Financings

Recent Financings

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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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    80% Loan-to-Value, $11,250,000 Refinance of a 44% Occupied Retail Center Shadow Anchored by an Independent Grocery Chain

    August 16, 2017

    Transaction Description:
    GSP successfully placed $11,250,000 in non-recourse, floating-rate bridge debt on a 44% occupied, but 97% leased, 1960’s vintage Salt Lake City metro multi-tenant retail property. Although the property was only 44% physically occupied at loan application as a result of a planned re-tenanting program, the borrower recently executed two leases with large-format retailers that will bring occupancy to 97%. GSP identified a lender comfortable with the story behind the property’s 1) low physical occupancy at time of application, 2) grocery shadow anchor, 3) temporary tenants paying below-market rent during transition period, and 4) lack of supporting sale comps for the market. The short-term bridge loan was sized to 80% of as-is value, 75% of stable value, and included future funding to cover 100% of lease-up costs with interest not paid on unfunded proceeds until drawn.

    Rate: 30-Day LIBOR + 4.75%
    Term: 24-month initial term plus two 12-month extension options
    Amort: Interest only (initial term)
    LTV: 80% as-is, 75% as-stable
    Prepayment: 15-month spread maintenance
    Lender Fee: 1%
    Guaranty: Non-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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    $12,000,000 Non-Recourse Acquisition Bridge Financing on a 1970’s 300-Unit Workforce Multi-Family Property in the Pacific Southwest

    August 9, 2017

    Transaction Description
    GSP successfully arranged $12,000,000 in first mortgage debt for the acquisition and reposition of a 300-unit workforce multifamily asset in the Pacific Southwest. The national balance sheet lender provided a non-recourse loan up to 70% of total project cost that includes funding 100% of future planned expenses (approximately $3,500,000) to upgrade the property’s common area amenities and interiors and implement a green and energy saving initiative. Interest expense is not incurred on the capital improvement funds until drawn. Borrower cash flow is maximized as the loan is interest only during the initial three-year term. Additionally, lender structured an interest reserve to cover a debt service shortfall during the peak reposition period.

    Rate: 30-Day LIBOR + 5.15%
    Term: 36 months plus two 12-month extensions
    Amortization: 36 months interest only; 30-year amortization thereafter
    Loan to Cost: 70%
    Prepayment: 18-month minimum interest with a 0.5% exit fee thereafter
    Guaranty: Non-recourse
    Lender Fee: 1.00%

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    $15,300,000 Non-Recourse Multifamily Construction Loan for a 97-unit apartment community in Chula Vista, California

    July 31, 2017

    Transaction Description
    George Smith Partners secured $15,300,000 in ground up senior construction financing for a to-be built 97-unit apartment community in Chula Vista, CA. The Sponsor was seeking capital to cover all hard costs, in addition to some soft costs, for the project. The subject, which is directly west of the Interstate 805 Freeway and roughly three miles east of the Interstate 5 Freeway, will be built using a “stone creek” concept to match the ascetics of the surrounding environment. In addition to the luxurious ambiance, the project will include lush amenities. A park will be dedicated to the project with barbeque and picnic areas. There is a protected creek running through the land which will be enhanced to embellish the “Stone Creek” concept. The financing structure secured by George Smith Partners allowed the Sponsor to complete the ground up development in one phase.

    Challenges
    The main challenge encountered in the capital markets was the scope of the project in relationship to the Sponsorship group’s track record. Many capital providers were concerned that the ground up component of the project required a Sponsorship group with more experience in the field.

    Solution
    George Smith Partners used its extensive capital market relationships, knowledge, and resources in order to identify the right capital for the project. Once the right lender was identified, GSP addressed the lender’s concerns surrounding the scope of the project by demonstrating the strength of the General Contractor.

    Rate: 30-day LIBOR+ 4.80%,
    Term: 30 months with Two (2) separate consecutive six (6) month extensions
    Amortization: Interest Only for initial term
    LTV: 60%
    LTC: 65%
    Origination Fee: 1.00%
    Exit Fee: None
    Guaranty: Non-Recourse with completion guaranty

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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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    $12,000,000 Non-Recourse Acquisition Bridge Financing on a 1970’s 300-Unit Workforce Multi-Family Property in the Pacific Southwest

    July 26, 2017

    GSP successfully arranged $12,000,000 in first mortgage debt for the acquisition and reposition of a 300-unit workforce multifamily asset in the Pacific Southwest. The national balance sheet lender provided a non-recourse loan up to 70% of total project cost that includes funding 100% of future planned expenses (approximately $3,500,000) to upgrade the property’s common area amenities and interiors and implement a green and energy saving initiative.  Interest expense is not incurred on the capital improvement funds until drawn.  Borrower cash flow is maximized as the loan is interest only during the initial three-year term.  Additionally, lender structured an interest reserve to cover a debt service shortfall during the peak reposition period.

