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
March 15, 2017
George Smith Partners secured $30,000,000 in proceeds for the non-recourse cash out refinance of a 156,000 square foot retail shopping center located in Los Angeles. The loan is fixed at a rate of 4.91% for a period of 10 years and offers 5 years of interest only payments. A number of challenges were encountered while marketing the deal. The property is anchored by a major grocery chain, but the lease rolls in 5 years. Several other tenants also roll within 5 years. Additionally, the property location is in a secondary area of greater Los Angeles. However, the borrowers had successfully kept the property at or near 100% occupied for the last several years due to the prominent visibility of the center along a high-traffic street. Finally, sales data was only available for the grocer and one of the separate pads. The owners did not have sales data for the other 20 tenants. GSP sourced a CMBS lender that was not only comfortable with each of these risks, but underwrote the transaction aggressively. The selected lender gave credit for rent increases coming within the next year and used a 3% vacancy rate, resulting in higher underwritten income. The lender was able to size the deal to a 7.75% debt yield, whereas most CMBS lenders would need a minimum 8% debt yield. This resulted in the selected lender providing proceeds of nearly $1,000,000 more than any other lender. Since the buyer had invested considerable amounts in capital expenditures and completed major upgrades in the past three years, the lender was able to underwrite to lower replacement reserves as well as lower tenant improvement and leasing commissions. The loan closed in about 40 days from the time it went into application.
March 1, 2017
Transaction Description: George Smith Partners successfully arranged the combined $63,400,000, 83% of total cost, non-recourse, construction financing for a 312 unit, 19 story high-rise, Class-A Multifamily over retail project in the downtown area of a major Southwestern MSA. The subject property will be located near major universities, offices, restaurants, and a growing arts district. This project represents one of the highest quality, most amenitized, and dynamic rental projects in this region.
Challenge: The Sponsor requested high leverage, non-recourse, construction financing on an asset class that at the time, and in this market, was a non-starter for most capital providers. The Sponsor had limited experience in the development of this specific asset class and was seeking leverage at a level that was a challenge for a single lender to get comfortable with.
Solution: GSP was able to demonstrate the compelling economics at the project level by showing the pent-up demand for this project type in this specific market, highlighting the barriers to entry with limited available land, and the singular quality of the location with proximity to places of employment, graduate level education, and a light rail line. The capital providers who stepped up, understood the value of this location, the cost basis and the Sponsor’s ability to deliver a product that is superior to competing properties in the market. The senior lender and third party mezzanine lender did not have an existing inter-creditor agreement in place prior to this transaction, but successfully structured an agreement. The final borrowing structure involved multiple entity-level-only guarantors for the limited guaranties that were required. GSP also assisted with two separate interest rate caps provided by a third party rate cap provider and placed with two separate institutions to protect from anticipated floating rates.
Rate: Terms are confidential
Term: 3 Years Plus 1 Year Extension
Amortization: Interest Only
- Advisors: Scott Meredith
$7,000,000 Non-Recourse Financing for a Single Tenant Investment Grade Retail Property in Suburban Northern California
February 22, 2017
George Smith Partners successfully placed ten year fixed rate financing on a single tenant retail property located in Northern California. The building is occupied by a national drug store tenant on a 75 year lease with a 2032 termination option. The tenant signed a fixed rate lease at the top of the market in 2007 but reported year over year sales decline since 2012 due to increased competition in the trade area. These two factors resulted in a high occupancy cost. GSP identified a national lender able to underwrite the tenant’s full rent because of the lease’s long-term investment grade characteristics, despite the high current occupancy cost. Additionally, GSP highlighted the recent closure of another drug store in the trade area that will increase the tenant’s market share going forward and increase sales. The loan structure includes five years of Interest Only payments to maximize Sponsor cash flow, then converts to a 30-year amortization schedule. The 67% leverage loan has a fixed rate coupon of 4.87% for the 10-year term.
February 22, 2017
George Smith Partners secured $4,950,000 for the refinance of a 20,020 square foot retail strip center located in Los Angeles, California. The Sponsor requested a rate and term refinance and was not interested in maximizing leverage. Accordingly, GSP was able to source a Lender known to compete aggressively on rate for lower leverage deals. Additionally, the property had two units located in a high-visibility corner pad, while the remaining units were inline strip space. The corner pad was leased at rates considerably higher than the inline space. Although it was challenging for the Lender and appraiser to support the higher rents of the corner pad, GSP provided extensive rent comparable data for freestanding pads in the submarket. Underwritten cash flow and property value were well supported and the Lender maintained originally quoted proceeds. Loan is fixed at 4.28% for 5 years, then floats at 6 month LIBOR plus 2.35%.
