Term: 7 Years
Amortization: 30 Years
Recourse: Full Recourse
Prepayment Penalty: None
Lender Fee: 1.0%
George Smith Partners secured $4,930,000 for the acquisition of a single-tenant office. The 30,000 square foot building was built in 1997 and was recently renovated by the seller as part of the tenant improvement package for the incoming tenant. The tenant signed a new, 7-year NNN lease that includes two, 5-year options and has a rental rate that increases by 2.5% annually. GSP was able to secure 75% LTV financing for the Sponsor’s purchase. The 7-year loan is fixed at a 4.875% interest rate for the entire term. It has a 30-year amortization and no prepayment penalty.
Senior Vice President
$31,380,000 High-Leverage Bridge Loan to Acquire & Renovate 89,000 SF Office Building in South Pasadena, CA
June 6, 2018
George Smith Partners secured $31,380,000 of non-recourse bridge debt to purchase and renovate a multi-tenant Class A office property in South Pasadena. The Sponsor purchased the property with the intent to add significant value through increasing rents and occupancy. The Sponsor purchased the property because of the very strong demographics in South Pasadena and intends to lease to tenants that will pay a premium to be near their clientele. The challenge was convincing the appraiser to use Downtown Pasadena rents since there are no comparable properties in the immediate area. George Smith Partners successfully arranged financing at 85% of cost given the expected increase in value over the next three years.
April 11, 2018
George Smith Partners successfully arranged non-recourse, floating-rate bridge debt on an 85%+ occupied but under performing portfolio of multi-tenant office properties located in Orange County. The portfolio includes four newly acquired office properties and the retiring of a loan encumbering a fifth office property owned by the client. Proceeds of the loan will be used to reposition all of the properties through the implementation of a strategic renovation and leasing program. In addition, the terms of the loan provide the partnership with the autonomy to execute its value-add strategy as well as the flexibility to distribute operating cash flow along with net sales proceeds resulting from the sale of properties thereby maximizing the portfolio-level returns.
Rate: 3.75% + 1-Month LIBOR
Term: 3 Years + 2, 1-Year Extension Options
Amortization: Interest-Only During Initial Term, 30-Year Amortization Schedule During Extension Period
LTC/LTV: 66% of cost/53% as-stabilized value
Prepayment: 15-month spread maintenance
- Advisors: Alina Mardesich
$16,900,000 Bridge Financing to Acquire & Renovate a 50,000 sf, 7-Story Office Building in Downtown Los Angeles
April 4, 2018
George Smith Partners secured $16,900,000 in bridge financing to acquire and renovate a 7-story office building (first floor retail) in the Jewelry District and historic core of Downtown Los Angeles. The property was originally built in 1913 with open floor plates and is perfectly designed for a conversion to creative office. Even though the project is well-located in the path of DTLA development, some challenges included a lack of both Sponsor experience and credit tenant preleasing. Moreover, being a purchase transaction added additional pressure to close without delays. GSP sourced a Capital Provider to get comfortable with the Sponsor’s team, business plan execution ability, and guarantor of the main leaseholder. While the original financing request estimated a 35% prelease, the Sponsor was able to obtain 60% preleasing by loan funding.
March 21, 2018
Transaction Description: George Smith Partners arranged an 80% acquisition financing for a large office building in Monterey Park, California. The sponsor for this transaction was a religious institution who was acquiring the property to serve as its main campus for community service and fundraising events. The religious institution previously operated its community service and fundraising events out of several smaller locations in Orange County, but needed to consolidate into one larger main campus. Fixed for 10 years at 6.75%, the acquisition loan represented 80% of the property’s value and is recourse to an entity. The loan amortizes over 30 years and has a 5,4,3,2,1 prepayment penalty.
Challenges: Conventional lenders could not get comfortable with the transaction because of the niche religious use of the property. The owner-user element further complicated the deal. Many lenders also struggled because the large office building sat vacant for many years and there was no warm body guarantor. The religious institution also required a highly leveraged loan to complete the purchase of the office building.
Solution: George Smith Partners understood the unique aspects of this transaction and ultimately identified a community development lender who was comfortable with both the religious use and the owner-user component of this deal. GSP also structured the transaction to be recourse to the entity, giving the lender further comfort with the deal. GSP was able to push leverage to 80% of the purchase price.
April 26, 2017
George Smith Partners arranged $5,500,000 in acquisition proceeds on a 15,122 square foot Los Angeles office building. Floating at Prime + 0.5%, the 3 year loan is interest only for 18 months before amortizing over 25 years for the balance of the term. Sized to 65% of the purchase price, there is no prepayment penalty for this loan.
Despite the prime location, the subject had somewhat aged interiors and exteriors and was just 70% occupied when our Sponsor executed the purchase contract. The income was below break-even debt coverage on the proposed loan. Most of the in-place tenants were paying well below market rent. One tenant was under a month to month lease and several others were facing lease roll in the next six months. On-site property management was charging an above market rate. Actual historical cash flow was well below potential.
GSP researched comparable rent and competitive operating data that proved out our Sponsor’s pro forma rents and business plan. Our Sponsor’s considerable success adding value to similar office properties over the past several years supported the business plan for the loan request. An aggressive lease campaign was initiated during due diligence, securing letters of intent from multiple tenants that would bring occupancy to 95%. A small debt service reserve was structured until the tenants took occupancy to cover all operating loss and mortgage expenses in the short interim.
December 7, 2016
George Smith Partners arranged the $7,800,000 acquisition loan for a 10,397 square foot creative office in San Francisco. Recently leased by a global financial services firm, the trophy asset was previously repositioned into creative office, while maintaining historical architectural heritage of the original building. Emphasizing the importance of closing as applied for, this escrow represented the Sponsor’s “down leg” for a 1031 exchange. Fixed for ten years at 4.56%, the non-recourse loan offers 5 years of interest only before amortizing over 30 years.
It was crucial to identify a Lender who would underwrite full proceeds on a tight capitalization rate where loan proceeds would be cash flow constrained. High dollars per square foot was requested for a non-investment grade tenant who had only 7 years remaining on the first term of the lease.
GSP identified a Lender who was confident with the submarket and understood the value of the location and physical real estate. Lender underwrote to a very aggressive debt yield and felt comfortable with the tenant’s financial strength to merit very high loan dollars per square foot. The lender closed on time and at fully request proceeds.
Rate: 4.56% Fixed
Term: 10 Years
Amortization: 5 years IO; 30 Years thereafter
- Advisors: Private: David Rifkind