Rate: 5.44% Fixed
Term: 10 Years
Amortization: 1 Year IO; 30 Years Thereafter
Prepayment: Step-down from 10%
Origination Fee: Par
Recourse: Carve-Outs
Transaction Description:
George Smith Partners placed non-recourse financing to take-out an existing construction loan on a 59,375 square foot multi-tenant flex industrial building located in an Austin suburb. In addition to paying off the recourse construction loan, the Sponsor received a notable return of equity. Located adjacent to a residential housing PUD, the commercial real estate is subject to the Homeowners Association’s CC&Rs. Fixed at 5.44% for ten years, prepayment steps-down from 10%. Amortization commences after the first year of interest only and is spread over 30 years.
Challenges:
During due diligence, it was determined the CC&Rs were not securitizable without a material modification precluding the HOA from inhibiting specific tenant uses on the subject property. Our bank ordered MAI appraisal value was below expectations. One tenant representing 12% of the net rentable went into monetary default and vacated the premises but did not turn the space back to management.
Solutions:
GSP identified a portfolio lender who became comfortable with the use subject to receiving an estoppel from the HOA. Although the potential remains for future changes/impediments from the HOA board, the lender obtained a high level of comfort that the current uses were grandfathered in and the HOA would not play an active role in their neighbor’s operations. The Sponsor, Lender and GSP provided additional sale comparables to support a higher value. The lender agreed to raise their LTV constraint by 3 percentage points to maintain proceeds. A tenant Improvement & lease commission reserve was funded at close to be reallocated for releasing the dark space.
Advisors
Related Financings
- No related financings.
