$40,000,000 JV Equity and $82,000,000 Non-Recourse Bridge Loan for Creative Office Campus Development

Equity Terms: Details shall remain confidential.
Debt Terms: Details shall remain confidential.

George Smith Partners negotiated and arranged $40,000,000 in JV Equity Financing and facilitated an additional $82,000,000 in Non-Recourse Bridge Financing for the repositioning and conversion of two adjacent historic buildings in Downtown Los Angeles into Class-A Creative Office spaces. At the time of closing, there was little to no pre-leasing of the 250,000 square feet of future office space. The century-old buildings will undergo a metamorphosis highlighting aspects of the original construction while simultaneously infusing modern design elements. The properties are strategically located at the border of the Fashion District and the Historic Core. Both areas are experiencing a remarkable transformation with considerable real-estate investment across asset classes.

George Smith Partners is uniquely positioned to advise on transactions of this nature; transactions requiring a consistent advisory team providing an “Outsourced-CFO Desk”. One of the two buildings was already well into the rehabilitation process, thus requiring an equity recapitalization of existing partners, adding further complexity to the transaction. The George Smith Partners team worked hand in hand with the Sponsor and JV Equity Partner to negotiate and structure a JV Equity Financing agreement providing mutually favorable terms while capitalizing an aggressive business plan.

Advisors

Related Financings

  • Expand

    $4,500,000 Cash-Out Refinance of Medical/Office Building

    May 16, 2018

    George Smith Partners secured a $4,500,000 cash-out refinance loan for a 43,435 square foot medical/office property in Los Angeles. Within the past year, the Borrowers had successfully secured a number of new leases, considerably improving cash flow. GSP sourced a lender to pay off the in-place loan and provide a partial return of equity. Although the property has several anchor tenants under long term leases, multiple tenants continue to operate under month-to-month leases. GSP demonstrated that these tenants had remained in place for several years and maintain a close relationship with the Sponsors. Because of this relationship, our capital provider included cash flow from month-to-month and short-term tenants in their underwritten cash flow. The loan closed 50 days from application.

    Rate: Prime + 0.25%
    Term: 5 years
    Amortization: 25 years
    LTV: 65%
    Prepayment Penalty: None
    DCR: 1.25 at stabilization

  • Expand

    75% Loan-to-Value Non-Recourse Permanent Financing for a Neighborhood Retail Center in a Tertiary Southwest Market

    May 16, 2018

    GSP successfully placed $9,867,000 of non-recourse, ten-year fixed rate first mortgage debt for the acquisition of an approximately 100,000 square foot, 1980’s vintage, 97% occupied multi-tenant retail property anchored by a national discount retailer and national drugstore. The anchor leases expire in 2019 and 2020, respectively, and almost 80% of leases at the property roll during the first five years of the loan term. GSP sourced a lender able to achieve 75% leverage non-recourse financing despite the tertiary location, and the loan is structured with an upfront holdback of $275,000 allocated for tenant improvement and leasing commission costs to mitigate near-term tenant rollover.

    The 75% leverage non-recourse loan was sized to the greater of an 8.5% debt yield or 1.30x debt service coverage ratio on the 4.91% fixed rate coupon. The 10-year term has one year of Interest Only payments and a 30-year amortization schedule thereafter.

    Rate: 4.91%, Fixed
    Term: 10 years
    Amortization: 1 Year Interest Only; 30 Year Amortization thereafter
    LTV: 75%
    Prepayment: Yield Maintenance
    Lender Fee: None

  • Expand

    $33,225,000 Bridge Loan – Construction Refinance for a 213-Key Boutique Lifestyle Hotel

    May 16, 2018

    George Smith Partners successfully closed a construction take-out and bridge refinance for a 213-key boutique lifestyle hotel located in the Southwest. The proceeds were used to refinance costlier construction financing, including a mezzanine facility. The loan featured an earnout of additional proceeds as well as a capital improvements budget. The hotel recently opened and thus significant operating history was not available. Additionally, the in-depth rehabilitation elevated the exterior corridor hotel to a new market segment which brought with it unique challenges.

    GSP’s mandate was to source a lender who not only had the ability to execute in a timely fashion, but one who recognized the value in the excellent location and strategic positioning of the Hotel. The selected lender needed to have a deep understanding of all aspects of the deal, from a millennial-focused customer demographic, to the significant food and beverage component reflected in the Hotel’s two restaurants and secret whisky bar.

