Specialty

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    $16,400,000 Non-Recourse Mixed Use Specialty Refinance

    August 23, 2017

    Transaction Description:
    George Smith Partners placed the non-recourse $16,400,000 rate and term refinance of a Southern California mixed use office and specialty retail center. Proceeds were used to retire the existing maturing loan and cover refinance costs. Actual in-place cash flow exceeded a 1.60 debt coverage ratio. Loan documents were drafted to allow for the transfer of ownership interests for estate planning purposes. Fixed for five years via a synthetic SWAP, the on-book loan allows for two – 1 year options; amortized over 30 years.

    Challenges:
    Anchored by a fitness center, store sales and membership information was not available. Approximately 30% of the net rentable office space was vacant and several tenants were also month-to-month.

    Solutions:
    Sized to 55% of value, our capital provider gained comfort of not having anchor store sales with physical inspections showing a strong client presence at this location. Our Sponsor demonstrated daily hands-on management addressing occupancy and maintaining good relations with existing office tenants. Three-quarters of the gross revenue is generated by the retail operations.

    Rate: 4.32% Fixed for Five Years
    Term: Five Years plus Two 1 Year Options
    Amortization: 30 Years
    LTV: 55%
    DCR: 1.60
    Guarantee: Non-Recourse
    Lender Fee: Par

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    $4,500,000 Acquisition Bridge Financing for the Condominium Conversion of a Historically Designated Trophy West Hollywood Apartment Building

    August 16, 2017

    Transaction Description:
    George Smith Partners arranged $4.5 million in bridge financing for the acquisition and condominium conversion of Patio del Moro, a seven-unit, historically designated trophy apartment property located in the heart of West Hollywood just one block south of the Sunset Strip. The sponsor’s business plan contemplates converting the apartment property built by famed developers Arthur and Nina Zwebell in their signature Spanish Courtyard style into a condominium complex and selling off units individually as condominiums to end users. This transaction was structured with a $3,500,000 initial advance and a $1,000,000 holdback with no negative arbitrage for condominium conversion fees, property rehab and interest reserve. Sized to 64% of total cost, the bridge loan is interest only and floats at Prime plus 0.5% for its 18-month term. The loan carries no prepayment penalty. Partial releases are subject to a 125% of par pay down and are not subject to a full cash flow sweep. The lender fee was a low 35 basis points.

    Challenges:
    West Hollywood is among the most challenging submarkets for re-entitlement in all of Southern California. Moreover, the property is historically designated, adding an additional layer of required approval, and is under-parked based on current condominium parking requirements. The project is also one of the first condominium conversions to occur since the Great Recession, so there is no recent precedent to fall back on. Finally, the project’s total cost is estimated at $7,000,000 equating to a high basis of $1,000,000 per door.

    Solution:
    George Smith Partners compiled a sales survey demonstrating robust demand for high priced condominiums in West Hollywood and surrounding areas, including recent sales in other Zwebell projects that were condominium converted over a decade ago. Moreover, George Smith Partners also highlighted the sponsor’s significant condominium conversion and real estate investment experience outside of Southern California. By demonstrating these items and leveraging its extensive capital markets relationships, George Smith Partners was able to identify a low cost capital provider that was comfortable with the deal’s entitlement risk and high basis per door.

    Rate: Prime +.50% (4.75% Today)
    Amort: Interest Only
    Term: 18 Months with one 6 Month Extension for a 0.15% Lender Fee
    LTC: 64%
    Partial Release Provision: 125% of Par
    Prepayment Penalty: None
    Lender Fee: 0.35%
    Guaranty: Recourse

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    $4,000,000 Non-Recourse Acquisition Loan for Bel Air SFR Fix and Flip Closed in 5 Days

    August 9, 2017

    Transaction Description
    George Smith Partners secured a $4,000,000 non-recourse acquisition loan to purchase a partially developed SFR project in Bel Air. The spec house development project had halted, and the previous developer was forced to sell the project. Our sponsor became involved in a competitive bid process and needed a quick close loan to purchase the property. George Smith Partners was able to identify a private money lender who not only closed in 5 days, but also gave the sponsor the necessary proceeds to take down the property. The interest only loan is priced at 7.99% and represents 50% of the property’s current value. The loan has a 1-year term with a 1-year extension option and no prepayment penalty.

