Retail

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    $8,700,000 Acquisition Bridge Loan for Renovation of Strip Retail Center and New Pad Construction

    December 5, 2018

    Transaction Description:
    George Smith Partners secured $8,700,000 of non-recourse, bridge acquisition financing for a 45,000 square foot retail center located in Richardson, TX. The Center, which was built in 1985, has a diverse mix of regional tenants and sits on the corner of two of the main thoroughfares in the area.

    Challenges:
    The Sponsor purchased the Property with the intent to add value through two approaches: (1) increasing rents for tenants that are rolling and paying below-market rates, and (2) constructing an additional 12,000 square feet on undeveloped land within the parcel. There were complications with parcelizing the existing building and the land, which meant that a single lender needed to fund the entire project. The large renovation and construction budget also resulted in only 41% of the total loan being funded at closing.

    Solution:
    George Smith Partners identified a lender that could structure the financing to have two holdback reserves, one for the CapEx and TI/LC’s for the existing space and the other dedicated to funding the construction of the new building. The separate reserves allow the Sponsor to pursue both value-add opportunities simultaneously, which drastically reduces the project timeline and maximizes the Sponsor’s IRR. Our capital source was able to get comfortable with the construction component by requiring 75% of the space to be pre-leased prior to funding.

    Rate: 1-Month LIBOR + 410
    Term: 36 Months + Two, 12-Month Extensions
    Amortization: Interest Only
    Loan to Cost: 76% LTC
    Lender Fee: 1.0% Origination Fee
    Prepayment: 12 Months of Yield Maintenance
    Guarantee: Non-Recourse

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    5-Day Close $6,350,000 Non-Recourse Bridge Refinance of a Multi-Tenant Retail Center in Northern California

    November 7, 2018

    Transaction Description:

    George Smith Partners successfully arranged a $6,350,000 bridge refinancing for a fully occupied un-anchored, 7-tenant retail center located in downtown San Mateo, California. The Property has a total net rentable area of 13,303 SF. Tenants include a convenience store and local restaurants. The Sponsor will utilize a portion of the loan proceeds to pay off existing lenders, and the rest of the proceeds will be invested into other investments. The Sponsor’s preferred exit is to sell the Subject Property through a 1031 exchange.

    Challenges:

    All tenants are on short-term or month-to-month leases by the time of funding. Although lacking a strong cash flow, the Sponsor requested maximum cash out. As a result of rising interest rates, several capital providers passed on this opportunity because the Property’s cash flow becomes tighter after applying a higher underwriting rate. The underwritten value was affected by a high debt service coverage ratio as the Property is classified as “un-anchored”. In addition, capital providers challenged the Property’s low capitalization rate given it is located on a busy corner with a signal in a downtown area.

    Solution:

    GSP identified an asset based private money lender who offers simple and quick closing without requiring an appraisal or third party reports. GSP worked with the Lender to structure a 24-month loan, fixed at 6.90% (months 1-12) and 7.90% (months 13-24), interest only payments, no upfront TI/LC holdbacks and on-going reserves. There is no prepayment penalty.

    Rate: Months 1-12 at 6.90%, Months 13-24 at 7.90%
    Term: 24 Months
    Amortization: Interest Only
    Loan to Value: 51.5%
    Prepayment: None
    Guarantee: Non-Recourse
    Lender Fee: 2%

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    $4,250,000 Refinance of Multi-Tenant Shadow Anchored Retail Center

    October 24, 2018

    Transaction Description:

    George Smith Partners successfully arranged a $4,250,000 mini perm to refinance an existing bridge loan collateralized by a 2007 constructed, 25,000 square foot shadow anchored shopping center located in the Inland Empire. The prior loan, also sourced by GSP, enabled the Sponsor to restructure the ownership entity plus take advantage of a discounted payoff dating back to the last recession. The most significant challenge was attributed to rising interest rates that ultimately governed the final loan sizing. After evaluating the firm’s extensive lending relationships, GSP sourced a community lender who became comfortable with this location and tenant mix as well as the Sponsor’s financial strength, track record, and personal guarantee. The new loan has a flexible prepayment structure that is open to repayment at any time.

