Financings

Recent Financings

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    $3,037,500 Cash-Out Refinance for an Unanchored Multi-Tenant Shopping Center in Florissant, Missouri

    September 19, 2018

    Transaction Description:

    George Smith Partners successfully arranged $3,037,500 in a cash-out permanent refinance secured by an unanchored shopping center located in a tertiary market in Florissant, Missouri. The Property consists of 14 tenants, with a total rentable area of 133,330 SF.

    The Property was 95% occupied at closing, but all of the leases will roll within the first four years of the loan term. In addition, the buildings were constructed in 1964, and sizable improvements have not been made since then.

    GSP identified a capital provider who was comfortable offering a 5 year fixed rate loan instead of a short-term bridge loan, and able to size it at 75% of value and 1.25x Debt Service Covenant. The loan was structured with no holdback, upfront or on-going Tenant Improvements/Leasing Commission. Considering GSP’s strong relationship with the Lender and Sponsor’s sturdy track record, GSP negotiated a 120 day free rate lock while interest rates are pushing higher. The 75% leverage recourse loan has a fixed interest rate of 4.875% for 5 years, with a 25 year amortization.

    Rate: 4.875%
    Term: 5 year fixed
    Amortization: 25 year amortization
    LTV: 75%
    DSCR: 1.25X
    Prepayment: No prepayment penalty
    Guarantee: Recourse
    Lender Fee: Par
    Free rate lock for 120 days

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    $10,750,000 Preferred Equity for Condo Construction; 83% Loan to Cost

    September 19, 2018

    Transaction Description:

    George Smith Partners successfully arranged $10,750,000 in preferred equity financing for the ground-up development of 61 condo units in an infill Los Angeles location.  The Sponsor acquired multiple adjacent single-family homes and successfully took them through the entitlement process. The Sponsor arranged the senior construction financing up to 65% Loan to Cost with a local bank and was seeking additional debt to complete the capital stack.  George Smith Partners located a preferred equity provider that give full credit for the imputed land value which put the preferred equity at 83% of total project cost and did not require any additional cash from the Sponsor.

     

    Rate: 13%
    Term: 36 Months
    Amortization: Interest Only
    LTC / LTV: 83% / 70%
    Recourse: Full Recourse
    Lender Fee: 1.0%
    Exit Fee: 1.0%

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    Acquisition Bridge Loan for a 17 Unit Multifamily Property in South Los Angeles, CA; 75% Loan to Cost at a 5.50% Rate

    September 12, 2018

    Transaction Description:

    George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in south Los Angeles, California. The 17 unit, 1950’s vintage Property had significant deferred maintenance and below market rents. The Sponsor’s business plan was to reposition the Property and release the units at market rents. Sized to 75% of total project cost, the loan includes 100% of future funding for a full gut renovation of unit interiors and an exterior upgrade. The two year bridge loan is interest only and floats at Prime plus 0.5% (5.50% today) with no prepayment penalty. Interest is not charged on the holdback until funds are drawn. Although the Property had sub 1.0x debt coverage (0.7x), an interest reserve was not required. The Lender also only required a recourse obligation from the general partner, who represented only 10% of the equity, even though there were limited partners representing over 25% of the equity. The Lender fee was negotiated down to 0.5%.

    Rate: Prime + 0.5%
    Term: 2 Years
    Amortization: Interest Only
    LTC / LTV: 75% / 65%, including 100% of future funding
    Prepayment Penalty: None
    Recourse: Full Recourse
    Lender Fee: 0.5%

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    10 Year Interest Only $8,500,000 Refinance of Large Class B Office Building in St. Louis

    September 12, 2018

    Transaction Description:

    George Smith Partners successfully placed $8,500,000 in permanent financing for the refinance of a 270,000 square foot Class B office building located in the heart of Downtown St. Louis, Missouri. The Building has a unique combination of national and local office tenants, as well as storage and data center space. The Property previously had an expensive floating rate bridge loan and the Borrower engaged GSP to find cheaper long term fixed rate debt. GSP ultimately sourced a 10 year non-recourse loan with a fixed rate of 5.39%. The loan is interest only for 10 years.

