80% Loan-to-Value, $11,250,000 Refinance of a 44% Occupied Retail Center Shadow Anchored by an Independent Grocery Chain
August 16, 2017
GSP successfully placed $11,250,000 in non-recourse, floating-rate bridge debt on a 44% occupied, but 97% leased, 1960’s vintage Salt Lake City metro multi-tenant retail property. Although the property was only 44% physically occupied at loan application as a result of a planned re-tenanting program, the borrower recently executed two leases with large-format retailers that will bring occupancy to 97%. GSP identified a lender comfortable with the story behind the property’s 1) low physical occupancy at time of application, 2) grocery shadow anchor, 3) temporary tenants paying below-market rent during transition period, and 4) lack of supporting sale comps for the market. The short-term bridge loan was sized to 80% of as-is value, 75% of stable value, and included future funding to cover 100% of lease-up costs with interest not paid on unfunded proceeds until drawn.
Rate: 30-Day LIBOR + 4.75%
Term: 24-month initial term plus two 12-month extension options
Amort: Interest only (initial term)
LTV: 80% as-is, 75% as-stable
Prepayment: 15-month spread maintenance
Lender Fee: 1%
July 26, 2017
George Smith Partners placed the rate and term refinance of four stand-alone Rite Aid Drug Stores. The loans are structured as four separate un-crossed loans to maintain reposition flexibility. At the time of loan commitment, the Walgreens/Rite Aid merger was still under consideration by the FTC and it was unknown if Walgreens would close any of the subject units. Our Sponsor wanted to maintain options and not to allow one store closure to negatively affect the remaining portfolio. Store sales were not available. Each lease has approximately 9.5 years remaining on the initial term. The balance sheet loan is coterminous with the lease term and does not carry the traditional two-year lease hang-out. No reserve structure is required prior to the tenant notice date, six months before the lease and subsequent loan expiration. Fixed at 4.52% for five years, the rate will float over LIBOR for the remaining loan term and amortizes over 30 years. Prepayment steps down allowing for additional reposition flexibly if needed.
July 12, 2017
George Smith Partners secured a $3,000,000 non-recourse bridge loan to demolish and begin the redevelopment of a fire damaged retail building on a prime corner in Downtown Los Angeles. After the fire, the sponsor decided to demolish and rezone the property. The long term plan is to redevelop the property into a mixed use building with ground floor retail, office, and condos. GSP used its experience and relationships to identify a private money lender who could understand the greater value of the project and was able to demonstrate both the inherent value of the property due to its extraordinary location as well as the future value of the project as completed. The lender was able to close in 5 days. The interest only loan is priced at 7.99% and represents 55% of the property’s current value. The loan has a 1-year term with a 1-year extension option and no prepayment penalty.
June 14, 2017
George Smith Partners successfully arranged a $5,275,000 non-recourse, 7-year fixed rate, non-CMBS loan for a non-anchored retail center in Imperial Beach, CA. While the property is 100% occupied in a coastal California location, the Sponsor needed a non-recourse loan with a flexible prepayment penalty on a long-term fixed rate basis which is extremely hard to locate outside of CMBS. Life insurance companies were not able to get comfortable with the collateral since the largest tenant was a is a non-credit gym and there is significant near-term lease roll. Other bank lenders would not provide full credit for the significant cell tower income which limited their loan proceeds. GSP was able to identify a typically recourse lender that was willing to provide a non-recourse loan on this property and was able to underwrite the full cell tower income.
$3,700,000 Refinance for “Single Tenant” Subleased Retail Property in Mid-Atlantic Secondary Location
June 7, 2017
George Smith Partners arranged a $3,700,000 loan for a non-credit tenant that subleases a significant portion of the space. The tenant is a middle market grocery chain recently acquired by a hedge fund. The formerly public company is now private with no financials available. The 31,000 square foot grocery store tenant subleases 8,000 square feet to an office supply store. The challenge was finding a lender that could be comfortable with 8 years left on the lease (and the co-terminus sublease) in a secondary location with no continuing sales available. GSP sourced a lender with local expertise that got comfortable with the historic sales that were reported prior to the tenant’s acquisition. The short amortization and recourse were also risk mitigates.
$11,500,000 Non-Recourse Refinance of a Recently Stabilized Los Angeles County Shopping Center Anchored by a National Discount Retailer and Shadow Anchored by a Regional Grocer
June 7, 2017
George Smith Partners successfully placed $11,500,000 of non-recourse, ten-year fixed rate first mortgage debt for the refinance of a 60,000 square foot multi-tenant retail property anchored by an investment grade rated discount retailer and shadow anchored by a successful regional ethnic grocer. The property was 99% leased at loan closing, but only 79% occupied as three new tenants were in a four month build out and free rent period. GSP worked with the lender to avoid a capitalized hold back of over $2,000,000 as the new tenants’ income was included in the underwritten income, but was not being collected yet. Instead GSP negotiated a structured a nominal six month rent and expense reserve held back at closing and released pro rata to Sponsor as the new tenants open for business.
The lender became comfortable with this structure due to a combination of positive factors including a having a highly experienced sponsor, strong shadow anchor sales, below market rent for the anchor tenant with fixed low renewal rates, and a rent roll with over 50% investment grade rated tenancy. The 4.59% fixed coupon loan is sized to an 8.0% debt yield and 1.25x debt coverage ratio and the 10-year term is interest only for the first five years, with a 30-year amortization schedule thereafter.
