Rate: PRIME + 0.75% (5.25% floor)
Term: 18 Months
Lender Fee: 1.00%
George Smith Partners successfully structured the ground-up construction debt for a 5 unit small-lot subdivision project near the North Hollywood Arts District. Sized to 70% of cost, the 18 month loan (with six-month extension option) is priced at PRIME + 0.75% with a 5.25% floor rate.
The Project consists of large three story units (1,750 SF+), with attached two-car garages and open floor plans. Product of this quality is in high demand in the area, but the small-lot format is new to the North Hollywood area. It was incumbent on GSP to support the value with market data and new construction. GSP identified a local construction lender with an understanding of the Los Angeles market, and an appetite for small-lot product.
Senior Vice President
Structured Financing: $3,265,000 Cash-Out Permanent Financing on a Newly Constructed Apartment Community in St. Louis City, Missouri
February 21, 2018
GSP successfully placed $3,265,000 in permanent debt to take out a construction loan on a newly built mixed-use property located in the heart of St. Louis City. The non-recourse, 75% leverage loan has a fixed coupon of 4.49% for the duration of the seven-year term. The financing provided significant cash out to the borrower and maximized cash flow via two years of interest only payments prior to converting to 30-year amortization. GSP leveraged its lender relationships to achieve the most competitive loan terms for the borrower which included structuring multiple pricing and loan-to-value exceptions.
December 6, 2017
George Smith Partners arranged $60,000,000 of ground-up construction debt for a mixed-use, luxury multifamily development to build a 241-unit Woodland Hills apartment project that will include 34,139 square feet of retail. GSP sourced a lender comfortable with the Sponsor’s lack of experience, exposure issues and ability to execute on the development plan. This property is located within the Warner Center 2035 Plan, a development blueprint for Warner Center that emphasizes mixed-use and transit-oriented development, walkability, and sustainability. Sized to 70% of cost, the three year term has two – 12 month options that float at 250 basis points over LIBOR.
$4,500,000 Acquisition Bridge Financing for the Condominium Conversion of a Historically Designated Trophy West Hollywood Apartment Building
August 16, 2017
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.
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.
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.
$15,300,000 Non-Recourse Multifamily Construction Loan for a 97-unit apartment community in Chula Vista, California
July 31, 2017
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.
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.
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.
June 14, 2017
George Smith Partners facilitated the seven-year fixed-rate construction loan for the ground-up development of 60 Los Angeles “For Rent” housing units. As part of this capitalization, GSP placed the land acquisition debt in 2015. Sized to 75% of actual development costs, this institutional capital provider will fund all draw requests at the 4.0% rate that was locked at application. Interest is paid as drawn; there is no negative arbitrage. The ten-year term negates the need to process a mini-perm upon Certificate of Occupancy and removes future interest rate risk. The recourse loan is fixed for seven years at 4.0% and floats at 275 over LIBOR for the remainder of the ten-year term. Prepayment steps down; 2,2,1,1 open.
$13,000,000 Los Angeles Ground-Up 59 Unit Multifamily Construction w/ Take-Out Fixed @ 3.20% at Commitment
March 22, 2017
George Smith Partners successfully structured the ground-up construction debt for a mixed-use 59 unit multifamily Los Angeles rental project that will include 2,000 square feet of ground floor retail. GSP identified a regional construction lender with a very unique construction & permanent loan in one package; the first five years are fixed @ 3.20%, inclusive of the construction phase. Interest is only paid on funds as drawn; there is no negative arbitrage for this fixed rate construction loan. The ten year term was sized to 63% of actual cost and Phase 1 of the loan will be interest only funded through a reserve until stabilized, which is estimated to be 30 months from ground-breaking. Upon lease-up, the loan automatically converts (Phase 2) to a mini-perm for the remainder of the five year at the same fixed rate at 3.20%, amortized over 27.5 years. Upon expiration of the initial five year term, the loan will float at 250 basis points over LIBOR for the remainder of the ten year term. Repayment guarantees burn down to 50% of the outstanding loan balance upon Certificate of Occupancy and drops to zero after the second year of stabilization. There are no additional fees or resizing tests at loan conversion from construction to mini-perm. Prepayment steps down: 2/2/1/1, with no prepayment penalty after the fourth year.