    Challenge:

    Numerous lenders where not interested in the Property because they were not comfortable with the St. Louis office market which has a soft market occupancy. Additionally, while the Building has strong cash flow, it appeared to have a weak occupancy, which caused lenders to view the Property as unstabilized. As a result, many lenders were not comfortable placing long term fixed rate debt on it. Additionally, many of the smaller tenants in the building were on month to month leases, so most lenders would not give credit to that income. Finally, the seemingly volatile historical occupancy of the Property was concerning to lenders.

    Solution:

    It became evident a large amount of the building’s “vacant” space was actually unusable space. Due to tenant changes over the years, floor space that was previously leasable had become common area space that is now unleasable. As a result, the Property’s occupancy was significantly higher than what it originally appeared. GSP calculated about 20% of the square footage previously counted in the square footage was actually unusable space/common area space. GSP was able to prove to both lenders and appraisers the building was stabilized, it’s cash flow was strong, and its true occupancy was in line with the local market. GSP also demonstrated it was irrelevant to look at any issues with historical occupancy in the Project. Once the current Sponsorship took control of the building, they immediately improved all aspects of the Property. In addition to investing significant capital to improve the Property, they also immediately increased the occupancy, cash flow, and overall quality of the Property.

    Rate: 5.39% Fixed
    Term: 10 Years
    Amortization: Full Term Interest Only
    Guarantee: Non-Recourse
    Prepayment Penalty: Defeasance
    LTV: 60%
    Lender Fee: None

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    Refinance of Prime Los Angeles Retail Shopping Center; Fixed at 4.715% for 10 Years

    September 4, 2018

    George Smith Partners secured a 10 year permanent refinance loan for a 17,054 SF retail strip mall shopping center located in a prime neighborhood in Los Angeles. The Property has prominent signage and easy access from a highly trafficked intersection. Several of the tenants have been in place for over 20 years and have a loyal and repeat customer base.

    The Borrower sought a low leverage rate and term refinance but required a flexible prepayment penalty in case he decided to redevelop the Property. The Property also has an onsite dry cleaner that does not use a green cleaning process. The presence of the dry cleaner mandated a Phase II report that would require drilling. In addition, the Property has several tenants that operate under short term leases.

    Instead of a Phase II report, the selected Lender estimated a Maximum Expected Loss if environmental remediation were required. The MEL was deducted from the appraised value of the Property. Since the loan still met the Lender’s LTV constraint, no further environmental testing was required. The Lender’s concern about short term leases was addressed by demonstrating that the Tenants had been located in the Property for many years. Overall, the Property had very little turnover due to the Owner’s skillful management. As a result, the Lender was comfortable with the consistency of cash flow at the Property.

    Rate: Fixed for 10 years at 4.715%, followed by floating at 6 month LIBOR plus 2.25%
    Term: 25 years
    Amortization: 25 years
    Prepayment Penalty: 5,4,4,3,2,1
    LTV: 45% maximum
    DCR: 1.5
    Origination Fees: Par

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    $12,100,000 Bridge Loan for 127 Unit SRO Outside of Downtown LA

    September 4, 2018

    Transaction Description:
    George Smith Partners successfully placed the $12,100,000 bridge loan for a 127 unit Single Resident Occupant (SRO) apartment building located just outside of Downtown Los Angeles. The loan allowed the Borrower to recapture $3,000,000 of capital he had spent out of pocket for the renovation and lease up of a 1920’s vintage building. Work included installing new plumbing, a new roof and electrical, upgrading units and common areas, and buying out tenants. The recourse loan was sized to 70% of the Property’s stabilized value, and has no prepayment penalty. The loan has a 5 year term and a rate of Prime + 0.25%, which today is 5.25%.
    Challenge:
    Prior to engaging George Smith Partners, the Borrower attempted to finance this asset with multiple capital providers, but was unsuccessful due to its SRO use. SROs are essentially studio apartments with a sink and kitchenette, but provide residents with shared bath and kitchen privileges. The lack of kitchens and full baths in the units, along with past operating issues of Hotel SROs, make them challenging to finance. The Borrower also required a return of capital given his length of ownership, management, and continued maintenance of the Asset which is typically a challenge on un-stabilized assets.
    Solution:
    GSP used its extensive market expertise and lender relationships to identify a Southern California based capital provider with unique bridge loan programs that would allow the Borrower to execute his business plan on an un-stabilized project. With an in-depth understanding of this product type and the Downtown Market, GSP secured a loan for 70% of the stabilized value, including the return of all capital expenditures spent by the Borrower out of pocket.