$11,700,000 Non-Recourse Acquisition Financing on a San Diego County Shopping Center with Near-Term Anchor Roll
May 10, 2017
GSP successfully placed $11,700,000 of non-recourse, ten-year fixed rate first mortgage debt for the acquisition of a 75,000 square foot Southern California multi-tenant retail property anchored by a regional Hispanic grocer and national discount retailer. The 1970’s vintage property is 100% occupied and the two 25,000 square foot anchor tenants who comprise 67% of total collateral square footage. The national discount retailer pays below market rent and its lease expires in 2018 with no renewal options, providing significant potential upside for equity and cash flow risk for debt. GSP highlighted strong anchor sales and an experienced sponsor with extensive retail tenant relationships in order to get the lender comfortable sizing to a 7.7% debt yield. The non-recourse loan has a 4.52% fixed coupon and the 10-year term is interest only for the first five years, with a 30-year amortization schedule thereafter.
$11,845,000 Non-Recourse Acquisition and Reposition Financing up to 75% of Cost on a Non-Cash Flowing Retail Property in Los Angeles
April 19, 2017
George Smith Partners arranged an $11,845,000 first mortgage on a value-add retail property with no cash flow located along the main retail corridor of one of the hippest neighborhoods in Los Angeles. The national balance sheet lender provided a non-recourse loan to up to 75% of total project cost including 100% of future capital expenditure funds to gut renovate the asset and convert the property to high-end retail plus an addition of four apartment units. Due to the lack of cash flow, the lender structured a 20-month interest and carry reserve to cover debt service during the reposition period. Over 50% to total loan proceeds are allocated for future funding. Interest is not charged on funds until drawn.
Rate: 30-Day LIBOR + 6.00%
Term: Three years plus two 12-month extensions
Amortization: 24 months interest only; 25-year amortization thereafter
Max Loan to Cost: 75%
Prepayment: 15-month lockout; open thereafter subject to 1.00% exit fee
Lender Fee: 1.00%
April 19, 2017
George Smith Partners placed a $7,500,000 refinance of two special use, unanchored multi-tenant retail properties located in the City of Industry. A sizable return on equity (142% of total capitalization) was permitted due to our Sponsors’ 20 year ownership and management history of the asset. This transaction was structured as senior debt funded at $4,300,000 and a $3,200,000 crossed-collateralized stand-by line of credit. Both vehicles were funded by the same capital source. Due to the special-use tenant mix, the senior debt was sized to 60% LTV and priced at Prime plus 1% fixed for five years and amortized over 25 years, while the credit line will float at Prime plus 1.5% for two years. Interest is only paid on funds drawn. There is no prepayment penalty for either tranche.
Special use tenancy at both properties is subject to a CC&R review by the local municipality at the end of 2017. One tenant who occupies 20% of the net rentable square feet went dark and vacated the property during the due diligence process.
GSP identified a regional lender that understood the market and was eager to build a relationship with our Sponsor, who has impressive real estate holdings, a long track record of execution and significant financial strength. By demonstrating that market rents and occupancy levels still allowed for significant debt service coverage, GSP was able to assist the lender in gaining comfort with the properties’ specialty-use and uncertain occupancy future.
Rate: Senior Loan – Prime + 1%; Line of Credit – Prime + 1.5%
Term: Senior Loan – 5 Years; Line of Credit – 2 Years + Extensions
Amortization: Senior Loan – 25 Years; Line of Credit – Interest Only
DCR: Senior Loan – 1.25x; Line of Credit – 1.5x
Lender Fee: 0.75%
April 3, 2017
George Smith Partners secured a $8,200,000 private money bridge loan to enable the renovation and re-tenanting of an un-anchored retail shopping center in Orange County, CA. The loan included over $1,500,000 of cash out to the sponsor at closing as well as $600,000 for future tenant improvements and renovations.
The sponsors requested maximum cash-out proceeds that dissuaded many capital providers. Additionally, several tenants were in the process of significantly upgrading their spaces and had unfinished renovations in place. Finally, the project had unsettled legal issues with one of the major tenants.
GSP used its experience and relationships to identify a lender who could understand the greater value of the project and was able to demonstrate both the inherent value of the property due to its extraordinary location as well as the future value of the project as completed. As a result, the lender became comfortable with the loan’s basis per square foot.
$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.
March 22, 2017
George Smith Partners arranged $5,000,000 for the acquisition of a newly constructed, 17,200 square foot single tenant build-to-suit Rite Aid. Our Sponsor was focused on minimizing monthly debt service costs plus maintaining prepayment flexibility. The proposed Rite Aid acquisition by Walgreens and the tertiary market location added levels of complexity to the transaction. After evaluating the firm’s extensive lending relationships, GSP sourced a regional lender experienced with this location and comfortable with Sponsor’s financial strength, track record, and personal guarantee. The loan is fixed at 4.75% for five years with a 30-year amortization schedule, sized to a 1.20x DSCR, and is open to prepayment at any time. The lender charged a nominal fixed $2,500 cost for loan processing and documentation.
Rate: 4.75% fixed
Term: 5 years
Amortization: 30 years
Prepayment Penalty: None
Lender Fee: 0.50%
- Advisors: Loren Bedolla