$13,850,000 Ground-Up Condominium Construction Financing to 87% actual LTC (75% LTC with imputed equity)

Rate: 30 day LIBOR + 315
Term: 24 months plus two 6-month extensions
Amortization: Interest only
LTC: 87% (75% with imputed equity)
LTV: 70%
Prepayment: None

George Smith Partners successfully structured senior construction debt for a 29-unit condominium development in the Pico-Robertson neighborhood of Los Angeles. GSP targeted a capital provider who was not only knowledgeable about the location and marketplace, but also comfortable with the Sponsor’s experience and ability to execute the construction project. GSP was able to use the land lift in the entitlements to achieve imputed equity, making the loan 87% of actual cost and 75% LTC using appraised land value. Priced at LIBOR + 3.15%, the two-year term offers two 6 month extensions.

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Related Financings

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    $24,400,000 Construction Loan and $7,900,000 PACE Equity Financing for a Resort Hotel Development in Coachella, CA (As Seen in Today’s LA Times)

    June 28, 2018

    George Smith Partners successfully arranged $32.4 million in financing for the ground-up development of a 250-room, 35-acre, casitas-style resort IHG Hotel Indigo in Coachella. The financing included both a $24.4 million senior construction loan and an $8.0 million PACE funding for the hotel. This hotel will be the closest hotel to the Empire Polo Club – the site of many famous music festivals held annually. The property includes a 13,000-sf convention center, 10,000 square-foot salt water pool with a summer cooling system and a DJ booth/cat walk, an 11-acre ‘playground’ to host music related events, wellness retreats and corporate/private events. The 250 guestrooms, which has private entrances and in-suite bathrooms, are located in spacious 2, 4 and 6 bedroom casitas with living rooms and social areas for entertaining options. The hotel also provides a restaurant, spa, gym and yoga/pilates studio.

    In today’s lending environment, hotel construction is a challenge to finance, but with GSP’s deep relationships, they were able to find a lender who was excited about the concept. Also, this is the first-ever PACE-financed new construction hotel project in California. The PACE equity, essentially an energy loan, finances the energy-efficient HVAC, which gives the Sponsor the ability to finance the high-end, environmentally friendly resort hotel they envision. The City of Coachella has also enthusiastically supported the project by providing a $25 million tax abatement and approving Mello Roos bond financing for the infrastructure.

    By communicating the Sponsor’s proven track record of developing and operating hotels, as well as their strong connections to A-list performers and music labels available for future concert performances, GSP was successful in proving the Sponsor’s unique ability to make this resort a ‘go to’ destination during the area’s many music festivals.

    ALL TERMS CONFIDENTIAL

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    Highly Leveraged $12,770,000 Ground Up Koreatown Condo Construction Financing

    May 30, 2018

    Transaction Description: GSP arranged ground-up construction financing for a 29-unit for-sale condominium development in the Koreatown sub-market of Los Angeles. The client was a local general contractor who partnered with an owner who contributed the land. The goal was to obtain highly leveraged, non-recourse construction financing and provide no additional equity. The Sponsor tried to access bank financing on their own before coming to GSP.

    Challenge: Non-recourse construction financing is very difficult, especially for first time developers. Lenders view ground-up condo construction as one of the most risky types of financing. In addition, the Koreatown market has seen lots of multifamily developments, but there has been little recent condo construction in this market since the last real estate cycle. Also, the insurance and other last minute expenses increased the overall project cost by $500,000.

    Solution: Using it relationships, GSP was able to identify a non-recourse construction lender who would provide highly leveraged construction financing. Because the ownership did not want to bring in new capital, it was also critical for the project to be correctly underwritten and achieve certain loan to cost and loan to value targets. When it was discovered that additional insurance would be needed to protect the contractor and the long-term welfare of the project, the lender agreed to increase the loan by $500,000 a few days before closing to provide capital for unexpected costs. This allowed us to close the loan and start construction.

     

    Rate: 10.25% Interest Only
    Term: 24 Month Construction Loan
    LTC: 85%
    Guarantee: Non-recourse

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    $13,700,000 Financing at 70% Loan to Cost for Completion of a Beverly Hills Single Family Residence

    May 23, 2018

    GSP successfully placed $13,700,000 in first mortgage financing for completion of construction on an approximately 10,000 square foot luxury single-family residence in Beverly Hills. The 12-month initial term has two three-month extension options with a 0.375% fee payable per extension, and Interest Only payments during the life of the loan. If the loan is paid off in less than nine months, the sponsor benefits from a 0.25% rebate on the 1.0% lender loan origination fee.

