Financings

Recent Financings

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    $7,000,000 Non-Recourse Financing for a Single Tenant Investment Grade Retail Property in Suburban Northern California

    February 22, 2017

    Transaction Description:

    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.

    Rate: 4.87% Fixed
    Term: 10 Years
    Amortization: 5 Years Interest only; 30 Year amortization thereafter
    LTV: 67%
    Guaranty: Non-Recourse
    Lender Fee: None

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    $4,950,000 Refinance of Retail Center Interest Only @ Low 4%

    February 22, 2017

    Transaction Description:

    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%.

    Term: 10 years
    Rate: Fixed for 5 years at 4.28%, followed by floating at 6 month LIBOR plus 2.35%
    Amortization: 30 years
    Prepayment Penalty: 5,4,3,2,1
    LTV: 65% maximum
    DCR: 1.45
    Origination Fees: Par

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    $2,700,000 Cash-Out Refinance Bridge Loan for an Unflagged Boutique Hotel

    February 15, 2017

    George Smith Partners arranged a $2,700,000 cash-out refinance bridge loan on an unflagged boutique hotel in Sacramento, California. The Borrower approached GSP seeking a financing solution from a lender that could close quickly, provide capital to renovate, and bridge until stabilization. GSP identified a lender who was comfortable lending on an unflagged hotel in the middle of renovations and located in a secondary market. During due diligence, an unpaid occupancy tax from the prior owner was discovered. With the prior ownership unable to pay the tax, the county placed a lien against the property, even though it was under new ownership with no relation to the prior owners. This created a setback for closing, as title could not be cleared until the tax, interest, and fees were paid in full. The borrower weighed the cost of litigating to fight the liens, but chose to pay off the liens which allowed the lender to close on time.  Sized to 50% of cost, the interest only loan has an 18 month term to allow for full stabilization of the property and has no prepayment penalty. The loan is priced at 7.90% for the first twelve months and 8.30% thereafter, for the remainder of the term.

    Rate: 7.90% Months 1-12 | 8.30% Months 13-18
    LTC: 50%
    Term: 18 months
    Amortization: Interest Only
    Non-Recourse
    Prepayment Penalty: None

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    $10,390,000 Non-Recourse Permanent Financing for Office in Central California

    February 15, 2017

    George Smith Partners arranged $10,390,000 for the refinance of a stabilized office building in Bakersfield, California. The loan was put into application with a verbal commitment from the largest tenant to extend their lease for an additional four years. While in application for the loan, the tenant became non-responsive and it became clear that they were debating whether to extend. As a primary tenant, the extension was critical to the loan closing. GSP worked directly with the tenant and the leasing broker to understand the market and to structure the lease terms to work for the tenant, landlord, and the lender. The lease was executed in a matter of weeks which allowed the lender to fund and avoid an imminent balloon default on the existing loan.

    Rate: 5.11% Fixed
    LTV: 68%
    Term: 10 Years
    Amortization: 30 Years
    Interest Only: 3 Years
    Non-Recourse

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    Non-Recourse $1,325,000 Acquisition Financing of Industrial Building to 70% of Purchase

    February 1, 2017

    Transaction Description:
    George Smith Partners successfully secured $1,325,000 in financing for the purchase of a 9,500 square foot industrial/warehouse building in Los Angeles. The proceeds were structured as $1,125,000 for a first trust deed at a rate of 7.9% and $200,000 for a second trust deed at a rate of 12.99%. The combined proceeds represented 70% of the acquisition price. A number of challenges were encountered in securing financing for the property. First, our Sponsor had to secure financing within 1 week. Second, the subject property was leased to a tenant who was occupying the entire 9,500 square foot property, even though the lease agreement stipulated only 5,000 square foot of space was available to them. While GSP was marketing the deal, legal proceedings were underway to compel the tenant to comply with his lease. Finally, there was lease-up risk since it was unclear when the buyer would be able to lease the remaining space to a new tenant. The selected lenders had an intercreditor agreement and were able to offer a quick close with minimal documentation. The lenders required only a property walkthrough in contrast to a full appraisal. GSP provided rent comps that supported the Sponsor’s business plan for the property, as well as market data that showed vacancy of less than 1% for industrial product in the market. As a result, our lenders were able to underwrite to the in-place income of the property, and were comfortable with the value regardless of the outcome of the pending litigation with the tenant.