    Rate: Confidential
    Term: Five years
    LTV: 70%
    DSCR: 1.20x (global)
    Guarantee: Recourse
    Lender Fee: 0.50%

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    $8,100,000 Forward Commitment for Walmart Grocer Anchored Center in Florida

    August 8, 2018

    George Smith Partners secured permanent forward commitment financing for a Walmart Neighborhood Market-anchored retail center in Jacksonville, Florida. The 71,000 square foot property was 98% leased at closing. The Walmart Market makes up 57% of the square footage and is on a new 20-year ground lease followed by sixteen, 5-year options. The Tenant built their own store after Sponsor delivered the pad, and opened the store just weeks prior to funding, which the ender required in order to close the loan. GSP sourced a ender that provided a forward commitment. The Lender locked the interest rate in mid-April for a July funding. The Sponsor was able to lock in a rate in advance of a run up in Treasuries. Other tenants include multiple restaurants (both local and chains), hair salon, nail salon, tax service, etc. — a classic “daily needs” retail tenant lineup. The property, which was built in 1990, recently underwent upgrades to the building façade, roofs, and parking lot; it looks like a brand new center. The $8,100,000 loan was sized to 70% of value and has a fixed interest rate of 4.70% for 10 years. It amortizes over a 30-year period, has a yield maintenance prepayment penalty, and is non-recourse.

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    Rate: 4.70% Fixed for 10 Years
    Term: 10 Years
    Amortization: 30 Years
    LTV: 70%
    DCR: 1.35
    Prepayment: Yield Maintenance
    Guarantee: Non-Recourse

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    $7,490,000 in Full Term 10 Year Interest Only Non-Recourse Permanent Financing for a Neighborhood Retail Center in the Southwestern US

    June 13, 2018

    GSP successfully placed $7,490,000 of non-recourse, ten-year fixed rate first mortgage debt for the recapitalization of an approximately 80,000 square foot, 95% leased multi-tenant retail property anchored by a regional Hispanic grocer.

    The sponsor initially acquired the 1980’s vintage property in 2013 and proceeded to undertake a major renovation and increase leasing from 5% to over 90% with the goal of recapitalizing the ownership structure and placing permanent debt on the asset at stabilization. During the permanent loan diligence process one of the tenants vacated due to a corporate mandate, however GSP and the lender worked with the sponsor to maintain loan proceeds and full term Interest Only payments despite the associated loss of income. The lender was able to partially underwrite income derived from a newly signed lease even though there is a substantial delay between lease execution and rent commencement for the new tenant, and held back tenant improvement funds for the new tenant’s buildout at loan closing.

    The 66% leverage non-recourse loan was sized to the greater of a 9.0% debt yield or 1.45x debt service coverage ratio on the 4.61% fixed rate coupon. The 10-year term has Interest Only payments for the entire loan term, maximizing sponsor cash flow.

    Rate: 4.61%, Fixed
    Term: 10 years
    Amortization: Full Term Interest Only
    Loan to Value: 66%
    Prepayment: Defeasance
    Lender Fee: None

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    $18,900,000 Fitness Anchored Retail Refinance w/10 Years Interest Only @ 10-year Swap Rate + 1.58%

    June 13, 2018

    Transaction Description:
    George Smith Partners secured an $18,900,000 non-recourse permanent refinance for an 89,000 square foot fitness-anchored retail center in eastern Los Angeles County. When discussing the transaction with lenders, GSP encountered a 42 basis point range between the highest and lowest spreads over the 10-year Swap Rate. Fixed for 10 years at 4.65%, payments are interest only for the entire 10-year term.

    Challenges:
    A Phase I environmental report revealed the presence of a former gas station, mandating a Phase II subsurface investigation. The subject property has a vacant freestanding pad comprising 16% of the rentable square footage that has been vacant since the end of 2015. A Tenants-In-Common (TIC) ownership structure added complexity to due diligence and closing documentation involving carve-out guarantors. Post application, market spreads widened considerably and threatened proceeds due to a DCR constraint.

    Solutions:
    A Phase II subsurface investigation confirmed the soils were void of any environmental contaminants. For the vacant pad, GSP verified the location is the last Class A retail space available in this submarket and provided recently generated LOIs from several prospective tenants. This allowed the underwriter to become comfortable with the in-place vacancy without mandating a newly signed lease for this pad. The TIC ownership is comprised of only four entities and the carve-out guarantor holds management control over of all four entities. This simplified due diligence and provided additional clarity for asset control. While in application, our Sponsor was able to renew a major tenant and replace another tenant with a newly signed lease without any downtime. An up-to-date list of tenant LOIs in the vacant pad allowed GSP to demonstrate a consistency of future cash flow and reinforced the strength of the asset. This allowed the lender to maintain the 1.58% spread and the original applied for loan proceeds.

