $34,400,000 non-recourse bridge loan, sized to 92% of total cost, for a 238,000 square foot retail shopping center and 67,000 square foot Southern California office building. This 1960s vintage property is well-located and sits on a 17 acre parcel with a traffic count of over 60,000 vehicles per day. Proceeds will be used to satisfy the existing term loan and a majority of the $17,400,000 in planned renovations, tenant improvements, leasing commissions, and other capital expenditures. Retail occupancy includes four value oriented chains, several local retailers, a future grocer and a national fitness/gym chain. The office building will be renovated to feature street level retail pre-leased to regional and national restaurant chains including Chipotle, Five Guys Burgers, and Ono Hawaiian BBQ. Office occupancy of the upper three floors will include a mixture of full floor tenants and local businesses. Several of the office tenants are currently leased month to month, but is supported by a strong occupancy history. Subject to several ground-leases executed in the 1950’s, all leases were recently restated and extended. Floating at 545 over 30 day LIBOR, the non-recourse loan provides for carve-outs executed at the entity level only with no warm body guarantor. The three-year term has one 12 month extension with interest paid current monthly; there is no interest reserve or amortization.
December 7, 2016
George Smith Partners arranged the $7,800,000 acquisition loan for a 10,397 square foot creative office in San Francisco. Recently leased by a global financial services firm, the trophy asset was previously repositioned into creative office, while maintaining historical architectural heritage of the original building. Emphasizing the importance of closing as applied for, this escrow represented the Sponsor’s “down leg” for a 1031 exchange. Fixed for ten years at 4.56%, the non-recourse loan offers 5 years of interest only before amortizing over 30 years.
It was crucial to identify a Lender who would underwrite full proceeds on a tight capitalization rate where loan proceeds would be cash flow constrained. High dollars per square foot was requested for a non-investment grade tenant who had only 7 years remaining on the first term of the lease.
GSP identified a Lender who was confident with the submarket and understood the value of the location and physical real estate. Lender underwrote to a very aggressive debt yield and felt comfortable with the tenant’s financial strength to merit very high loan dollars per square foot. The lender closed on time and at fully request proceeds.
October 26, 2016
GSP arranged the acquisition loan for a 9,928 square foot office building in Whittier, California for a first time real estate owner. The acquisition allowed our Sponsor to grow her counseling firm rehabilitating injured workers returning to the work force. Prior to engaging GSP, the Borrower sought SBA financing but was declined due to credit issues. GSP identified a bank and CDC (SBA) who invested the time to fully qualify the credit concerns of the borrower prior to issuance of application. The flow of communication and supporting documents led to the approval from both bank and CDC. Sized to 90% of cost the blended Bank 1st Trust Deed and SBA 2nd Trust Deed netted a 3.85% coupon, fixed for 10 years. Amortization is also blended between 25 and 20 years respectively for this recourse loan.
October 12, 2016
Transaction Description: George Smith Partners successfully placed $14,400,000 in acquisition and reposition financing to acquire a 30,400 square foot West Los Angeles office building currently occupied by a single tenant with rolling annual termination options. Our Sponsor’s business plan assumes the current tenant will exercise one of their annual termination options; allowing for a building renovation and conversion to a multi-tenant creative office building with ground floor retail. The tenant, through extensions, may choose to continue to occupy this location and is not obligated to vacate during the initial 3½ year loan term. George Smith Partners sourced a flexible lender comfortable executing on the transaction regardless of the tenant’s occupancy status. Sized to 65% of total project cost, this financing is priced at 2.95% over one-month LIBOR despite the potential for zero cash flow should the tenant choose to vacate. Our Capital Provider underwrote and will fund 100% of creative office conversion and re-tenanting costs. Interest is not paid on this additional $4,400,000 funding until drawn.
September 7, 2016
George Smith Partners secured the $1,440,000 acquisition loan for two non-contiguous commercial properties for the same Sponsors. Our Sponsors, two physicians that will relocate their practice into the first space, did not qualify for an SBA execution as they will occupy less than 50% of net rentable. Traditional institutional capital providers pushed back on the non-contiguous collateral and not currently zoned for medical office occupancy, adding entitlement risk to the structure. George Smith Partners identified a lender that exclusively underwrites medical professionals. Their expertise allowed for a 20% increase the Sponsors’ underwritten global income and provided an increase in net loan proceeds to the funded 80% of cost. Fixed for 7 years at 3.8%, a 25 year amortization was negotiated (versus the traditional 20 year amortization usually offered), with a three year step-down prepayment.
Term: 7 years
Rate: Fixed at 3.8%
Amortization: 25 years
Prepayment Penalty: 3,2,1, open
Lender fee: 0.25%
Advisors: Shahin Yazdi
- Advisors: Shahin Yazdi
July 13, 2016
Transaction Description: George Smith Partners arranged the cash-out refinance of a recently renovated Upland, California office building. The new 15 year term loan is fixed for 3 years at 3.90% and resets for a fixed term every 3 years at 300 basis points over the then 3 Year CMT. This financing replaces a bridge loan and allowed our Sponsors to recover the majority of their equity invested for their acquisition and renovation. With an initial funding of $2,815,000, the remainder of the proceeds will be released once rent increases have been realized. There is no prepayment penalty or exit fee.
Interest Rate: 3.90% fixed for 3 years. Rate is reset every 3 years at 3.00% + 3 YR CMT
Term: 15 Years
Amortization: 30 Years
Prepayment Penalty: None
Lender Fee: Par
- Advisors: Private: Jason Gaffner
$116,000,000 Non-Recourse Financing on a Four Asset Class A Suburban Office Portfolio in Non-Gateway Cities
July 13, 2016
Transaction Description: George Smith Partners arranged $116,000,000 in non-recourse debt to refinance a suburban office portfolio in conjunction with an institutional equity recapitalization. George Smith Partners invested six months to optimize execution due to recent capital markets turmoil.
The first mortgage loan is cross-collateralized across the four properties in order to mitigate tenant rollover risk on the individual asset level, and features release provisions to allow flexibility in the event of a future sale of one or more of the assets. Proceeds are structured as an initial $109,000,000 loan, with up to $7,000,000 of additional funds available during the initial term for tenant improvement costs, leasing commissions, and free rent across the portfolio. The loan requires no additional reserves with interest is not paid on the $7,000,000 until drawn.
The first mortgage debt priced at one-month LIBOR plus 2.60% and required a LIBOR cap with a 3.00% strike price for the first two years of the term with a renewal for the third year, thereby reducing the overall cap cost to Borrower by shortening the cap’s duration. The loan features Interest Only payments for the three-year initial term in order to maximize cash flow available for distribution to investors.
June 29, 2016
Transaction Description: George Smith Partners secured an acquisition bridge loan for a vacant office building in Long Beach, California. Application to funding occurred in four business days. Our Sponsor’s business plan is to convert the vacant office building into a 6-unit multifamily rental. Permits to convert were expected to be in hand by the expiration of the escrow period but had not yet been secured, precluding the institutional lender from funding the acquisition. A quick-close loan was structured to close on the purchase and refinance once permits are issued. Fixed at 8.60% for 6 months, the loan was sized to 60% to acquisition price and was funded within four business days on the escrow’s due date. There is no prepayment penalty.