Term: 12 Months + One 3-Month Extension
Amortization: Interest Only
LTV:(Purchase Price): 60%
Lender Fee: 1%
George Smith Partners arranged $9,120,000 in non-recourse acquisition debt secured by a cold storage facility. The Property is situated in the Chinatown submarket of Downtown Los Angeles and benefits from being within the CASP (Community-Based Planning Effort) area. GSP targeted a capital provider comfortable with the single tenant nature of the property, and the ability to focus on the future value of the parcel. Sized to 60% of the $15.2MM total purchase price and fixed at 5.90% on an interest only basis, the non-resource facility has an initial term of 12 months followed by an optional 3-month extension. All prepayment penalties were waived, allowing the Sponsor the flexibility to refinance at a lower rate once construction financing is obtained.
Principal/Managing Director - Equity
Senior Vice President
Senior Vice President
Assistant Vice President
$7,600,000 in Non-Recourse Permanent Financing for a Single Tenant Medical Office Property with 100% Lease Roll During the Loan Term
March 6, 2019
George Smith Partners secured $7,600,000 in non-recourse permanent acquisition financing for a 38,000 square foot medical office property in Lowell, Massachusetts. The Property was 100% leased to a single tenant with strong credit but with only five years of remaining lease term. Despite the limited lease term, the Sponsor sought long term permanent financing that exceeded the lease term, which is difficult to obtain.
After an extensive marketing effort, George Smith Partners sourced a national lender with a favorable view of medical office properties and a history of providing permanent financing on properties with significant near term lease roll. Sized to 65% of value, the 10-year fixed-rate execution is non-recourse and amortizes over 30 years. The interest rate was fixed at 5.12% at closing or 242 basis points over the 10 Year Swap Rate.
$12,790,000 Non-Recourse Acquisition Bridge Financing to Reposition a 120,000 Square Foot Retail Center in Phoenix, Arizona
January 30, 2019
George Smith Partners secured $12,790,000 in non-recourse acquisition bridge financing for the heavy reposition of a 1980s vintage shopping center in the Paradise Valley submarket of Phoenix, Arizona. The value-added property had a vacating grocery anchor tenant, low occupancy rates and below market rents. The Sponsor’s business plan was to acquire the asset with a fitness tenant anchor in tow and then reposition and stabilize the remainder of the center.
Sized to 80% of total project cost, the loan includes a future funding facility to cover tenant improvements, leasing commissions and capital expenditures. The rate floats at 1 Month LIBOR plus 4.25% (approximately 6.75% today) and carries a two year term with two one year extension options. Interest is not charged on the holdback until funds are drawn. The Lender was able to accommodate several changes to the business plan throughout the application process. This included relocating several existing tenants within the center due to a conflict presented in existing tenant leases.
$32,700,000 (85% Loan-to-Value) Non-Recourse Financing for the Acquisition of a 33-Property Single Tenant Dollar General Portfolio
January 9, 2019
GSP successfully placed $32,700,000 of non-recourse, ten-year, fixed-rate debt for the acquisition of 33 newly-constructed freestanding retail buildings 100% leased to Dollar General. The individual assets have 15-year lease terms and are located primarily in the Upper Midwest and Southern United States. GSP executed the financing concurrent with construction completion and sourced a lender who, due to Dollar General’s investment grade credit rating (S&P: BBB) and the geographic diversity of the assets, was able to achieve 85% leverage financing (including a mezzanine debt component) on the portfolio at a 5.74% blended fixed coupon plus three years of Interest Only payments on the ten year loan term, despite an absence of sales history and concurrent tenant lease terms expiring five years after loan maturity. This structure minimized the equity required to close the transaction and provides additional cash flow to the Sponsor during the first three years of the loan term. The loan structure also provides the Sponsor flexibility to release properties from the loan collateral in the event of sale after year three of the loan term, and allows the Sponsor to release up to 30% of the individual assets from the mortgage collateral and substitute like kind properties through year nine of the term.
$13,130,000 Acquisition and Reposition Financing with Low 3% Going-In Debt Yield on Two Multifamily Properties in the San Fernando Valley, California
October 17, 2018
GSP arranged the $13,130,000 first mortgage on two 1960’s vintage multifamily assets in the San Fernando Valley. The National Balance Sheet Lender provided a non-recourse loan at 75% of total project cost including 100% of future CapEx funds to complete an extensive interior and exterior renovation of $45,500 per unit. Interest expense is not incurred on CapEx funds until drawn. The 30-Day LIBOR plus 3.20% coupon requires interest rate risk protection throughout the term, and in order to minimize associated sponsor cost the Lender structured the initial term as two years, with three, one-year extensions and no hurdles or fees for the first extension. Due to low going-in cash flow, the Lender structured an interest reserve to cover debt service during the peak reposition period.
October 10, 2018
George Smith Partners secured $28,700,000 in proceeds for the acquisition of a 254-unit multifamily property in Boise, Idaho. While near full occupancy at close, the Property has dated interiors and common areas, as well as some deferred maintenance. A capital budget was drafted by our Sponsor for unit upgrades at lease-turn as well as common area improvements. Proceeds are structured with $25,500,000 for the initial funding plus an additional $3,200,000 for capital improvements. Floating at 30 day LIBOR plus 3.0%, the two-year term will be paid current, monthly out of cash flow and does not carry a pre-payment penalty. An earn-out for an additional $2,300,000 was structured once the Subject Property achieves an 8.5% debt yield.
Challenges and Solutions:
The Sponsor was in a 1031 exchange and needed to close quickly as their exchange provided a narrow window to close. While the going in cap rate provided meaningful yield Day 1, GSP focused their marketing efforts on the Sponsor’s proven track record to execute on their previous deals.
Several capital providers passed on the deal due to the fact Boise is not a top MSA by population, even though it was recently named as America’s fastest growing city by Forbes Magazine. Certainty of execution was required for this short acquisition escrow, and the need to identify a capital provider knowledgeable with the Boise market was paramount in avoiding educational “ramp-up” delays so that escrow would fund timely.
GSP vetted this location and confirmed market knowledge with loan decision makers prior to the issuance of an application. The loan closed within 40 days of GSP’s engagement on the deal.
$7,300,000 Acquisition Financing 5 Day Close of 48 Unit Apartment Building in the Koreatown Neighborhood of Los Angeles
August 1, 2018
George Smith Partners successfully arranged the acquisition financing of a 48 unit multifamily building located in the Koreatown neighborhood of Los Angeles. The Borrower needed a quick close loan to win the acquisition and also needed as much leverage as possible. With numerous tenants paying severely under market rent, the borrower’s business plan was to buy these tenants out and release the units at market rent. GSP ultimately worked with a senior lender and a mezzanine lender to maximize proceeds, while still closing the loan in time for the acquisition. GSP was able to push proceeds on the deal to 84% of the purchase price. The non-recourse loan has a 12 month term and a fixed blended interest rate of 8.24%. GSP additionally worked with the Lender to remove any prepayment penalty, This gave the Borrower the flexibility to refinance with permanent financing should he execute his business plan early. This is increasingly important in a rising interest rate environment.