$4,080,000 Adaptive Re-Use Bridge Loan for the Conversion of a Former Chapel to a Bed & Breakfast

George Smith Partners successfully placed the $4,080,000 adaptive re-use bridge loan for the conversion of a former chapel to a 10 unit Bed & Breakfast (B&B) in Napa, CA. When the property was purchased in 2015, our sponsor, a local developer, saw that a B&B would be the highest and best use due to its prime location, being in the heart of downtown Napa. After a year of getting the property entitled and permitted, GSP was hired to fund the conversion.

Challenge: Our sponsor initially requested a SBA loan due to its competitive rate and high leverage bridge and permanent debt. However, since the subject property was purchased with other parcels under one note, SBA took into account those other parcels in their occupancy calculation and the property became below SBA’s 51% “owner-occupied” threshold. In addition, the seller’s note used to purchase the property was ineligible for SBA refinance.

Solution: In order to prime this transaction for a SBA take out, GSP used this bridge loan to (1) refinance the subject property with a loan that is separate from the other parcels, fulfilling the 51% “owner-occupied” threshold (2) replace the ineligible seller note, allowing SBA to refinance the debt, (3) complete the conversion and make the deal more compelling since there will be no construction risk for the SBA lender.  Sponsor anticipates to taking out this bridge loan after the 9 month construction period with an SBA permanent loan already arranged by GSP.

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