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$6,320,000 Owner-User Acquisition Financing for a Beverly Hills Medical Office Building

Rate: 3.42%
Term: 10 Years
Amort: 25 Years
LTC: 80%
Prepayment: 5,4,3,2,1,0
Recourse

Transaction Description: Steve Bram, David R. Pascale and Brian Asheghian successfully arranged a $6,320,000 permanent acquisition loan of an owner-user medical office building in Beverly Hills, California. The Sponsors occupy over 50% of the building, qualifying for owner user financing. This is the first commercial property the Sponsors own and they will self-manage the property. The subject includes a two story 8,600 square foot medical office footprint with a 3,750 square foot surgical center, numerous doctors’ offices and a private parking lot. The surgical center caters to a very high end client base that enjoy luxury surroundings, designer furnishings, a plush waiting room, private patient suites, three state of the art operating rooms and six private room recovery beds. This size medical building with its’ own surgical center is rare in Beverly Hills; the surgical center use is grandfathered. The property is adjacent to a 5-Star Hotel, providing overnight stays for extended patient recovery. GSP identified a bank that was creative on the loan structure while providing competitive terms including a very competitive rate and no lender origination fee. The loan was sized to 80% loan-to-value ($734 psf), with a 10 year fixed term at 3.42%, amortized over 25 years with a step-down prepayment penalty.

Advisors

Related Financings

  • $8,350,000 in Non-Recourse Permanent Bank (non CMBS) Financing for a Medical Office with 86% Occupancy, 3.88% Fixed Rate; Tampa, FL

    November 20, 2019

    Transaction Description:

    George Smith Partners secured $8,350,000 in non-recourse permanent bank financing for a 44,000 square foot medical office property in Tampa, Florida. Although the Property was only 86% leased at closing, the Sponsor required non-recourse, permanent financing from a portfolio lender and was not open to a CMBS execution. For tax purposes, the Sponsor also required a lender that would not require a new single purpose borrowing entity. After an extensive marketing effort, GSP sourced a bank lender that specializes in financing healthcare related properties. Sized to 65% of value, the 7-year execution carries a fixed rate of 3.88% as a result of a SWAP executed by the bank at application at no additional cost to the Sponsor. In addition to being non-recourse, the loan structure offers two years of interest only followed by a 30 year amortization (as opposed to a 25 year amortization, which is more common for a commercial, non-multifamily property). The loan carries no prepayment penalty apart from SWAP breakage.

    Rate: 3.88% Fixed as a result of a SWAP
    Term: 7 Years
    Amortization: 2 Years of Interest Only; Followed by 30 Years
    LTV: 65%
    Prepayment: None except for SWAP Breakage
    Guaranty: Non-Recourse

  • $5,127,000 Acquisition & Reposition for 79% Occupied Medical Office Building

    March 16, 2016

    Transaction Description: George Smith Partners successfully secured the 70% of cost acquisition of a 39,000 square foot on-campus medical office building in Gardena, California. Initially master leased to the adjacent hospital, the master lease expired a year prior to this acquisition. Allowing for the first year of interest only, the bridge to perm loan is fixed for five years at 4.25% and will amortize over 25 years for the balance of the term. This loan was sized to a 1.20 debt coverage ratio on the interest only debt service payment against the actual cash flow at the time of funding. Prepayment steps-down from 4% and is open without prepayment for the final year. This structure includes a one-time future earn-out of $627,000 should the subject obtain 90% occupancy within the first year.

    Challenges: Most of the tenants were on month-to-month or had no lease in place; seller historical operating history was incomplete. Physical occupancy was only 79% at application and those tenants with leases presented significant turnover during the first few years of the loan. Minimal in-place cash flow at funding challenged loan proceeds. Our Sponsor did not have any experience owning or operating medical office real estate.

    Solutions: Estoppels were secured for underwriting to back-fill incomplete P&L statements. Two lease extensions were negotiated and executed with current tenants to minimize the rollover exposure. By sourcing a capital provider whose DCR requirement was based on interest only payments, we were able to maximize loan dollars while meeting their underwriting guidelines in spite of the property’s low, in-place NOI. Market strength and hospital campus location supplemented the Borrowers’ financial strength. A 3rd party property management company was engaged for day-to-day operations.

    Rate: 4.25%
    Term: 5 Years
    Interest Only: 1 Year
    Amortization: 25 Years thereafter
    Loan-to-Cost: 70%
    Lender Fee: .25%
    Prepayment Penalty: 4,3,2,1, Open
    Debt Coverage: 1.20 Based on IO Debt Service

  • $18,000,000 Non-Recourse Acquisition Financing on a San Gabriel Valley Medical Office Building

    September 2, 2015

    GSP arranged the $18,037,500 non-recourse first mortgage from a regional commercial bank on the acquisition of an 114,471 square foot, 1940’s San Gabriel Valley medical office building. The loan allows the opportunity for the Sponsor to redevelop an approximately one-acre surface parking lot at a future date. GSP sourced a lender who was comfortable with the numerous month-to-month tenants in the mid-century vintage, masonry construction building. The subject is not adjacent to a complimentary hospital system. Sized to 65% of purchase price, the first mortgage priced at one-month LIBOR plus 2.65% (2.90% all-in today with a 25 basis point floor) and required a LIBOR cap with a 3.00% strike price for the first two years of the term. The LIBOR cap renewal structured for the third year reduced the cap cost to Borrower by shortening the cap’s duration. Interest only for the first 12 months, the 3 year term amortizes over 25 years for the remaining loan term.

    Rate: LIBOR + 2.65%
    Term: 3 Years + Options
    Amort: 1 Year IO; 25 Years Thereafter
    LTC: 65%
    Prepayment: 1, Open
    Lender Fee: 0.75%
    Advisors: Gary E. Mozer, Katie H. Rodd, Michael Anderson, Kyle Howerton