    Rate: 30-Day LIBOR + 5.15%
    Term: 36 months plus two 12-month extensions
    Amortization: 36 months interest only; 30-year amortization thereafter
    Loan to Cost: 70%
    Prepayment: 18-month minimum interest with a 0.5% exit fee thereafter
    Guaranty: Non-recourse
    Lender Fee: 1.00%

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    80% LTV Land Acquisition Financing at a 9.00% Fixed Rate for a Future Multifamily Development Site in Mid-City Los Angeles

    July 19, 2017

    George Smith Partners arranged 80% LTV land acquisition financing for a future multifamily development site in the Mid-City neighborhood of Los Angeles, California.  The sponsor, a non-resident non-citizen, sought maximum proceeds for the land acquisition and had a 30-day closing time frame from initial contact, which was impractical for many lenders.  Certainty of execution was critical as an extension to the purchase contract was not obtainable.  GSP identified a non-bank lender with a long history of providing quick close bridge execution and who was familiar with the location and comfortable with the land basis.  The loan was sized to 80% of value with no hold back requirement for interest reserve or capital expenditures.

    Rate: 9.00% Fixed
    Term: 12 Months with four 3 month extensions
    Amortization: Interest Only
    LTV: 80%
    Prepayment Penalty: None
    Guaranty: Recourse
    Origination Fee: 2%

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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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    75% of Cost Acquisition and Re-position Financing on a 1960’s 36-Unit Multifamily Property in Long Beach, California

    July 19, 2017

    George Smith Partners arranged $7,400,000 in non-recourse bridge financing from a national balance sheet lender for the acquisition and re-position of a 36-unit, 1960’s multifamily asset located within one block of Long Beach’s trendiest neighborhoods. The 75% of total project cost loan includes $1,300,000 ($36,000/unit) of future capital expenditures for unit and property upgrades and there is no interest charged on unused allocated capital expenditure funds.

    The loan is structured with an increasing exit fee in lieu of an upfront lender origination fee to minimize upfront costs and incentivize the Borrower to execute the business plan in a timely manner. However, the three-year initial term protects the Borrower from impending maturity in the event that the renovation takes longer than projected.  After an initial 12 month spread maintenance period, the exit fee is 1.33% for months 13 through 24, increasing to 1.66% for months 25 through 30 and 2.00% for months 31 through 36.

    Borrower cash flow is maximized as the loan is interest only during the initial three-year term.  The interest reserve covers debt service shortfalls during the re-position period.

    Rate: 30-Day LIBOR + 5.00%
    Term: 3-years plus two 12-month extensions
    Amortization: 3-years interest only; 30-year amortization thereafter
    Loan to Cost: 75%
    Prepayment: 12-month yield maintenance; open thereafter subject to 1.33% exit fee through month 24, 1.66% exit fee through month 30 and 2.00% thereafter
    Guaranty: Non-recourse
    Lender Fee: 0.00%

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    5 Day Close $3,000,000 Non-Recourse Bridge Loan on Fire Damaged Downtown LA Retail Property

    July 12, 2017

    Transaction Description
    George Smith Partners secured a $3,000,000 non-recourse bridge loan to demolish and begin the redevelopment of a fire damaged retail building on a prime corner in Downtown Los Angeles. After the fire, the sponsor decided to demolish and rezone the property. The long term plan is to redevelop the property into a mixed use building with ground floor retail, office, and condos. GSP used its experience and relationships to identify a private money lender who could understand the greater value of the project and was able to demonstrate both the inherent value of the property due to its extraordinary location as well as the future value of the project as completed. The lender was able to close in 5 days. The interest only loan is priced at 7.99% and represents 55% 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
    Amortization: Interest Only
    Guaranty: Non-Recourse
    Prepayment Penalty: None
    LTV: 55%