Financings

Recent Financings

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    78% Loan to Cost Acquisition Bridge Financing for 8-Unit Apartment in Leimart Park, CA

    July 18, 2018

    George Smith Partners placed an acquisition bridge loan for an 8-unit property in Leimart Park, California. The property was operating at below-market rents and the Sponsor’s business plan included increasing rents at market rates and renovating the property’s exterior and interior build. While the lender’s underwriting fully supported the low acquisition basis for the property located in the quickly developing market of Leimart Park, the Borrowers’ track record was not sufficient to sustain the high leverage loan request. GSP worked closely with the lender to get them confident on the group’s growth potential. Sized to 78% of total project cost, the interest-only loan carries a 12-month term and no prepayment penalty.

    Rate: 8.50% LTC: 78%
    Term: 12 months with extension options
    Fee: 1.5%
    Prepayment: None

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    $8,600,000 in Acquisition and Development Joint-Venture Equity Financing for 52-Unit Ground-Up Multifamily Development

    July 18, 2018

    GSP successfully secured $8,600,000 in Joint-Venture Equity Financing for the acquisition, pre-development and vertical construction of a 52-unit luxury multifamily apartment complex with 3,000 sf of retail space. The Partnership allowed the Sponsor to acquire the West Los Angeles property, buy-out the existing tenants and fund pre-construction expenses including building permits which are expected to take approximately 12-15 months to obtain. GSP was hired by the Sponsor to provide advisory services throughout the development, including financing the construction loan. After engaging with over seventy groups who focus on providing Joint Venture Equity Financing, GSP was able to identify a West-Coast based family office as an equity finance partner. GSP structured a mutually beneficial, long-term relationship that both the Sponsor and the capital partner stand to gain from.

    ALL TERMS CONFIDENTIAL

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    $2,849,250 Permanent Loan for Acquisition of Single-Tenant Building in Tertiary Market

    July 11, 2018

    George Smith Partners secured $2,849,250 in acquisition financing for a single-tenant Tractor Supply Company in Las Vegas, New Mexico. The Sponsor purchased the 19,000 square foot building for $3,800,000 at a very attractive cap rate for the product type. The tenant has 10 years remaining on their original lease with 10% rental increases every 5 years. GSP was able to mitigate the risk that the market presented by highlighting the Sponsor’s track record with similar assets. Sized to 75% of purchase price, the permanent loan is fixed for 7 years then floats for the last 3 years of the 10-year term.

    Rate: 4.375% Fixed for 7 Years
    Term: 10 Years
    Amortization: 25 Years
    LTV: 75%
    Guarantee: Recourse

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    $3,650,000 Cash-Out Refinance of an Auto Service Center

    July 11, 2018

    Transaction Description:
    George Smith Partners placed the cash-out refinance of a carwash anchored auto service center in a secondary Los Angeles market. A portion of the loan proceeds for the return on equity will be targeted for future car wash acquisitions. Over half of the Subject’s gross income is generated by a car wash lease from a related party of the Borrower. Although the Operator and Borrower are related, this was not structured as an owner-user execution. Other significant tenants include an auto parts retailer, an insurance broker and a tire retailer/installer. No Phase II investigation was required. Fixed for 5 years at 4.65%, the 10-year term will readjust to the 5-year CMT plus 280 basis points, amortized over 25 years. Sized to 60% of as-is value, proceeds were limited to a 1.35 DCR. Prepayment penalty steps down from 3% and is open years 5 and 10.

    Problems:
    The MAI appraisal came in above projections. Upward movement on the five-year CMT hampered loan proceeds due to the DCR constraint.

    Solutions:
    Due to the favorable appraisal we requested additional loan proceeds and the Bank offered $150,000 more than was applied for. When those proceeds were threatened by the run-up in the CMT, the Bank agreed to reduce their rate by 20 basis points. The Sponsor received more loan dollars at a lower rate than applied for in a rising rate environment.