    The selected lender was able to recognize the unique value proposition of the property and the strong sponsorship involved in the project.

    Rate: L+535
    Term: 3 Years
    Amortization: Interest Only
    Loan to Cost: 83%
    Guarantee: Non-Recourse

  • Expand

    7 Day Quick Close Acquisition Bridge Loan for 3 Unit Property in South Los Angeles

    May 9, 2018

    George Smith Partners arranged a quick close acquisition bridge loan for an REO triplex in South Los Angeles. The sponsor approached GSP with an extremely tight closing timeframe of 7 days and a property that had just recently been foreclosed on and had significant deferred maintenance. The sponsor valued certainty of execution above all else, so he could close on the property in short order. GSP identified a non-bank private individual willing to make the loan with no origination fee. Sized to 80% of purchase with no holdback requirement for interest reserve or capital expenditures, the loan carries a 12 month term, interest only payments at a 9.5% rate and a 3 month prepayment penalty.

    Rate: 9.5% Fixed
    Term: 12 Months
    Amortization: Interest Only
    LTV: 80% of Purchase / 65% of Stabilized Value
    Guarantee: Recourse
    Prepayment Penalty: Three Months
    Lender Fee: None

  • Expand

    80% Loan to Cost Bridge Loan for New/Vacant Skilled Nursing Facility in Pacific Southwest

    May 9, 2018

    Transaction Description:
    George Smith Partners arranged the $6,500,000 in bridge financing for a Skilled Nursing Facility in the Pacific Southwest. The bridge loan took out a construction loan GSP had previously placed on the same project and was necessary to provide capital to the sponsor. The sponsor needed capital to begin operations of the facility as well as to secure the required approvals to house Medicare patients. Fixed for 10 years at 6.75%, the bridge loan represented 80% of the property’s cost and is recourse. The loan amortizes over 30 years and holds a 5,4,3,2,1 prepayment penalty.

    Challenges:
    The building had no existing cash flow, and conventional lenders could not get comfortable with the unique use of the property. Additionally, while the sponsor was very experienced as an operator of Skilled Nursing Facilities, this was his first development project. Furthermore, the only way the sponsor could finish the project, start operations, and secure the necessary approvals was if this bridge loan provided all of the required capital to do so. Every aspect of building and opening the facility was not only incredibly capital intensive, but also required government approval.

    Solution:
    With an expertise in financing Senior Housing, George Smith Partners understood the importance of proving the strength of the operator of the Skilled Nursing Facility and carefully demonstrated this particular operator’s track record and abilities to interested lenders. GSP ultimately identified a community development lender that we have a very strong relationship with, who was comfortable with the niche use of the property. By proving the stabilized value of the property to the lender, GSP was able to push leverage to provide the sponsor the necessary capital for finishing construction, for starting operations, and for gaining the necessary approvals.

    Rate: 6.75%
    LTV: 80%
    Term: 5 years
    Amortization: 30 years
    Guarantee: Recourse to the entity
    Prepayment Penalty: 3,2,1

  • Expand

    $18,000,000 Cash-Out Refinance at 4.47% Fixed for Seven Years, Non-Recourse

    May 9, 2018

    Transaction Description:
    George Smith Partners secured $18,000,000 for the cash-out refinance of two stabilized multifamily buildings in Los Angeles containing a total of 116 units. Constructed in the 1960s these buildings are situated in one of the most sought after areas in Los Angeles and in close proximity to popular restaurants, bars and entertainment. Fixed at 4.47% for seven years, the non-recourse loans float at 6 month LIBOR + 2.25% for the remaining 23-year term. The non-recourse loans are fully amortizing and have a 5,5,4,3,2,1 step down prepayment penalty.

    Challenges:
    Many of the buildings have long term residents who have lived at the properties for over a decade. The long term residency leaves the owner with dozens of units with uncaptured market rents, ultimately affecting the amount of loan proceeds.

    Solution:
    GSP worked with a Lender who understood the strength of these assets and was able to underwrite to a 1.15 x DCR at the actual note rate in order to maximize loan proceeds. Both properties also had a handful of recent move ins, which gave the Lender comfort in the future upside of the properties as units continue to turn.

    Rate: 4.47% Fixed for 7 years; 6 Month LIBOR + 2.25% thereafter
    Term: 30 years
    Amortization: 30 Years
    Prepayment Penalty: 5,5,4,4,3,2,1
    LTV: 65%
    DCR: 1.15
    Guarantee: Non-Recourse
    Origination Fees: Par