$17,910,000 Non-Recourse Multifamily Acquisition and Renovation Financing

Rate: LIBOR + 4.20%
Term: 36 months
Amortization: Interest Only
LTC: 69%
Guarantee: Non-Recourse
Prepayment Penalty: 18-Month Minimum Interest, Open Thereafter

George Smith Partners arranged $17,910,000 of non-recourse, acquisition bridge financing for the purchase and renovation of a 206-unit multifamily property located in the Southwest. The property, which was built in 1979, is comprised of 17 garden-style buildings with studio, 1 and 2-bedroom units. Although 97% occupied, the property suffered from lower than market rents due to both exterior and interior deferred maintenance. The Sponsor intends to capture higher rents by investing $1,800,000 to upgrade individual apartments and the property’s communal facilities. The lender was able to get comfortable with the capital expenditure budget and the projected rents due to the Sponsor’s proven track record in the submarket. Sized to 69% of total cost, the non-recourse bridge loan floats at 4.20% over 1-Month LIBOR for 3 years.


Related Financings

  • Expand

    $5,060,000 Permanent 19 Unit Multifamily Acquisition Loan; 5 years Interest Only

    January 24, 2018

    Transaction Description:
    George Smith Partners secured $5,060,000 of non-recourse acquisition debt for the purchase of a 19-unit multifamily property in Los Angeles. The loan has interest only payments at a fixed rate of 3.92% for the first 5 years, before switching to a 30-year amortization. The lender provided non-recourse execution and a short prepayment penalty structure.

    The property is located in a prime Los Angeles location, but low tenant turnover had resulted in one third of the tenants paying less than 50% of market rent. As a result, the property was income constrained. Many lenders stressed their cash flow at a rate higher than their current note rate, resulting in limited proceeds. The seller had upgraded several units and classified the cost as an operating expense on historical P&Ls. The property had a minor deferred maintenance issue that created some uncertainty during the appraisal inspection.

    GSP identified a Capital Provider that sized their proceeds at the actual note rate, rather than a stressed underwriting rate. The selected lender was also able to underwrite down to a 1.15 DCR, compared to the 1.20 constraint offered by other institutional providers. This resulted in considerably higher proceeds. Invoices were obtained for the unit upgrades which allowed the exact amount of capital expenditures to be deducted from operating expenses. It was confirmed that the deferred maintenance issue was disclosed to potential buyers during the bidding process, thus establishing that the sale price was inclusive of the cost of the repair.

    Rate: 3.92% fixed for 5 years; floating at 6 month LIBOR + 2.25%
    Term: 30 years
    Amortization: 30 years
    LTC: 65%
    Interest Only: 5 years
    Prepayment Penalty: 3, 1
    Origination Fees: Par
    Guarantee: Non-Recourse

  • Expand

    $58,000,000 of Debt and Joint Venture Equity Financing – $45,000,000 Non-Recourse Acquisition Financing and $13,000,000 of Joint Venture Equity, 680-Unit Atlanta Workforce Multifamily

    October 25, 2017

    GSP successfully arranged a total of $58,000,000 in Acquisition Debt and Joint Venture Equity Financing for the acquisition and reposition of a 1970’s/1980’s vintage work-force housing portfolio consisting of 680-units in an Atlanta submarket. The Financing consisted of $45,000,000 in non-recourse acquisition debt financing and $13,000,000 of joint venture equity (80%/20% co-invest). GSP structured the variable rate debt facility as two uncrossed loans utilizing the Agency green program to achieve favorable leverage of 75% loan-to-value and a reduced interest rate of LIBOR + 2.15%. The Sponsor with their newly formed joint venture equity partnership will implement a value-add reposition strategy by investing a combined $5,500,000 into the two properties, to upgrade property common area amenities, interiors, and implement a green–energy saving initiative. Through the reposition, Sponsor’s cash flow is maximized as the loan is interest only during the initial four-year term.

    Rate: 30-Day LIBOR + 2.15%
    Term: 10 Years
    Amortization: 48 months interest only; 30-year amortization thereafter
    LTV: 75%
    Prepayment: 12-month Lock-out, 1% pre-payment penalty thereafter
    Guarantee: Non-recourse
    Origination Fee: 0.50%

  • Expand

    $14,400,000 Non-Recourse Financing for Acquisition and Reposition of a 196-Unit Southwest Apartment

    October 18, 2017

    George Smith Partners arranged $14,400,000 of non-recourse, acquisition and renovation financing for a 196-unit garden-style multifamily apartment in a Southwestern MSA. Constructed in 1984, the property consists of 15, two-story, wood frame buildings with flat roofs. In 2014, the seller completed exterior renovations and also upgraded 90 of the 196 units. Our Sponsor’s business plan is to fine tune exterior renovations, finish renovating the remaining 102 units and install low flow plumbing fixtures to take advantage of green program incentives. GSP identified a capital provider able to provide long-term financing and was comfortable with the renovation business plan. The proposed Green program discounted the interest rate by 20 basis points.

    Rate: 4.41%
    Term: 10 Years
    Amortization: 12 months IO, followed by 30 year amortization
    Loan-to-Purchase Price: 75%
    Guarantee: Non-Recourse

  • Expand

    $4,584,000 Non-Recourse Acquisition and Renovation of an 84-Unit Bradenton, Florida Rental to 75% of Cost

    September 20, 2017

    George Smith Partners arranged $4,584,000 of non-recourse financing to acquire and renovate an 84-unit garden-style multifamily apartment in Bradenton, Florida. Located within close proximity to many national retailers, top employment centers, our Sponsor will renovate 100% of the units and add an additional $145,000 in exterior improvements. GSP identified a capital provider willing to advance to 70% of the appraiser’s “as renovated” value and 75% of the purchase price. Proforma operating expenses were underwritten and supported with the Sponsor’s operational experience in this market.

    Rate: 4.79%
    Term: 12 Years
    Amortization: 1 year IO, followed by 30-year amortization
    LTC: 75%
    Guarantee: Non-Recourse