    Rate: 4.65% years 1 – 5; then 280 over the 5 Year CMT
    Term: 10 years
    Amortization: 25 year
    LTV: 60% (Closed at 58%)
    DCR: 1.35
    Prepayment: 3,2,1,1,0, 3,2,1,1,0
    Guarantee: Recourse

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    Multifamily Refinancing: $4,500,000 Non-Recourse Cash-Out Refinance for a 3-Property Multifamily Portfolio in South Los Angeles and Inglewood

    June 28, 2018

    George Smith Partners arranged the cash-out refinance of a 3-property, 28-unit multifamily portfolio in South Los Angeles and Inglewood, California.  The Sponsor had purchased all three workforce housing properties in the past five years and had existing debt on each property that was not maturing.  The impetus for the refinance was to secure long term fixed rate financing to hedge against rising interest rates.  Maximum proceeds and maximum interest only were requirements.  The location of the properties, which are in growth corridors but have yet to gentrify, posed challenges for many lenders and the quotes were scarce.

    GSP leveraged its strong relationships to identify a lender willing to quote the deal with maximum proceeds.  Initially, the Lender was only comfortable with one year of interest only.  However, GSP was ultimately able to secure 3 years of interest only for the entire portfolio by emphasizing the Sponsor’s strong track record and large operating portfolio.  Interest rates rose about 50 basis points in the 70 day period from application to closing, but the lender was willing to hold the application rate. Fixed for 5 years at 4.48%, the non-recourse loan is sized to 65% LTV and carries a flexible, step-down prepayment structure.

    Rate: 4.48% rate

    LTV: 65%

    Term: 5 year fixed; 20 year term

    Amortization: 3 years of IO; 30 year amortization thereafter

    Prepayment Penalty: 5-4-3-2-1 Prepay

    Guarantee: Non-recourse

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    $5,300,000 Cash-Out Non-Recourse Refinance of an Austin, Texas Flex-Industrial

    June 28, 2018

    Transaction Description:

    George Smith Partners placed non-recourse financing to take-out an existing construction loan on a 59,375 square foot multi-tenant flex industrial building located in an Austin suburb.  In addition to paying off the recourse construction loan, the Sponsor received a notable return of equity.  Located adjacent to a residential housing PUD, the commercial real estate is subject to the Homeowners Association’s CC&Rs.  Fixed at 5.44% for ten years, prepayment steps-down from 10%.  Amortization commences after the first year of interest only and is spread over 30 years.

    Challenges:

    During due diligence, it was determined the CC&Rs were not securitizable without a material modification precluding the HOA from inhibiting specific tenant uses on the subject property.  Our bank ordered MAI appraisal value was below expectations.  One tenant representing 12% of the net rentable went into monetary default and vacated the premises but did not turn the space back to management.

    Solutions:

    GSP identified a portfolio lender who became comfortable with the use subject to receiving an estoppel from the HOA.  Although the potential remains for future changes/impediments from the HOA board, the lender obtained a high level of comfort that the current uses were grandfathered in and the HOA would not play an active role in their neighbor’s operations.  The Sponsor, Lender and GSP provided additional sale comparables to support a higher value.  The lender agreed to raise their LTV constraint by 3 percentage points to maintain proceeds.  A tenant Improvement & lease commission reserve was funded at close to be reallocated for releasing the dark space.

    Rate: 5.44% Fixed

    Term: 10 Years

    Amortization: 1 Year IO; 30 Years Thereafter

    Prepayment: Step-down from 10%

    Origination Fee: Par

    Recourse: Carve-Outs

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    Refinance for 6-Unit Multi-Family Property in Santa Monica, CA

    June 20, 2018

    George Smith Partners arranged permanent financing for a 6-unit multi-family property in Santa Monica, CA. Despite the property’s spectacular location, footsteps from Santa Monica College, the property was operating well below market rents. GSP identified a lender that was willing to rely solely on the Sponsors strong global cash flow, perfect credit history and experience managing and owning multi-family and commercial properties to size the loan down to a 1.01x DCR. Most conventional lenders require a minimum 1.15x DCR on their multi-family loans and could not reach the loan dollars needed for this transaction. Using its long standing relationship with the lender, George Smith Partners mitigated the below market rents by stressing the strength and experience of the Sponsor with a portfolio bank and obtained fixed-rate leverage at maximum loan proceeds.