    Rate: 4.65% for 10 years (10 year Swap Rate + 1.58%)
    Term: 10 years
    Amortization: Full Term Interest Only
    Prepay: Defeasance
    LTV: 62%
    DCR: 1.40
    Debt Yield: 9.25%
    Guarantee: Non-Recourse

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    $7,800,000 Cash-Out Permanent Financing for an 88% Occupied Multi-Tenant Shopping Center in Tulare, CA

    June 6, 2018

    George Smith Partners successfully arranged $7,800,000 in cash-out permanent financing secured by a shopping center anchored by national grocery store and discount retailer, located in Tulare, California. The property consists of 15 tenants with a total rentable area of 82,852 SF.

    The subject property is encumbered by a ground lease. Located in a tertiary market, the property is 88% occupied. The tenants are under short-term leases, 90% of which will roll within the first five years of the loan term. GSP identified a capital provider who was comfortable with ground leases and short-term tenant leases by underwriting a reserve for tenant improvements and leasing commissions. The non-recourse loan floats at 10-year Swap + 2.20% for 10 years. Interest only for 5 years, and 30 year amortization thereafter.

    Rate: 10-Year Swap + 2.20% (5.09% Coupon)
    Term: 10 years
    Amortization: 5 years interest only, followed by 30 years amortization
    LTV: 65%
    DSCR: 1.35X
    Prepayment: Defeasance. 2-year lock out period
    Guarantee: Non-Recourse
    Lender Fee: Par

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    Commercial Real Estate $2,925,000 Cash-Out Refinance for a Mixed Use Property in Palm Desert at 87% Loan to Cost

    May 30, 2018

    George Smith Partners arranged a $2,925,000 cash-out refinance loan for a 20,300 square foot mixed-use office over retail property in Palm Desert, California. The deal presented numerous challenges. First, the sponsor only owned the property for three months. Second, a lease was not available for the anchor restaurant space comprising two thirds of the property’s square footage. Third, the sponsor required extremely high leverage and conventional bank interest rates. Finally, the Sponsor needed to close the refinance transaction in 30 days due to a pending acquisition.

    To overcome the challenges George Smith Partners sourced a bank lender with which it had a long history of closing aggressive conventional financing with low interest rates. The property’s attractive location in Palm Desert, between the well-known retail thorofare of El Paseo and Highway 111, was emphasized as well as the Sponsor’s successful track record of purchasing notes on distressed properties, foreclosing on those properties and repositioning them.

    Sized to an aggressive 87% of purchase price, the loan included a 6-month interest reserve but did not require a holdback for TIs and LCs. The three year mini permanent loan is interest only for the first 12 months followed by 25 year amortization for the remaining two years. The loan floats at Prime plus 0.5% (5.25% today) with no prepayment penalty, and the lender fee was a minimal 0.5%. The loan closed in exactly 30 calendar days from application, which is an extremely fast closing timeframe for a conventional bank.

    Rate: Prime + 0.5%
    Term: 3 Years
    Amortization: 12 Months Interest Only; 25 Year Amortization Thereafter
    LTC / LTV: 87% / 65%
    Recourse: Full Recourse
    Prepayment Penalty: None
    Lender Fee: 0.5%

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    $1,750,000 Cash-Out Permanent Financing for a Multi-Tenant Shopping Center in Rialto, California

    May 23, 2018

    George Smith Partners successfully arranged $1,750,000 in cash-out permanent refinance secured by a 107,965 SF, 9-tenant shopping center in Rialto, California. The shopping center is currently 100% occupied, anchored by Superior Grocers, CVS and McDonald’s. The purpose of the cash-out refinance is to pay-off an existing loan, and use the remaining balance for future investment.

    The subject property is encumbered by a ground lease with 12 years of the term remaining. GSP identified a capital provider who was comfortable with the ground lease due to the financial strength and track record of the Borrower. GSP facilitated communications between Borrower and Lender to clarify complicated subleases between tenants, and assessed the property’s cash flow risks upfront. The loan is fixed for 10 years at 4.75%, 25 year amortization. No prepayment penalty.