    Rate: Prime + 0.25% (5.25% today)
    Term: 5 Years
    Amortization: 30 Years
    Prepayment Penalty: No Prepay
    LTV: 70%
    Origination Fee: ½ Point
    Guarantee: Recourse

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    $59,000,000 Non-Recourse Refinance of a Regional Power Center in a Tertiary Midwest Market

    September 4, 2018

    George Smith Partners secured $59,000,000 in non-recourse bridge debt to refinance out an existing construction loan currently in forbearance due to a maturity default. The maturity default was due to a longer-than-expected construction period to convert the former 1,000,000 square foot enclosed regional mall, located in a tertiary Midwest market, into an open-air, 750,000 square foot power center. The Property lost a few anchor tenants to bankruptcy, requiring the Borrower to re-lease those spaces in addition to the lease-up of new retail suites created by the power center conversion. The Property is now 91.5% leased but 85% occupied, and due to lease co-tenancy violations a major tenant is currently paying percentage rent in lieu of base rent. Loan proceeds repaid the existing construction loan, covered closing costs, and will fund 100% of future CapEx, tenant improvement, and leasing commission costs associated with stabilizing the Property. The loan offers a 24-month initial term plus three extension options with durations of one year each, which provide the Borrower maximum flexibility. The non-recourse floating-rate loan priced at 3.70% over One-Month LIBOR and offered full term interest only payments.

    Rate: One-Month LIBOR + 3.70%
    Term: Two years plus three one-year extension options
    Amortization: Full-term interest only
    Loan to Cost: 77%
    Loan to Stable Value: 70%
    Guarantee: Non-recourse
    Lender Fee: 1.00%
    Prepayment: 15-month spread maintenance

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    Acquisition Bridge Loan for Multifamily Property in South Los Angeles, CA; 70% Loan to Cost at a 5.25% Rate

    August 29, 2018

    George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in the Mid-City neighborhood of Los Angeles, California, a gentrifying urban submarket. The 9 unit, 1960’s vintage property had significant deferred maintenance and below market rents. The Sponsor’s business plan was to reposition the property and release the units at market rents. Sized to 70% of total project cost, the loan includes 100% of future funding for property renovation, which includes a full gut renovation of unit interiors and an exterior upgrade. The two year bridge loan is interest only and floats at Prime plus 0.5% (5.00% today) with no prepayment penalty. Interest is not charged on the holdback until funds are drawn, and the loan was structured with an interest reserve to mitigate the property’s weak cash flow during the renovation period. The lender fee was negotiated down to 0.5%.

    Rate: Prime + 0.5%
    LTC / LTV: 70% / 65%, including 100% of future funding and interest reserve
    Term: 2 Years
    Amortization: Interest Only
    Prepayment Penalty: None
    Recourse: Full Recourse
    Lender Fee: 0.5%

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    $9,220,000 Non-Recourse Bridge Loan for 51-Unit Multifamily Portfolio Priced at L + 3.25%

    August 29, 2018

    Transaction Description:
    George Smith Partners secured a $9,220,000 non-recourse acquisition bridge loan for a portfolio of 3 multifamily properties totaling 51 units in Los Angeles. Although located in a prime rental market, the majority of units are rented well below market rate, limiting in-place cash flow. Floating at Libor + 3.25%, the interest-only loan was structured as $8,250,000 in initial funding plus $970,000 in holdbacks for capital expenditures.

    Challenges:
    The property has tuck-under parking, which mandates a seismic retrofit. As a result, all potential lenders required earthquake insurance. The common areas of the property are dated and in need of refreshing. Although several lenders were able to size their proceeds to a 1.0x DCR at closing, they required debt coverage milestones to be met, or a cash flow sweep would be triggered. The borrower intends to renovate the majority of units by year 3, but wanted flexibility in case the business plan proceeds slower than anticipated.

