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$4,000,000 Mixed-Use San Francisco Acquisition

Rate: 5.75% Fixed for Ten Years, 6.0% Fixed Thereafter
Term: 15 years
Amortization: 30 years
LTV: 80%
Guarantee: Recourse
Prepayment Penalty: 4,3,2,1

George Smith Partners successfully arranged the $4,000,000 acquisition debt of a 62-unit affordable SRO (Single Room Occupancy) property with two retail spaces in San Francisco. SRO units lack a full kitchen and has shared bathroom facilities. As a result of the unique use and shared bathroom units, financing this style of multifamily housing is extremely difficult for conventional lenders, even with very strong sponsorship and an incredible San Francisco location. In addition to challenges related to the asset type, this particular property had strict affordable covenants and complications related to the retail element.

GSP identified a community development lender who became comfortable with the asset type, affordable nature of the project and the future value of the property. The 15-year loan represented 80% of the stabilized value of the property and also provided funds for the rehab and renovation of the property. Fixed for 10 years at 5.75% and increasing to a 6.0% for the last 5 years, the recourse loan holds a 4,3,2,1 pre-payment penalty while amortizing over a 30-year schedule.

 

Related Financings

  • $14,050,000 Acquisition and Reposition Financing, 89% LTC (4.90% blended coupon) on a 79-Unit, Mixed-Use Apartment and Retail Project; St. Louis City, Missouri

    December 2, 2020

    Transaction Description:

    George Smith Partners successfully placed $14,050,000 in construction financing, which funded 89% of total project cost, for the acquisition and reposition of a 79-unit, mixed-use property in a desirable and historic St. Louis City neighborhood. GSP was engaged by the Borrower when its original lender, a national REIT, was forced to re-trade the Borrower on loan terms due to the COVID-19 pandemic. Upon being engaged, GSP was able to source the replacement debt and equity in time to close the transaction without a material delay. The financing structure included a senior loan to 81% loan-to-cost and a preferred equity investment with last-dollar exposure to 89% of total project cost with a 4.90% blended cost of capital. GSP leveraged its expertise of the St. Louis market, long-standing lender relationships, and capital markets creativity to achieve the Borrower’s goals of minimizing cash equity invested into the Project so that it can keep a substantial cash reserve to pursue additional projects which are expected to present themselves during the COVID-19 pandemic.

    Rate: 4.90%
    Term: 36-months with one, 12-month extension option
    Amortization: 24-months interest only, 25-year amortization thereafter
    LTC: 89%
    Prepayment: None
    Guaranty: Full repayment guarantee (on senior loan only; does not apply to the non-recourse preferred equity investment)
    Lender Fee: 50bps

  • $5,625,000 (75% LTV) for Acquisition of Development Site for 157 To-Be-Built Units; Koreatown/Los Angeles, CA

    August 28, 2019

    Transaction Description:

    George Smith Partners secured $5,625,000 of combined senior and mezzanine financing for the acquisition of a mixed-use property located in Koreatown in Los Angeles. The Property is located on a desirable corner and currently has 6 apartments over approximately 10,000 square feet of retail. The Sponsor acquired the Property with the intention of constructing a 157-unit apartment tower on the site. The Project is already entitled for multifamily and will receive a density bonus due to its Tier 4 TOC status. Final plans and permits will be completed over the next 9-12 months prior to groundbreaking.

    The senior and mezzanine lenders provided proceeds that were sized to 75% of purchase price. The interest rate was 8.39% and the total financing had a blended origination fee of 1.35%. The 18-month, non-recourse loans are co-terminus and will provide the Sponsor ample time to ready themselves for the construction. Both loans closed in under 30 days from application.

    Blended Rate: 8.39%
    LTPP: (Loan-to-Purchase Price): 75%
    Term: 18 Months
    Amortization: Interest Only
    Guaranty: Non-Recourse
    Blended Lender Fee: 1.35%
    Prepayment Penalty: None, open to prepay immediately

  • $4,235,000 Acquisition Bridge Financing for a 19 Unit Mixed-Use Property in Santa Barbara, CA

    March 20, 2019

    Transaction Description:

    George Smith Partners arranged $4,235,000 of acquisition/bridge financing for a 19 unit residential mixed-use property in Santa Barbara, CA. The Property, originally constructed as a 10 unit apartment building in 1951, was converted to mixed-use with a second and third floor office and residential penthouse addition in 1973. The change in use was a response at the time to demand for office given the Property’s close proximity to the popular State Street retail corridor just a block away. The Borrower plans to seek approval to convert the 1973 office addition portion of the project back to residential use and lease all but two front commercial units with long term leases. The challenge was finding a Lender that could underwrite the business plan and get comfortable with take-out financing of this mixed-use residential/office project. GSP was successful in identifying a lender that could get comfortable with the uncertainty of the Borrower’s ability to convert the project to mostly residential.