    Rate: 4.75%
    Term: 10 year fixed rate loan
    Amortization: 25 years
    Loan to Value: 64% (as-is)
    DSCR: 1.25X (Based on Actual Income)
    Prepayment: No prepayment penalty
    Guaranty: Recourse
    Lender Fee: Par
    TI/LC Reserves: No upfront TI/LC holdbacks and on-going reserves
    Free rate lock at signing of LOI for 5 Months

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    75% Loan-to-Value Non-Recourse Permanent Financing for a Neighborhood Retail Center in a Tertiary Southwest Market

    May 16, 2018

    GSP successfully placed $9,867,000 of non-recourse, ten-year fixed rate first mortgage debt for the acquisition of an approximately 100,000 square foot, 1980’s vintage, 97% occupied multi-tenant retail property anchored by a national discount retailer and national drugstore. The anchor leases expire in 2019 and 2020, respectively, and almost 80% of leases at the property roll during the first five years of the loan term. GSP sourced a lender able to achieve 75% leverage non-recourse financing despite the tertiary location, and the loan is structured with an upfront holdback of $275,000 allocated for tenant improvement and leasing commission costs to mitigate near-term tenant rollover.

    The 75% leverage non-recourse loan was sized to the greater of an 8.5% debt yield or 1.30x debt service coverage ratio on the 4.91% fixed rate coupon. The 10-year term has one year of Interest Only payments and a 30-year amortization schedule thereafter.

    Rate: 4.91%, Fixed
    Term: 10 years
    Amortization: 1 Year Interest Only; 30 Year Amortization thereafter
    LTV: 75%
    Prepayment: Yield Maintenance
    Lender Fee: None

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    $38,750,000 Acquisition Loan for Retail Parcels in Prime Southern California Location

    May 2, 2018

    George Smith Partners secured $38,750,000 of acquisition financing for the purchase of a retail assemblage in West Hollywood, CA. The Assemblage is currently 100% occupied on month-to-month leases and provides sufficient cash flow to cover all operating and debt service costs. The Sponsor purchased the property with plans to entitle for a mixed-use project which would include condos and a hotel. The lender was able to get comfortable with the entitlement risk due to the Sponsor’s strong track record in the market, the irreplaceable location, and the ability to generate significant additional revenue through already approved billboards. The recourse loan was sized to 62% of as-is LTV, 70% LTC, and is priced at LIBOR + 3.75%. The financing has a 3-year term with a 1-year extension and a stepdown prepayment.

    Rate: LIBOR + 3.75%
    Term: 36 months with a 12 month extension
    Amortization: Interest Only
    LTC: 70%
    LTV: 62% of as-is value
    Guarantee: Recourse
    Prepayment Penalty: 1.0% for first 12 months, 0.5% for next 12 months, open thereafter

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    $5,750,000 90% LTC Acquisition Bridge Financing for Mixed-Use Development in Burbank, CA

    April 25, 2018

    Transaction Description:
    George Smith Partners arranged $5,750,000 in bridge financing for the acquisition of a retail building and the refinance of five contiguous office and retail buildings. Together these buildings form half a city block in Burbank, CA. The loan not only allowed for the consolidation of properties, but also provided predevelopment and entitlement capital for the future redevelopment of the city block into a large mixed-use development. Because of the future plans, the Sponsor was charging below market rents and a low cash-flow to value. The 10 year 90%/70% LTC/LTV loan has a fixed interest rate of 4.25% for the first 36 months of the term. Subsequently, the loan transitions to a 1-year ARM set at 2.75% over the 3-year treasury benchmark through maturation. The recourse loan has no prepayment penalty.

    Challenges:
    The Sponsor required the highest proceeds possible in order to complete the acquisition of the retail building and have enough capital for predevelopment and entitlement expenses for the future mixed-use development. However, the current in-place cash-flow on the five contiguous office and retail buildings severely limited the proceeds most lenders could become comfortable with providing. Additionally, with the impending redevelopment, the Sponsor wanted a loan with no prepayment penalty. Finally, the Sponsor had a tight window to close on the acquisition of the retail building.

    Solution:
    George Smith Partners understood based on the in-place cash flow of the five contiguous office and retail buildings, most lenders could not get to the desired proceeds required by the borrower. GSP ultimately utilized its relationships to identify an unconventional lender who used the actual rate rather than an underwriting rate when working through their internal underwriting constraints. As a result, this lender became comfortable with the proceeds number required by the Sponsor. GSP was able to structure the loan to have no prepayment penalty and close the loan timely for the impending acquisition.

    Rate: Fixed at 4.25% for 36 months; converting to an ARM for next 7 years at 2.75% over the 3-year treasury
    Term: 10 years
    Amortization: 30 Years
    Interest Only: 3 years
    Prepayment Penalty: 2,1
    LTC/LTV: 90% LTC/ 70% LTV
    Origination Fee: Par
    Guarantee: Recourse