    Rate: 4.80% fixed for 5-years
    Term: 30 Years
    Amortization: 30 Years
    Recourse: Full Recourse
    Prepayment Penalty: 3/2/1
    Lender Fee: Par

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    Apartment Complex Bridge Financing: Quick Close Reverse 1031 Exchange Acquisition Financing For Apartment Complex Located Outside Los Angeles

    June 20, 2018

    George Smith Partners arranged the acquisition bridge financing for an apartment complex that served as the up-leg of a reverse 1031 exchange. The property was located in Cudahy, CA, just outside of Los Angeles, and was operating with below-market rents. The complex nature of a reverse 1031 exchange required GSP to find and tailor a loan that complied with the specific rules and regulations of the reverse exchange. For example, as the 1031 accommodator is taking title to the property until the full exchange is completed, a non-recourse loan is required. With this in mind, it was crucial for GSP to work with a lender comfortable with this type of transaction and exchange. GSP ultimately identified a lender who could close in a timely fashion on the acquisition and had ample experience in financing reverse 1031 transactions. Additionally, GSP worked with the lender to get rid of any prepayment penalty, saving the borrower capital during the down-leg of the reserve 1031 exchange. The non-recourse loan holds a fixed rate of 7.5% and is interest only for the term of the loan. The loan was sized to 65% of purchase price.

    Rate: 7.5% Fixed
    Term: 6 Months
    Amortization: Full Term Interest Only
    LTV: 65%
    Prepayment Penalty: None
    Guarantee: Non-Recourse

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    83% Loan to Total Project Cost Acquisition Bridge Financing for Apartments near the University of Southern California

    June 13, 2018

    George Smith Partners arranged an acquisition bridge loan for a property near the University of Southern California. At the time of purchase, the property was operating at below-market rents. The borrowers include a foreign national and first time real estate investors, so GSP identified a lender that was willing to rely on the sponsors’ strong credit histories and experiences managing and owning SFR and Condo units to get comfortable with the high leverage loan. Sized to 83% of total project cost with no hold back requirements for an interest reserve or capital expenditures, the loan carries a 12-month term, interest only payments at a 8.75% rate and a 4-month prepayment penalty.

    Rate: 8.75%
    Term: 12 months with extension options
    LTC: 83%
    Lender Fee: 1.5%
    Prepayment: 4 months minimum Interest

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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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    $6,800,000 Acquisition Bridge Financing for a 50-Unit 3-Property Multifamily Portfolio in North Long Beach at 72% Loan to Cost

    June 6, 2018

    George Smith Partners arranged $6,800,000 in bridge financing for the acquisition of a 50-unit 3-property multifamily portfolio in North Long Beach, California. The three properties were all late 1950s vintage properties with significant deferred maintenance and below market rents. The Sponsor’s business plan was to reposition the properties and release the units at market rents. The Sponsor required a bank lender that would only require recourse from the general partner, which constituted 10% of the equity, and not from any of the limited partners, some of whom were investing more than 25% of the equity. By emphasizing the gentrifying location and the Sponsor’s track record in the value added apartment space, George Smith Partners was able to successfully source a bank lender that was comfortable with recourse from the general partners only and who closed the transaction in 45 days.

    Sized to an aggressive 72% of total cost, the two-year loan is interest only. The loan floats at Prime plus 0.5% (5.25% today) with no prepayment penalty, and the lender fee was a minimal 0.5%. Despite the portfolio’s weak cash flow during the rehabilitation period, an interest reserve was not required.

    Rate: Prime + 0.5%
    Term: 2 Years
    Amortization: Interest Only
    LTC / LTV: 72% / 65%
    Recourse: Full Recourse
    Prepayment Penalty: None
    Lender Fee: 0.5%

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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