Rate: 7% Fixed
LTV: 72.5% As-Is / 65% As-Complete
Term: 9 Months
Amortization: Interest Only
Recourse
Prepayment Penalty: None
Lender Fee: 1%
Transaction Description
George Smith Partners arranged a $2,500,000 cash-out refinance loan at a 7% fixed on a free and clear luxury 7,200 square foot single family residence located in Laguna Beach, California. The sponsor recently purchased the property for $3,465,000 all-cash at an auction and sought a cash-out refinance loan to close on another acquisition opportunity, but was sensitive to pricing and terms. GSP identified a specialty lender that could lend aggressively on the asset and close quickly. Sized to 72.5% of purchase price and 65% of as-complete value, the 9-month loan is interest only with no prepayment penalty or yield maintenance. GSP identified a lender that understood the submarket and that the sponsor was experienced enough to rehabilitate the property in a timely fashion to either sell or lease as a rental. GSP underscored the sponsor’s track record and significant remaining equity in the property after the cash-out at closing. This ultimately allowed the lender to get comfortable with the significant cash out and to not require an interest reserve, even though the property has no cash flow. The lender allowed the sponsor to fund an estimated $125,000 in repairs out-of-pocket versus a hold back due to the sponsor’s financial strength and track record of execution. The loan funded in 5 business days with an exceptionally low rate and lender fee for quick close private money execution.
Related Financings
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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% -
$1,430,000 Refinance of a Day Care Facility
September 20, 2014
9 – 17 – 2014
Transaction Description: GSP successfully placed the $1,430,000 refinance of a 13,754 square foot family owned Day Care Facility what was operating under a Chapter 11 bankruptcy. The Day Care Facility serves 140 students from kindergarten to 4th grade. Sized to 65% LTV, the 8.99% coupon is fixed for the 12 month term. Challenge: The Borrower was in default with debt service payments and was unable to refinance the asset due to contingencies with its business partner. Our Sponsor filed Chapter 11 bankruptcy in an attempt to negotiate a mutually beneficial resolution. Sufficient proceeds were needed to pay off the existing loan, buy out a shareholder and cover outstanding property taxes. Solution: GSP identified a capital provider who was comfortable with the on-going operating cash flow and agreed to fund the transaction out of bankruptcy. This proposal was ultimately approved by the court. Rate: 8.99% Fixed Term: 12 Months w/two-6 Month Ext Amort: Interest Only LTV: 65% Prepayment: 6 Months Yield Maintenance Recourse Advisor: Gilda Rivera -
$4,500,000 Non-Recourse Acquisition Quick Close Charter School
April 3, 2014
4 – 2 – 2014 Transaction Description: GSP successfully placed the $4,500,000 non-recourse acquisition loan for the purchase of a 41,000 square feet commercial office building located in Oakland, California. The property is currently being utilized and serves as the main campus for a local Charter School. Our Sponsor manages the school which has 650 students ranging from kindergarten to eighth grade. The school lease to the prior real estate owner was about to expire and the financing sourced by George Smith Partners allowed the tenant to take advantage and exercise their option to acquire the property. A second trust deed was recorded at closing bringing the total debt allocation to 73% of cost. The interest only, non-recourse loan closed in three weeks from application to funding. Challenge: The Borrower had been under contract to acquire the property for over 4 months and received several loan rejections as most lenders are not comfortable financing charter schools. Pending litigation threatened the future of the charter and thus the viability to service the debt. Timing became critical as the Seller received other higher bids. A portion of the buyers’ capital was in the form of a recorded second trust deed, typically a prohibition in the debt markets due to “cram-down” should the asset get moved into bankruptcy. Solution: GSP identified a reliable private equity capital provider who understood the pending lawsuit and is comfortable with the Sponsors’ business plan and the ultimate exit strategy. A higher than anticipated valuation (as confirmed by the sellers’ additional bids) added more comfort to the senior lender; ie allowing a recorded second trust deed, etc. The entire financing process took three weeks to fund and maintain the escrow. Rate: 10% Term: 1 Year Amort: Interest Only LTC: 60% Non-recourse Advisors: Gilda Rivera, Salar Royaei -
Bridge Loan For Mixed-Use Hotel Property
August 7, 2013
