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Related Financings
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$25,000,000 Construction Mezzanine Financing for Speculative Office in Tempe, Arizona
October 3, 2018
Transaction Description:
George Smith Partners arranged $25,000,000 of Mezzanine construction financing and supported the sponsor in negotiating the $80,500,000 senior financing for a speculative, mixed-use, office and retail project located on North Scottsdale Boulevard and Tempe Town Lake in Tempe, Arizona. This phase of the development includes 250,000 square feet of a 15 story, Class A, high rise office space and 44,000 square feet of lifestyle retail space.Challenges:
Given the perceived historical volatility of the Phoenix and Tempe office markets, and the speculative nature of the business plan, many potential investors were unwilling to take on the risk. Preleasing was critical to the advancement of the Project and to the capital markets. The Senior Lender mitigated the uncertainty by requiring a minimum leasing threshold to be achieved prior to advancing any loan proceeds. However, the local leasing market would not commit to new leases without a committed delivery date.Solution:
The Sponsor, with George Smith Partners’ assistance, was able to develop an alternate structure to the Senior Loan. This allowed the Sponsor to fully engage the equity solution and provide a certain completion date to the Lenders and the tenant market.TERMS ARE CONFIDENTIAL
- Advisors: Scott Meredith
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$52,285,850 Senior Construction & Mezzanine Development Financing w/Performance Bonds
June 19, 2013
6 – 12 – 13 Transaction Description: George Smith Partners placed the $52,285,850 Senior Construction & Mezzanine Development Financing w/Performance Bonds for Phase I of a 310 acre master development project in Upper Marlboro, Prince George County, Maryland. Upon completion, the build out will encompass 533,000 sf of retail, 845 “for sale” SFRs & town homes, 2,240,000 sf.of office, 600 key hotels (multiple flags) and 884 multifamily rental units. The financing provided was for Phase I of the development, which consists of the entire infrastructure to deliver 500,000 sf of retail, 348 town homes, 504 rental units and a 150-key hotel. The raw land was initially purchased in February 2012 for $23,700,000. Challenge: The foreign based international development company has been extremely active in acquiring land in the United States during the past 5 years from their Canadian HQ. Collectively, they have acquired over 50,000+ acres in Arizona, Texas, Georgia, North Carolina, DC Region and Southern California. While they have been active in developing their land holdings in Canada since 1979, this was their first large financing request in the U.S. (The company owns all of their land un-levered). To add further complexity, the ownership structure in this asset included a Canadian Public Company and a German entity, which owned the asset as a TIC Structure. This precluded the sponsor from using a pledge of membership interest for the mezzanine financing. Sponsorship also had an important deadline to start the development. Negotiating the inter-creditor was paramount in a successful closing of the capital stack between the senior & mezzanine lenders. Prince George County has some of the most difficult performance bonding requirements in the country. Solution: GSP immediately embarked on a strategic and national in scope process of marketing that included face-to-face meetings in Boston, New York, Maryland, Virginia, DC, Texas, Arizona & California. The project included many moving parts involving articulating the strengths in multiple disciplines; valuation in retail, single family, hospitality, multifamily rentals, office & residual tract land. Combining this articulation and blanketing the country, GSP was able to secure senior debt from a Texas based bank that understood land development and was excited about the prospects for future development opportunities with this sponsor. GSP then structured the mezzanine loan from a New York based hedge fund making its first investment in commercial real estate. By focusing on market education in structuring and collateral, we were able to successfully complete a complicated inter-creditor agreement and funding by the mezzanine loan. Securing the mezzanine loan as a 2nd trust deed, we were able to provide the mezzanine lender it’s security, rather than by the standard pledge of membership interest. By adding a portion of the bonding capacity from the lender, the Sponsor was able to reduce the overall costs to secure the performance bonds for the project. The Grand Opening of the project is Thursday, June 13th. Rate: 7.58% Blended Term: 3 Years w/two – 1 Year Exts LTC: 66.7% Recourse: 50% recourse limited to a corporate entity. Advisors: Malcolm Davies, Peter Kleinberg, Drew Sandler.
For more information, please visit www.WestphaliaTownCenter.com
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$3,200,000 DPO Joint Venture/Recapitalization
July 12, 2012
7 – 11 – 12 Transaction Description: GSP arranged a new $3,200,000 equity infusion, enabling the Sponsor to execute a discounted note purchase (DPO) of his mixed use/office-retail property, plus an adjacent finished lot. The Clients’ loan was in maturity default and in-place cash flow did not support new debt. Depressed market rents made a bridge loan unlikely. GSP assisted with the discount negotiations and structuring of the new ownership, as well as identifying an equity investor willing to underwrite this size of a request in a secondary market. Because a potential major tenant (a trade school), required significant TIs, they only would execute their lease once an entity purchased the property with capacity to pay for improvements. Challenge: The building was completed in late 2010 at a cost of $6,000,000, necessitating a bank discount in addition to fresh equity. Identifying an equity partner willing to invest less than the typical $5,000,000 allocation in a secondary market added to the complexity. The sponsor had no liquidity, requiring the partner to post 100% of the cash to purchase. Solution: As this process had been on-going for some time, the Bank was realistic in their value expectations. There were few other bidders for the note purchase and our proposal provided them the highest net proceeds and higher certainty of close. GSP located a private equity fund that is not adverse to secondary California markets and focuses on smaller transactions. The equity fund accrued the sponsors management fees to address the liquidity issue and supplement their co-invest. Hold Period: Three Years Broker: Nathan Auslander