     

     

    Rate: 7.99%
    Term: 1 year with a 1 year extension option
    Amortization: Interest Only
    Guaranty: Non-Recourse
    Prepayment Penalty: None
    LTV: 50%

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    $21,635,000 Non-Recourse Ground-Up Construction Loan for 35 Unit Condominium to 80% of Cost

    July 31, 2017

    Transaction Description
    George Smith Partners placed the ground-up development loan of 35 “For Sale” Los Angeles residential units over a 2,000 square foot retail unit. Offering convenient mass-transit and surface street access to employment centers in the Valley and minutes to downtown Los Angeles, this sub-market witnessed double-digit price growth year-over-year since 2011; yet housing is still significantly constrained by availability. Walking distance to a number of “hip” restaurants, entertainment, and boutique retail has made this area a weekend destination for many Los Angelinos. Sized to 80% of total cost, the two-year term allows for two-6 month options to extend and is priced at 10% for this non-recourse debt.

    Challenges
    No construction had been completed in this sub-market since the residential down-turn; unit sales comparables do not exist. A significant amount of grading is necessary to create the pedestal. Our General Contractor lacked this level of grading experience. The Sponsor is not an American citizen and lacks real or liquid assets here in the U.S. Hard costs increased while under due diligence.

    Solution
    Recent downtown Los Angeles unit sales far outpriced our Sponsor’s proforma. The ease of downtown access and less urban density permitted our underwriter to accept out-of-market sale comps in their valuation. A sizable reserve is held by the lender until all grading is completed and the pedestal is poured. Once the subject is above-grade, funds will be released and allocated to the balance of the development. Our Sponsor’s vested interest, capital contribution, and retention of a local developer supported this request regardless of where his assets are held. GSP worked with the capital provider to increase loan proceeds in lock-step with an additional equity contribution to address increased hard costs.

    Rate: 10%
    Term: 2 Years + two-6 Month Options
    Loan to Cost: 80%
    Fee: 1.0%
    Recourse: Completion Guarantee from an Off-Shore Investor

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    $3,500,000 Acquisition Bridge Financing for a Waterfront Newport Beach Multifamily Property Closed in 5 Business Days at a 7.00% Fixed Rate

    July 26, 2017

    George Smith Partners arranged $3,500,000 in quick-close acquisition bridge financing for a waterfront Newport Beach multifamily property.  The sponsor approached GSP with an extremely tight closing time frame and a property with one down unit. The sponsor valued certainty of execution above all else, so he could close on the property in short order. GSP identified a non-bank lender with a long history of providing quick close bridge execution, familiar with the location and comfortable with the property’s weak in place cash flow.  Sized to 65% of purchase with no hold back requirement for interest reserve or capital expenditures, the loan carries a 9-month term, interest only payments at a 7.00% fixed rate and no prepayment penalty.  The loan also includes two 3 month extensions and a 1.5% lender fee.

     

    Rate: 7% fixed
    Term: 9 months
    Amortization: Interest Only
    Loan to Cost: 65%
    Guarantee: Recourse
    Lender Fee: 1.5%

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    $2,475,000 Non-Recourse Mini-Permanent Acquisition Financing for a 693-Unit Self Storage Facility in a Major Metro in the Southwest

    July 19, 2017

    George Smith Partners arranged a $2,475,000 non-recourse loan for the acquisition of a 693-unit Self Storage facility in a major metropolitan market in the Southwest.  Although the facility is well located near a major university and a central business district, many lenders were uncomfortable with the facility having below market occupancy, limited frontage to the road, deferred maintenance, and being niche property type.  The institutional sponsor also required fixed rate execution to hedge against rising interest rates, a non-recourse structure, and a flexible prepayment structure.  GSP sourced a lender familiar with the strength of the location and sponsorship as well as believed in the property’s upside.  Sized to 55% of purchase, the non-recourse loan carries a 4.71% fixed rate for a five-year term and amortizes over 25 years.  There is a one-point prepayment penalty for the first three years of the term with no prepayment penalty thereafter.

    Rate: 4.71%
    Term: 5 Years
    Amortization: 25 Years
    Loan to Value: 55%
    Prepay: 1-1-1-0-0
    DCR: 1.3x
    Guaranty: Non-Recourse

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    $7,500,000 Cash-Out Refinance Senior and Stand-By Line of Credit

    April 19, 2017

    Transaction Description
    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.

    Challenges
    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.

    Solutions
    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
    LTV: 60%
    DCR: Senior Loan – 1.25x; Line of Credit – 1.5x
    Recourse
    Lender Fee: 0.75%

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    $2,500,000 Cash-Out Refinance Private Money Loan at a 7% Fixed Rate for a Luxury Single Family Fix and Flip Property Closed in 5 Business Days

