March 4, 2015
Transaction Description: Jonathan Lee arranged the ground-up construction financing for 49 unit multi-family rental building in Brentwood, California. The subject will be mapped for condominiums for additional exit flexibility. Sized to 80% of cost, the 30 month loan is priced at LIBOR + 2.5%, netting an all-in coupon of less than 3.0% today. Recourse is limited to the top 50% of the loan amount.
Challenge: Project features units that are larger than typical rental products in this market, resulting in a higher total rental dollar per unit. A high land basis was required to support the Sponsor equity contribution.
Solution: Market research, area demographics and asset quality supported the larger unit footprints and thus the higher gross dollar rents underwritten. Exit flexibility added additional comfort to support the higher land basis and value created by the Sponsor through his assemblage and entitlements.
August 21, 2014
8 – 20 – 2014
Transaction Description: Jonathan Lee successfully placed the construction financing for a ground-up six unit luxury condominium property in Westwood, California. The Sponsor purchased the entitled land in 2012 all cash and re-designed the building, spending over a year obtaining required approvals. The 18 month construction term is priced at LIBOR plus 3.5% and was sized to 75% of total cost. Imputed equity was factored in to a 65% of value metric. Challenge: The Sponsor required high leverage for a for-sale development and was not seeking to invest additional cash equity into this project. Pro-forma sales were difficult to comp given the older product in the area. The high price per foot added to the comparable challenge. Solution: GSP supported the leverage request by highlighting the Sponsor’s and the Contractor’s successful development history with similar project types. By canvassing the market and demographic data, a sales pro-forma for the finished project was developed by GSP, reviewed and accepted by the Appraiser. The estimated demand and price point for new product was independently supported by the MAI appraiser. Rate: LIBOR + 3.50% Term: 18 Mnths+ 1-Six Mnth Ext Amort: Interest Only LTV: 65.0% LTC: 75.0% Recourse Lender Fee: 0.5% Advisors: Jonathan Lee, Adam Candler
July 16, 2014
7 – 16 – 2014 Transaction Description: GSP arranged the financing for the ground-up development of an 18 unit apartment building in the Warner Center area of Los Angeles. The developer had recently purchased the land before entitling it. Because of the strong housing demand in the Warner Center sub-market, the Borrower was able to syndicate equity amongst friends and family. GSP successfully negotiated for imputed equity to round-out the capital stack in lieu of an additional cash investment. Sized to 75% of cost, the 18 month term floats over LIBOR but requires a 5.5% interest rate floor. Challenge: The Borrower’s previous construction projects were financed by private lenders with high interest rate coupons. While financially sound, with two other projects under construction, the Borrowers’ contingent liabilities pushed underwriting standards. Solution: GSP worked with the capital provider to demonstrate a clear pipeline of projects based on existing assets under construction. Because of the construction progress in the other assets, GSP was able to demonstrate that several recourse construction loans were about to roll to non-recourse debt within six months of funding. Rate: 5.5% Term: 18 Months + one 6 Month Ext Amort: Interest Only LTC: 75% Recourse Lender Fee: 0.75% Advisors: Jonathan Lee, Adam Candler
April 30, 2014
Transaction Description: GSP successfully placed $12,100,000 of ground-up construction financing for a 45-unit luxury boutique amenities transit-oriented apartment development in Los Angeles. Recourse was limited to a 25% repayment guarantee; burning down to zero once a 9.10% debt yield is achieved. The senior loan was sized to 68% of total cost and priced at LIBOR + 2.65%. The three year loan equates to $269,000 per door.
Challenge: Thirty-five days before the Sponsor had a hard date to begin construction, the Sponsor’s original Lender reduced proceeds due to a low appraised stable net operating income that dropped the debt yield below the threshold stipulated at application. In order to maintain the debt yield the lender cut proceeds to a level that made the transaction unfeasible for the Sponsor.
Solution: GSP stratified the appraisal numbers into loan-to-value and debt yield conclusions, and identified a new capital provider focused on loan-to-value sizing versus debt yield sizing. The new lender accepted an 8.17% debt yield on appraised stable net operating income because they focused more on the stabilized appraised loan-to-value. The result is the Lender was able to achieve the required proceeds and close within thirty-five days and did not require a new appraisal.
March 13, 2014
Transaction Description: George Smith Partners placed the ground-up construction of an age restricted active adult community in the Pacific Northwest. The loan equates to $170,277 per door for the 112 luxury unit complex. Sized to 60% of cost, the three year loan does not require a warm body repayment guarantees. A 60% Limited Recourse component is exclusive to a capitalized entity during construction but burns down to 30% at stabilization. There are no warm body repayment, completion or carve-out guarantees. Priced at LIBOR + 350; the capital structure did not require additional mezzanine debt to execute.
Challenge: A top west coast Multifamily Development & Investment Company was embarking on their first Age Restricted Development. The 112-Unit Development plans called for luxurious amenities, large floor plates, all elevator access units catering to the 55+ Active Adult Community. This significantly increased construction costs over similar market rate multifamily developments in the region. While these amenities matched the consumer demand, it was necessary to articulate that the revenue demand generated by this would match and/or exceed the additional construction cost expenditures. While the Active Adult Single Family markets are well accepted, the Multifamily Active Adult sector is still in its infancy.
Solution: Initially retained to secure mezzanine financing for this transaction, GSP proved their contribution by working with the Sponsor and demonstrating their knowledge of Adult Active Communities and product demand in this market. The Borrower then retained GSP to secure the entire capital stack. GSP secured a Senor Loan without the necessity of more costly mezzanine debt by utilizing a combination of deferred fees and excess land as equity contribution which accounted for over 10% of the capitalization. GSP negotiated all guaranties solely to the capitalized corporate entity including all standard ‘warm body’ carve-outs.
- Rate: LIBOR+350
- Term: 3 Years+Two – 1 Year Extensions
- Amort: IO
- LTC: 60%
- Recourse: Limited to a Capitalized Entity: 60% during construction burning down to 30% at stabilization
- Advisors: Malcolm Davies
$51,075,000 Structured Financing; $38,750,000 Senior Trust Deed and $12,325,000 Mezzanine Loan for Ground-Up Construction of a Class-A Multifamily Asset
February 27, 2014
2 – 26 – 14 Transaction Description: GSP successfully arranged the combined $51,075,000 of construction financing for a 360 unit Class-A Multifamily project located in Las Vegas, Nevada. The subject is adjacent to Green Valley Ranch and “The District” in Henderson, a mixed-use project that includes a life-style shopping center and resort hotel. This project represents one of the highest quality, most amenitized and dynamic rental projects in Las Vegas. Challenge: The Sponsor requested a large construction loan in a market that is not on the preferred list for most capital providers. The projected loan per unit was higher than most completed comps in the market. The Sponsorship was seeking high leverage construction financing which required a combination of a senior and mezzanine loans. Solution: GSP demonstrated the considerable experience of the Sponsorship and the singular quality of the location within Green Valley Ranch as compared to other Vegas submarkets, and distinguished this project to justify the high cost per unit. The capital providers understood the value of this location and the Sponsor’s ability to deliver a product that is superior to competing properties in the market. GSP identified a senior lender which had recently negotiated an inter-creditor agreement with a construction mezzanine provider, resulting in a smooth and fast closing process.