Rate: 4.75% Fixed for Five Years; 6L+270 thereafter
Amortization: 30 due in 30 Years
Prepayment: 3-3-2-2-1 open
LTV: 60% Blended
Amortization: Interest Only
George Smith Partners placed the structured senior and collateralized Line of Credit revolver in a cash-out execution for a Hollywood multifamily rental. The two loans are both recorded deeds of trust with the senior loan fixed @ 4.75% for five years prior to rolling into a LIBOR based floater and self-liquidating over the remaining 25 year term. At $4,200,000 there was a small return of equity to the Borrower. A $2,800,000 Second Trust Deed is a true revolver that can be used as a check-book to tie up additional properties in a competitive acquisitions market. Funds may be drawn down, re-paid and re-drawn without additional bank approval. Priced at Prime, the revolver is interest only with interest accruing only on drawn funds. There is no non-utilization fee. As the Credit Line is collateralized, there is no mandatory “clean-up” for funds outstanding over 12 months.
Senior Vice President
Senior Vice President
Assistant Vice President
October 17, 2018
George Smith Partners successfully arranged the refinance of a 14 building, 120-unit multifamily asset located in the Arden-Arcade neighborhood of Sacramento, CA. GSP worked with a life company with a strong appetite for multifamily lending and ultimately structured a loan in which the Sponsor pulled out $10,000,000 of cash. The non-recourse loan has a fixed rate of 4.24% and refinanced an existing agency loan. Some of the unique features of this loan included: rate lock at application, assumption rights in the event of a sale and future loan advances/top-offs upon increase in NOI.
September 26, 2018
George Smith Partners secured $7,125,000 in proceeds for the refinance of a 50-unit multifamily property located in Los Angeles. Fixed at 4.515% for a period of 5 years, the loan self-liquidates at 6 month LIBOR plus 2.25% for the remaining 25 year term; there is no balloon date. Two years of Interest Only payments precede loan amortization. Sized to a 1.15 Debt Coverage Ratio, proceeds were coverage constrained. Prepayment steps down from 3% with no penalty after the third year.
Although the building was previously retrofitted, several capital providers required a new PML earthquake risk assessment study due to the masonry construction. As cap rates continue their compression, cash flows are often the limiting constraint for sizing loan proceeds. Industry standard DCR constraints are limited to 1.20x or 1.25x and often use an inflated rate over the actual indexed note rate.
The selected lender did not require any additional structural reports. Our underwriter allocated credit to our Sponsor for their success in fulfilling their business plan over the past two years; the balance sheet basis was not an underwriting factor. Net cash flow included the Property’s higher rental income as well as previously unreported RUBs income, parking income, and laundry revenue. A quoted competitive spread of 160 basis points over the 5 year swap rate demonstrated the Capital Provider’s belief in this location and sponsorship. Our 1.15 DCR constraint resulted in proceeds above the rest of the market.
$80,228,000 Cash-Out, Fixed-Rate Refinance of a 297-Unit Multifamily Property; 10-Years Interest Only at 4.20%
September 19, 2018
George Smith Partners successfully placed a 10-Year, Cash-Out, Fixed-Rate refinance of a 297-unit multifamily property located in Downtown Los Angeles, California. This loan refinanced a 10-Year floating rate loan with a remaining term of 8 years, also arranged by GSP.
Two years ago the Sponsor decided on a variable rate loan and paid an early prepayment penalty on his prior loan, allowing for a significant cash-out and reduction in interest carry. Our client benefited from lower interest rates for the past two years, however, as the long-term interest rates began to increase they decided to switch to a long-term fixed-rate strategy.
There were two objectives for this transaction: 1) leverage appreciated equity, and 2) replace floating rate risk with a long-term fixed-rate. Recent fluctuations in the 10-year Treasury prompted additional urgency in the transaction and GSP moved quickly to arrange the new loan as soon as the former loan’s two-year lockout period expired. Sized at 55% of value, the non-recourse, interest-only loan is fixed at 4.20% for 10 years.
August 1, 2018
George Smith Partners secured $9,150,000 for the non-recourse cash-out refinance of a newly built 25-unit multifamily building located in Los Angeles. The building is situated in one of the most sought after areas in Los Angeles and is in close proximity to popular restaurants, bars and entertainment in nearby Culver City. The construction take-out permanent loan is fixed at 5.04% for ten years with full term interest-only and has a yield maintenance prepayment penalty structure.
The building was in lease up when the financing process started. Thus, the owner did not have any seasoning on the newly leased units nor any historical operating expenses.
GSP identified a capital source who was willing to provide proceeds at over 90% of cost and understood the strength of the asset in addition to the experience of the Developer. Based on these strengths, the Lender was able to underwrite to in-place income without seasoning, proforma operating expenses, and a 7.35% debt yield, which maximized loan proceeds. The Lender was able to fund once the property achieved 80% physical occupancy. The Sponsor locked a full term interest-only structure, which is advantageous to the property’s cash flow as the new leases continue to season.
Rate: 5.04% Fixed for 10 years
Term: 10 years
Amortization: Interest Only
Prepayment Penalty: Yield Maintenance
DCR: 1.35x on an IO basis
Origination Fees: Par
Multifamily Townhome Project Refinancing: $157,500,000 Cash-Out Refinance of a 752-Unit Multifamily Property; 10-Years Interest Only at 4.29%
June 20, 2018
George Smith Partners arranged the refinance of Colony Townhomes, a 752-unit multifamily property located in Canyon County, California. The refinance proceeds replaced a HUD loan, also previously arranged by GSP, with a remaining term of 23 years and with pre-payment penalties. Sized to 65% of value, the non-recourse, 10-year, interest only loan is fixed at 4.29%.
The Sponsor wanted to seize the opportunity to cash out significant appreciated equity, while locking in low interest rates in a rising interest rate environment. The early refinance meant that the Sponsor would have to incur the pre-payment penalty. The recent fluctuations in the 10-year Treasury spurred additional urgency in the transaction.
The Sponsor’s original HUD loan was priced at 3.75% with over 20 years remaining. Through analysis, GSP determined that the interest rate savings for a new 10-year loan would easily offset the early prepayment costs of the existing loan, as well as provide for the major cash out the Sponsor was hoping to achieve. Once the Sponsor decided to proceed, Rate Lock was accomplished in 14 business days and the loan closed 21 days later.
While an early refinance does not make sense in every situation, frequently, the opportunity to liberate trapped equity as well as lock in long term fixed rates ahead of expected further rate increases offsets the prepayment penalty cost incurred by refinancing prior to the open prepayment window.
March 7, 2018
GSP successfully placed $2,180,000 in non-recourse permanent financing for a three property multifamily portfolio in the Pacific Southwest. The 75% leverage loan carries a low fixed coupon of 4.45% for the duration of its 10-year term. Cash flow is maximized via three years of interest only payments prior to converting to 30-year amortization. The loan presented significant challenges including a 100% cash-out requirement, sponsorship with credit issues, the property’s workforce housing tenant base, as well as tax and unpermitted work liens clouding title. GSP leveraged its strong lender relationships and emphasized the sponsorship’s length of ownership and its real estate investment track record to ultimately overcome these issues. The loan carries a flexible step-down prepayment penalty offering the ability of early payoff or sale and no lender fee was charged.
Rate: 4.45% Fixed
Term: Ten Years
Amortization: Three Years Interest Only; 30-Year Amortization Thereafter
Lender Fee: None
- Advisors: Zachary Streit