    Rate: 7.9% on the 1st TD, 12.99% on the 2nd TD
    LTV: 70% overall
    Term: 2 years
    Amortization: Interest Only
    Non-Recourse
    Prepayment Penalty: None
    Origination Fees: 2%

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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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    $1,527,000 Cash-Out Refinance Bridge Loan for a Multi-Tenant Retail Property in a Tertiary Market

    January 11, 2017

    Transaction Description

    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
    Recourse
    Prepayment Penalty: None
    Lender Fee: 0.5%

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    Permanent Financing of Luxury Hollywood Multifamily

    January 4, 2017

    George Smith Partners arranged $2,546,000 in permanent debt for a five-unit luxury multifamily project in Hollywood, California. The property received certificate of occupancy and was fully leased as the construction loan neared its term. Built adjacent to Paramount Studios, luxury rentals of this quality are not common in the area. Although the property recorded full occupancy, due to its limited operating history and lack of comparable properties, securing the fully requested proceeds was challenging. In order to retain proceeds for our Sponsor, GSP supported the high dollar per unit loan request with substantial market data. Sponsor secured 100% of total construction cost financing at an interest rate of 3.61% fixed for five years with 15 years floating thereafter.

    Rate: 3.61%
    Term: 20 Years; 5 Years Fixed, 15 years Floating
    Amortization: 30 Years
    LTV: 65.0%
    Prepayment Penalty: Yield Maintenance
    Recourse

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    $3,400,000 Acquisition Bridge Loan of Retail Property in Tertiary Colorado Market – 30 Day Close

    December 13, 2016

    Transaction Description
    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.

    Rate: L+575
    LTC: 65%
    Term: 3 Years; Two, 1-Year Extensions
    Amortization: Interest Only
    Non-Recourse
    Lender Fee: 1.0%

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    1,820,000 Los Angeles Multifamily Acquisition Bridge Loan to 70% of Cost

    December 7, 2016

    Transaction Description
    George Smith Partners secured the $1,820,000 acquisition bridge loan to purchase a 15-unit multifamily property in Los Angeles. Proceeds were constrained by a below market, in-place income. GSP sourced a Capital Provider who provided full proceeds and pricing that resulted in a below break-even going-in DCR of 0.8x. Lender required a 6-month interest reserve until property reached a DCR of 1.25. Sized to 70% of cost, the floating rate loan was priced at Prime +0.5%, adjusting daily for 2 years and is interest only for 2 years with no prepayment penalty.

    Rate: Prime + 0.5% w/4% Floor
    Term: 2 years
    Amortization: Interest Only
    Prepayment Penalty: None
    LTV: 70%
    Recourse

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    $6,500,000 Senior and Stand-By Line of Credit for an Inland Empire Container Depot

    November 9, 2016

    George Smith Partners placed a $5,000,000 senior trust deed on an existing net-leased container depot in the Inland Empire of Southern California. This location is ideal given the accessibility to the Ports of Long Beach, Northern and Eastern Interstates and within two miles of an industrial railhead. With only 2,000 square feet of improvement on an 11 acre parcel, many capital providers viewed this as a land loan despite the arms-length net lease to a global logistics operator. Our Lender also structured a $1,500,000 line of credit to cover expansion costs of an adjacent parcel to be leased to the same logistics operator. Both facilities carry five-year terms although the senior note is fixed at 4.23% and amortizes over 15 years whereas the Credit Line is priced at Prime + 0.75% and is interest only. The combined debt service underwrote to better than a 1.50 dcr on actual cash flow at close.

    Term: 5 Years
    Amortization: 1st TD: 15 Years, Credit Line: IO
    DCR: +1.50
    Recourse
    Loan Fee: ½ point