    January 18, 2017

    Transaction Description

    George Smith Partners arranged a $2,500,000 cash-out refinance loan at a 7% fixed on a free and clear luxury 7,200 square foot single family residence located in Laguna Beach, California. The sponsor recently purchased the property for $3,465,000 all-cash at an auction and sought a cash-out refinance loan to close on another acquisition opportunity, but was sensitive to pricing and terms. GSP identified a specialty lender that could lend aggressively on the asset and close quickly. Sized to 72.5% of purchase price and 65% of as-complete value, the 9-month loan is interest only with no prepayment penalty or yield maintenance. GSP identified a lender that understood the submarket and that the sponsor was experienced enough to rehabilitate the property in a timely fashion to either sell or lease as a rental. GSP underscored the sponsor’s track record and significant remaining equity in the property after the cash-out at closing. This ultimately allowed the lender to get comfortable with the significant cash out and to not require an interest reserve, even though the property has no cash flow. The lender allowed the sponsor to fund an estimated $125,000 in repairs out-of-pocket versus a hold back due to the sponsor’s financial strength and track record of execution. The loan funded in 5 business days with an exceptionally low rate and lender fee for quick close private money execution.

    Rate: 7% Fixed
    LTV: 72.5% As-Is / 65% As-Complete
    Term: 9 Months
    Amortization: Interest Only
    Recourse
    Prepayment Penalty: None
    Lender Fee: 1%

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    $10,141,000 Equipment Cash-Out Refinance for an Aerospace Machining and Assembly Company

    January 18, 2017

    Transaction Description
    George Smith Partners closed a $10,141,000 equipment financing loan with cash-out for a repeat client. After successfully placing two non-recourse loans on two industrial buildings for the client, GSP was engaged to help consolidate several higher interest loans on their equipment and get cash-out for re-investment. Prior attempts by the borrower to refinance the equipment with cash out on their own were not successful.

    Challenges
    (1) Lenders are dissuaded when it comes to cash-out, especially if the request is significant relative to the collateral value. (2) Under SBA 504c, equipment is required to have a useful life greater than 10 years to qualify. The appraisal indicated approximately 35% of the equipment had a useful life of 8 years. This resulted in almost $4.6M lost in value and would have required the borrower to bring in cash to close versus getting cash-out.

    Solution
    (1) GSP recognized the “owner-user” attributes of the borrower and how the equipment was used. They identified that the transaction would be eligible for the SBA 504c program which would allow for cash out and carry a lower interest rate. Additionally, GSP worked with an aggressive bank that was comfortable underwriting a loan secured by equipment and not the real estate (2) GSP highlighted to the lender that an experienced in-house maintenance crew was actively servicing the equipment and demonstrated that useful life would be well over 10 which increased the value of the equipment by $4,600,000 and allowed for cash-out. The bank loan and SBA loan carries a blended rate of 4.72%, saving the borrower approximately $1,000,000 in interest costs annually.

    Rate: 4.72% Blended
    Term: 1st- 10 Years; 2nd – 10 Years
    Amortization: 10 Years
    Loan to Orderly Liquidation Value: 74%
    Loan to Fair Market Value (FMV): 62%
    Recourse

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    $16,800,000 Refinance Movie Theater Anchored Retail Center in a Tertiary Market to 65% LTV

    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
    LTV: 65%
    DCR: 1.25
    Prepayment Penalty: None
    Lender Fee: 0.25%
    Recourse

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    5,000,000 Western States Self-Storage Cash-Out Refinance

    September 14, 2016

    Transaction Description: George Smith Partners placed the $5,000,000 refinance of a 1079 unit self-storage facility located in the Pacific Southwest. George Smith Partners was engaged as the in-place debt opened to prepayment and our Sponsors sought to reduce their current 6.75% coupon while recapitalizing their partnership. Sized to 48% of appraised value, this financing returned over $500,000 of equity to the Sponsor. Funded as a Prime plus execution, the loan was synthetically fixed with a SWAP and locked at 4.35% for ten years, amortizing over 25 years. As a Prime based loan, there was no prepayment penalty although there is the potential for a SWAP breakage fee.

    Challenges: The self-storage property is in a sub-market that has been slow to recover from the economic downturn, historically operating below break-even coverage. To achieve requested proceeds and cover the existing debt, capital providers needed to look past historic cash flow and focus on trailing 3 month collections.

    Solutions: George Smith Partners promoted the significant operational turnaround since the instillation of a new management company. George Smith Partners then identified a portfolio lender that vetted and underwrote the new operator, allowing them to model the recent cash flow to secure the requested proceeds. A higher than expected appraised value and Sponsors’ financial strength further solidified the return of equity.

    Rate: 4.35% Fixed
    Term: 10 years
    Amortization: 25 years
    Prepayment: SWAP Breakage
    Recourse
    Lender Fee: Par

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    80% of Cost Fixed at 3.8% for Seven Years

    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
    LTC: 80%
    DCR: 1.20;1.00
    Prepayment Penalty: 3,2,1, open
    Lender fee: 0.25%
    Recourse
    Advisors: Shahin Yazdi