8 – 7 – 13 Transaction Description: GSP successfully placed the bridge loan for the acquisition of a hotel, RV park, car wash, restaurant and vacant former casino commercial building located near Death Valley. The restaurant features slot machines and video gambling. The Sponsor purchased the mixed use property from the original developer who owned the asset for multiple decades. The subject is the best performing hotel property in this tertiary market, which serves as a gateway for campers traveling to Death Valley. Challenge: The tertiary market, an unincorporated town with a population of just over 35,000, proved to be a challenge for most prospective lenders. The large vacancy created by the former casino was a drag on overall occupancy, while driving down property value on a capitalized basis. Due to the multiple uses and lack of directly comparable properties, both Lender and Sponsorship had difficulty deriving an actual cap rate and value for the asset. Solution: GSP was able to source a West Coast Lender with the real estate knowledge to understand the strengths of the asset, regardless of the tertiary location. GSP and its Sponsor articulated the strengths of the asset with the large vacancy in place, and the potential upside presented by the space. GSP consulted multiple local appraisers to arrive at a capitalization rate which kept leverage (from a value perspective) at a satisfactory level for the Lender. Rate: 11% Fixed Term: 1 Year + Two-6 month Extensions Amort: IO LTC: 65% Non-recourse Lender Fee: 3% Advisors: Malcolm Davies, Peter Kleinberg, Drew Sandler -
$6,000,000 Bridge Loan to repay Chapter 11 Creditors
December 13, 2012
12 – 12 – 12 Transaction Description: GSP arranged the bridge financing of a stalled residential condominium project along the a Pacific Northwest waterfront. The project consisted of a 204- Slip Marina and entitlements for 208 to-be-built condominium units. The original construction lender was seized by the FDIC late 2007 and the project stalled mid-stream. At the time of the bank take-over, $44,000,000 of developer equity and bank debt had been invested in to development. The FDIC later forgave $24,000,000 of the then outstanding debt as a result of the bank failure. Our Sponsor has since engaged GSP to provide construction financing for what is now a re-entitled 373-Unit Apartment site. Challenge: Although the FDIC settlement forgave a bulk of the bank debt, many creditors were not paid when the project stalled. The sponsor entered into bankruptcy, ultimately exiting in 2011 with a court approved re-organization plan that included the repayment of all mechanic’s liens. The Developer was ordered to pay off the creditors by a specified date or the property would revert back to the creditors. Timing was critical with no opportunity for an extension. Solution: GSP identified a private bridge lender who became comfortable with the special purpose use, Sponsor credit issues and partial development of the site. The marina was completed and 95% occupied, offering a nominal cash flow to cover taxes and operating expenses. All grading and horizontal improvements were finalized with finished pads. A parking garage for the residential units had been completed to further support the “As-Is” value. GSP also identified a qualified ‘exit’ for the bridge lender having secured a qualified term sheet for the final phase of construction. While the construction due diligence was underway, funding could not occur timely to meet the court ordered schedule. The GSP lender funded literally in the 11th hour. Rate: 11.75% Term: 12 Months Amort: Interest Only Recourse Lender Fee: 3.25% Brokers: Malcolm Davies, Drew Sandler -
Arms-Length Non-Performing Note Purchase on a Southern California Mixed-Use Property to 85% Loan-to-Purchase
August 23, 2012
8 – 22 – 12 Transaction Description: GSP successfully placed the 85% loan to purchase debt on the distressed note for a first time note purchaser. The original loan funded a large mixed use property that was part of a complex New Market Tax Credit (NMTC) Project. The note seller mandated a quick sale with a five day due diligence period and a five day close. GSP secured a two-year loan for 10.25% interest only. Challenge: Unlike traditional real estate assets, note purchasers only acquire the legal right to collect previously contracted mortgage payments; and in event of default, foreclose on the property. A note lender has very limited options to secure their interest in this type of transaction. The quick timing and knowledge that the original borrower is non-cooperative, using every legal tool to delay or block lender actions, added a significant complexity to this transaction. In addition to being contested by the primary borrower, the NMTC structure of the borrower increased the difficulty of this transaction. Solution: GSP used its’ expertise and strong relationships to identify a private equity lender who had financed 3rd party contested notes and worked with the client to understand the collateral loan and the NMTC structure. With the LOI signed on day two of the five day due diligence period, GSP worked with the client to complete legal and due diligence before the end of the five day period. GSP successfully closed the transaction for the client within the five day period after the due diligence period as required by the note seller. Rate: 10.25% Interest Only Term: Two Years LTC: 85% DCR: 1.20 Recourse Broker: Bryan Shaffer