    Solutions:
    GSP demonstrated the huge potential upside of the property by providing rent comparables for renovated units in the submarket. This data showed that although the seller had increased income by renovating a small number of units, enormous value-add potential still remains at the property. The lender required earthquake insurance, but considered it a temporary expense and did not count it against cash flow. The requirement for earthquake insurance will be removed when the retrofit is complete. The lender provided future funding reserves of $970,000 that can be drawn down to complete interior and exterior renovations. The lender allowed for 15 months of operation post closing until they will perform a DCR test. Since the borrower’s business plan anticipates considerable improvement in cash flow by month 15, it reduced the likelihood of any cash management trigger. The loan term is 3 years, but also provides for two 1-year extensions in case the borrower needs additional time to complete their business plan.

     

    Rate: Floating at L + 3.25%
    Term: 3+1+1
    Amortization: Interest Only
    Prepayment: Yield maintenance for 18 months then open
    LTC: 67%
    DCR: 0.98x at close
    Guarantee: Non-Recourse

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    $2,255,000 Non-Recourse Acquisition Loan for 16-Unit Multifamily Property in Los Angeles

    August 22, 2018

    George Smith Partners secured a $2,255,000 non-recourse acquisition loan for a 16-unit property in Los Angeles. A number of challenges were encountered in closing the transaction. First, the Sponsor was acquiring the property as part of a 1031 Exchange and did not want to put any additional equity into the deal so they required maximum proceeds; however, the property had 4 vacant units which reduced the in-place cash flow and quoted loan proceeds. Second, the Sponsor had to close within 40 days.

    GSP was able to source a lender that provided a solution to both challenges. The Lender was able to quickly close the transaction with a bridge loan. The bridge loan provided sufficient proceeds to complete the purchase with the 1031 Exchange. Next, once the Sponsor controlled the property, they were able to lease up the vacant units. This increased cash flow at the property and met the underwriting criteria for a permanent financing. As a result, the Sponsor was able to refinance the bridge loan and lock in a low fixed rate. The Lender was able to lock the rate for the permanent loan while they were still closing the bridge loan.

    Rate: 4.18%
    Term: 20 years
    Amortization: 1 Year Interest Only followed by 30 year amortization
    Prepayment: 5,4,3,2,1 then 1
    LTV: 80%
    DCR: 1.2x
    Guarantee: Non-Recourse

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    $7,250,000 Non-Recourse Predevelopment Land Loan in Coastal Los Angeles; 14-Day Close

    August 22, 2018

    GSP arranged the $7,250,000 ($328/Land SF, $1,375/Building SF) non-recourse first mortgage from a debt fund to refinance a maturing bridge loan on a 22,150 square foot land parcel located along a major thoroughfare in coastal Los Angeles. The Borrower recently entitled the land for a retail redevelopment and is now pre-leasing the to-be-constructed improvements. The loan repaid the existing debt, covered 100% of closing costs, and provides the borrower with an additional 12 months of loan term while it pre-leases the project and gains final site plan approval from the City. Even though the loan is non-recourse, the Lender did not require an appraisal or other third-party reports, nor did it require an interest or carry reserve although there is no in-place cash flow. Sized to 60% of value, the loan priced at 6.90% fixed for the 12-month loan duration.

    Rate: 6.90% Fixed
    Term: 12 Months
    Amortization: Interest Only
    Loan to Value: 60%
    Prepayment: Open Full Term
    Guarantee: Non-Recourse

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    $2,700,000 Acquisition Financing for an 8-Unit Apartment in Mar Vista, CA

    August 15, 2018

    George Smith Partners arranged bridge financing for the acquisition of an 8-unit multifamily property in Mar Vista, California. The Property was operating at below-market rents and the Sponsor’s business plan included increasing rents to market rates, renovating the Property’s exterior and interior build, and a complete rehab to a detached home in the back of the Property. At time of loan application, the Subject Property was operating at a 75% occupancy rate, but by the time the appraiser went out to inspect the building the occupancy level dropped to 62% with no notice given. GSP worked closely with the Lender and the Appraiser to get them confident with the Sponsor’s ability to rehab the vacant units quickly and lease them up within the first 6 months of the loan.

    Rate: Prime plus ½
    Term: 5 Years
    Amortization: Interest only for the first six months than fully amortized
    Recourse: Full Recourse
    Prepayment Penalty: None