    The loan funds up to 70% of lender-approved costs and the interest rate floats at 1-Month LIBOR plus 6.1% (8.0% coupon at closing). The cash neutral transaction allowed the sponsor to refinance out of a prior construction loan and release $1,500,000 from a pledge account with the prior lender in order to free up equity.

    The offshore sponsor provided a completion guaranty and a repayment guaranty capped at $5,000,000.

    Rate: 8.0% at closing (1 Month LIBOR + 6.1%)
    Term: 12 Months
    Amortization: Interest Only
    LTC: 70% of lender approved costs
    Guaranty: Completion Guaranty; Capped Repayment Guaranty
    Lender Fee: 1.0%; 0.25% rebate to sponsor if loan paid off in less than 9 months

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    $33,225,000 Bridge Loan – Construction Refinance for a 213-Key Boutique Lifestyle Hotel

    May 16, 2018

    George Smith Partners successfully closed a construction take-out and bridge refinance for a 213-key boutique lifestyle hotel located in the Southwest. The proceeds were used to refinance costlier construction financing, including a mezzanine facility. The loan featured an earnout of additional proceeds as well as a capital improvements budget. The hotel recently opened and thus significant operating history was not available. Additionally, the in-depth rehabilitation elevated the exterior corridor hotel to a new market segment which brought with it unique challenges.

    GSP’s mandate was to source a lender who not only had the ability to execute in a timely fashion, but one who recognized the value in the excellent location and strategic positioning of the Hotel. The selected lender needed to have a deep understanding of all aspects of the deal, from a millennial-focused customer demographic, to the significant food and beverage component reflected in the Hotel’s two restaurants and secret whisky bar.

    The selected lender was able to recognize the unique value proposition of the property and the strong sponsorship involved in the project.

    Rate: L+535
    Term: 3 Years
    Amortization: Interest Only
    Loan to Cost: 83%
    Guarantee: Non-Recourse

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    $33,000,000 (80% LTC) Construction Financing for Mixed-Use Project with Micro Units

    March 21, 2018

    George Smith Partners arranged $33,000,000 of construction financing for a mixed-use project located in the Southwest. The project is set to include 165 micro-unit apartments, 20,000 square feet of retail, and 43,000 square feet of office space. The apartments comprise a majority of the income, but it was very hard to obtain quality comps given the lack of micro-unit inventory in the market. GSP identified a lender that was able to get comfortable with the micro-unit concept even with a lack of comparable properties. The Lender was also comfortable giving the Sponsor credit for an increase in the value of the land since acquisition, eliminating the need for any new cash at closing. The non-recourse loan is sized to 80% of total cost (including the appreciation in the land) and is priced at LIBOR + 8.75%. The financing carries an 18-month term with three, 6-month extensions.

    Rate: LIBOR + 8.75%
    Term: 18 Months with Three, 6-Month Extensions
    Amortization: Interest Only
    LTC: 80%
    LTV: Sized to 70% of As-Complete Value
    Guarantee: Non-Recourse

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    $21,025,000 75% LTV, Non-Recourse Predevelopment Financing for a Land Parcel Adjacent to a Southern California University

    March 14, 2018

    GSP arranged the $21,025,000 ($175/Land SF), non-recourse first mortgage from a debt fund for the acquisition of an infill 2.76-acre land parcel located adjacent to a major Southern California university. The acquisition loan will be taken out with a construction loan upon receipt of entitlements for a large-scale student housing redevelopment. GSP worked with borrower and lender to tailor a unique loan structure that provides financing during the entitlement period via an interest and carry reserve. The lender was able to provide a high-leverage loan on an unentitled parcel that provides no cash flow due to the project’s streamlined “by right” entitlement process, experienced sponsorship, and strong market fundamentals. Sized to 75% of as-is value, the acquisition loan priced at 7.25% over One-Month LIBOR for the 24-month loan duration.

    Rate: One-Month LIBOR + 7.25%
    Term: Two years plus one, one-year extension option
    Amortization: Interest only
    Loan to As-Is Value: 75%
    Prepayment: 12-month yield maintenance