January 11, 2017
George Smith Partners arranged a $1,527,000 cash-out refinance bridge loan on a 35% occupied, shadow-anchored, multi-tenant retail property in Castaic, California. The Sponsor recently purchased the property for $2,000,000 all-cash at a trustee auction and sought a bridge loan to provide funds to stabilize the property as well as cash-out. Sized to 71% of as-is value and 65% of as-stabilized value, the two year bridge loan is interest only and floating at Prime + 1 with no prepayment penalty. Interest is not charged on the holdback until funds are drawn. The subject property is located in a tertiary market without an anchor tenant and very low occupancy which prevented many lenders from entertaining a cash out request. GSP identified a lender that understood the sponsor was experienced enough to reposition the asset. A $527,000 “good news” budget was allocated for tenant improvements and leasing commissions to complete the reposition upon successful signing of new leases. GSP underscored that the property was shadow anchored by a Walgreens and highlighted that the sponsor would still have significant equity in the property remaining even after the cash out at initial funding. This ultimately allowed the lender to get comfortable with significant cash out and even fund an interest reserve during the life of the loan
Rate: Prime + 1 %
LTV: 71% As-Is / 65% As-Stabilized
Term: 2 Years
Amortization: Interest Only
Prepayment Penalty: None
Lender Fee: 0.5%
- Advisors: Zachary Streit
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 13, 2016
George Smith Partners arranged the $3,400,000 acquisition bridge loan for a two-tenant retail property in a small, tertiary Colorado town. Current tenants, Hobby Lobby and Tractor Supply Company, have below-market leases that expire in 2 and 4 years, respectively. The non-recourse loan has a 3-year term with two, 1-year extensions, providing Sponsor with ample time to either extend the current tenants or to re-tenant the space at market rents. Lender got comfortable with short-term leases by underwriting a TI/LC reserve to be released in the event of a new lease. Our Capital Provider funded the loan in 30 days from application to close, in order to accommodate the Sponsor’s purchase timeline. Sized to 65% of purchase price, loan floats 575 over LIBOR.
November 30, 2016
George Smith Partners successfully secured the $5,375,000 acquisition loan for the purchase of a Los Angeles in-line retail center. Sized to 65% of the purchase price, the loan is fixed for 5 years at 4.15% before floating at 2.5% over the 5 year CMT for the remaining 10 years of the term. Underwritten for a 25 year amortization schedule, there is no prepayment penalty for the 49,235 square foot collateral.
Physical occupancy was 75% at funding. Institutional permanent debt providers traditionally require 80% occupancy or more by close. The MAI appraisal needed to use a 5% vacancy factor in order to support the value and maintain loan proceeds and terms.
GSP obtained historical data which proved the property consistently operated at over 90% occupancy for prior five years. Our Sponsor’s extensive experience leasing and stabilizing retail properties allowed us to gain a Policy Exception that generated competitive pricing and leverage. Market data supported the higher occupancy and allowed the MAI appraiser to underwrite to historical and market standards rather than the current “snap shot” occupancy.
November 15, 2016
George Smith Partners successfully placed the ground-up construction debt of 49 Class-A apartment rental units in the San Fernando Valley, Los Angeles. Sized to 77% of actual costs, this construction loan will also fund the development of 1,300 square feet of ground-floor retail for residents and the local community. Despite ample development experience in this market, most lenders were unwilling to reach beyond 70% of cost. A strong lender relationship, cobbled with supportive market data and a meaningful repayment guarantee, allowed us to secure 77% of actual cost while maintaining an institutional rate without the use of sub-debt. Priced at LIBOR + 2.95%, the two year term is floored at 3.25%.
November 2, 2016
George Smith Partners arranged $16,800,000 for the rate & term refinance of a 91,000 square foot retail center anchored by a national movie theater. Located in the Inland Empire submarket of Los Angeles, this tertiary market location added a level of complexity for this special use retail asset. Our Sponsor sought to reduce monthly debt service yet maintain prepayment flexibility. The movie theatre operator is a privately held company and provided limited financial information for underwriting, but GSP sourced a regional lender experienced with this location and comfortable with Sponsor’s financial strength, track record and guarantee. Floating at 0.50% over WSJ Prime, the three year debt is sized to 65% of value with a 25-year amortization schedule and does not carry a prepayment penalty.
Rate: WSJ Prime + 0.50%
Term: 3 years
Amortization: 25 years
Prepayment Penalty: None
Lender Fee: 0.25%
- Advisors: Loren Bedolla
$8,100,000 Non-Recourse Permanent Financing for Secondary Market Shadow Anchored Retail with Rollover Risk
October 19, 2016
Transaction Description: George Smith Partners successfully placed $8,100,000 in ten year fixed rate first mortgage financing on three big-box retail spaces occupied by national retailers in a secondary California Walmart shadow-anchored retail center. Constructed in 2015, all three tenants executed ten year lease terms, creating rollover event risk during the new loan term. George Smith Partners identified a national institutional lender able to provide a ten-year loan term despite not having historical sales. To mitigate the tenant rollover concentration at loan maturity, the transaction is structured with a cash flow sweep 12 months prior to two of the three tenants’ lease maturities. Sized to 68% of appraised value, the transaction includes five years of Interest Only payments prior to converting to a 30-year amortization schedule. This non-recourse loan carries a 4.54% fixed coupon.