    Rate: 9.25% Fixed
    Term:
    2 year term with Two, 6-month extension options and 50 bp extension fee
    Amortization:
    Interest Only
    Loan to Value:
    68% max LTV “as complete”
    Loan to Cost:
    75%
    Yield Maintenance:
    24 months
    Loan Fee:
    1%
    Guaranty:
    Non-Recourse

  • $22,050,000 Non-Recourse, Acquisition and Development Financing to Reposition a 100,000 Square Foot Mixed-Use Building in Phoenix, AZ

    February 20, 2019

    Transaction Description:

    George Smith Partners secured $22,050,000 of non-recourse acquisition and development financing for the reposition of a 100,000 square foot mixed-use office building and a 334 stall parking garage located in the Roosevelt Row Art’s District of Downtown Phoenix. The main tenant of the building recently vacated, leaving the Property with low occupancy. The Sponsor was able to acquire the asset with LOI’s for several large tenants in tow. The business plan was to reposition and stabilize the remainder of the mixed-use building after executing the leases shortly thereafter.

    Sized at 70% of total project costs, the loan includes a future funding facility to cover tenant improvements and leasing commissions. The rate floats at 30 Day LIBOR plus 6.85% and carries a two year term with a one year extension option. The Lender was able to underwrite and deliver an executable term sheet in less than 48 hours. The loan funded roughly three weeks from the date of the application, meeting the required short window for closing. The Sponsor was also given occupancy credit based on the LOI’s, with executed leases allowed as a post-closing item. This offered the Sponsor more time to negotiate more favorable lease terms.

    Rate: L+685
    Term: 2 yrs +1 yr extension
    LTV: 75% (70% LTC)
    Guarantee: Non-Recourse

  • $5,750,000 90% LTC Acquisition Bridge Financing for Mixed-Use Development in Burbank, CA

    April 25, 2018

    Transaction Description:
    George Smith Partners arranged $5,750,000 in bridge financing for the acquisition of a retail building and the refinance of five contiguous office and retail buildings. Together these buildings form half a city block in Burbank, CA. The loan not only allowed for the consolidation of properties, but also provided predevelopment and entitlement capital for the future redevelopment of the city block into a large mixed-use development. Because of the future plans, the Sponsor was charging below market rents and a low cash-flow to value. The 10 year 90%/70% LTC/LTV loan has a fixed interest rate of 4.25% for the first 36 months of the term. Subsequently, the loan transitions to a 1-year ARM set at 2.75% over the 3-year treasury benchmark through maturation. The recourse loan has no prepayment penalty.

    Challenges:
    The Sponsor required the highest proceeds possible in order to complete the acquisition of the retail building and have enough capital for predevelopment and entitlement expenses for the future mixed-use development. However, the current in-place cash-flow on the five contiguous office and retail buildings severely limited the proceeds most lenders could become comfortable with providing. Additionally, with the impending redevelopment, the Sponsor wanted a loan with no prepayment penalty. Finally, the Sponsor had a tight window to close on the acquisition of the retail building.

    Solution:
    George Smith Partners understood based on the in-place cash flow of the five contiguous office and retail buildings, most lenders could not get to the desired proceeds required by the borrower. GSP ultimately utilized its relationships to identify an unconventional lender who used the actual rate rather than an underwriting rate when working through their internal underwriting constraints. As a result, this lender became comfortable with the proceeds number required by the Sponsor. GSP was able to structure the loan to have no prepayment penalty and close the loan timely for the impending acquisition.

    Rate: Fixed at 4.25% for 36 months; converting to an ARM for next 7 years at 2.75% over the 3-year treasury
    Term: 10 years
    Amortization: 30 Years
    Interest Only: 3 years
    Prepayment Penalty: 2,1
    LTC/LTV: 90% LTC/ 70% LTV
    Origination Fee: Par
    Guarantee: Recourse

  • $13,740,000 Non-Recourse Acquisition Bridge Loan of Land Parcels For a Future $200,000,000 Mixed-Use Hotel Development Project; 5-Day Close

    September 27, 2017

    Transaction Description:
    George Smith Partners successfully placed a $13,740,000 acquisition bridge loan to acquire two land parcels and refinance three adjacent land parcels for a large mixed use hotel and condo development site in the heart of the Koreatown district of Los Angeles. With the final components of the land assemblage completed, the $200,000,000 mixed used development project is scheduled to break ground in March of 2018. Our Sponsor’s initial business plan was to build the mixed use project on three parcels of land previously held in his portfolio. The opportunity to acquire two adjacent parcels will allow him to double the total buildable square footage of the project. Fixed for 12 months, the non-recourse loan does not carry any prepayment penalty and closed in 5 days.

    Challenges:
    It was crucial to identify a lender who could close quickly, provide leverage, and waive any prepayment penalty. Due to the upcoming March 2018 groundbreaking, existing tenants on the current 3 parcel assemblage were all on short term leases with discounted rents. As a result, in place cash flow had been compressed and limited the ability for institutional lenders to get comfortable with the property and provide meaningful proceeds. Additionally, a fast close was necessary to take advantage of a seller discount.

    Solution:
    GSP identified an unconventional lender who focused on the future value of the five parcel assemblage and shovel ready development site rather than the current value based on in-place NOI. This capital provider closed the loan in 5 days, allowing the Sponsor to achieve a significant discount on the purchase price. The capital provider also waived all prepayment penalties, assuring the Sponsor would preserve significant capital once the subsequent construction loan is placed within the next few months.

     

    Rate: 7.99%
    Term: 1 Year with a 1 Year Extension
    Amortization: Interest Only
    Guaranty: Non-Recourse
    Prepayment Penalty: None