$9,120,000 Non-Recourse Acquisition Financing to Acquire a Well Located Property in Chinatown

Rate: 5.90%
Term: 12 Months + One 3-Month Extension
Amortization: Interest Only
LTV:(Purchase Price): 60%
Guarantee: Non-Recourse
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.


Related Financings

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    $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

    Transaction Description:

    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.

    Rate: 30-Day LIBOR + 3.20%
    Term: Two years plus three 12-month extensions
    Amortization: 36 months interest only
    Max Loan to Cost: 75%
    Guarantee: Non-recourse
    Lender Fee: 1.00%

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    $28,700,000 Boise Bridge Non-Recourse Acquisition Loan to 73% of Cost @ LIBOR+300

    October 10, 2018

    Transaction Description:

    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.

    Rate: LIBOR +300
    Term: 24 months
    Amortization: Interest Only
    LTC: 73%
    Debt Yield at Close: 6.3%
    Origination Fees: 1.0%

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    $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.

    Blended Rate: 8.24%
    Term: 12 months
    Amortization: Interest Only
    LTV: 84%
    Prepayment Penalty: None
    Guarantee: Non-Recourse

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    $3,820,000 Non-Recourse Acquisition Loan for Seattle Area Multifamily Property

    July 25, 2018

    George Smith Partners secured a $3,820,000 non-recourse permanent acquisition loan for a 44 unit multifamily property in the greater Seattle area. The loan provided 65% leverage and is fixed at a rate of 4.34% for five years. The seller had owned the property for decades and was operating with expenses much higher than a typical multifamily property. In order to maximize proceeds, GSP provided market expense data and emphasized our Sponsors’ extensive experience operating over 2,000 multifamily units. This helped provide support for expenses more in line with the market. The seller also rented units only through word of mouth and had 5 vacant units. By demonstrating the market vacancy, the lender was able to use market rents for the vacant units in order to maximize proceeds. The lender was also able to provide a short prepay period, giving the borrower flexibility to pay off the loan after just two years.

    Rate: Fixed at 4.34% for 5 years then floats at LIBOR + 3.25%
    Term: 20 years
    Amortization: 30 years
    Prepay: 3,1,0
    LTV: 65%
    DCR: 1.2
    Guarantee: Non-Recourse

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    $31,380,000 High-Leverage Bridge Loan to Acquire & Renovate 89,000 SF Office Building in South Pasadena, CA

    June 6, 2018

    George Smith Partners secured $31,380,000 of non-recourse bridge debt to purchase and renovate a multi-tenant Class A office property in South Pasadena. The Sponsor purchased the property with the intent to add significant value through increasing rents and occupancy. The Sponsor purchased the property because of the very strong demographics in South Pasadena and intends to lease to tenants that will pay a premium to be near their clientele. The challenge was convincing the appraiser to use Downtown Pasadena rents since there are no comparable properties in the immediate area. George Smith Partners successfully arranged financing at 85% of cost given the expected increase in value over the next three years.

    Rate: L+565
    Term: 2 years + Two 12 Month Extensions
    LTC: 85%
    Amortization: Interest Only
    Prepayment: 18 Months Minimum Interest
    Guarantee: Non-Recourse

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    $3,900,000 Acquisition Bridge Loan at Prime + 1.25% for Five Years, Non-Recourse

    May 30, 2018

    Transaction Description:
    George Smith Partners secured $3,900,000 to facilitate a value add acquisition of a 28-unit multifamily building in Silver Lake. Constructed in the 1950s, this building is located near the heart of Silver Lake which houses many trendy coffee shops, restaurants, bars, and entertainment. Floating at Prime + 1.25% for five years with a 5.50% floor rate, this non-recourse loan has 12 months of interest only payments followed by a 30-year amortization. The loan has a prepayment penalty of 2% for the first two years, then open.

    The subject property has many long term residents. The long term residency left the property with dozens of units at below-market rents, ultimately affecting loan proceeds. The property required a significant amount of capital improvements in order to deliver the type of product and aesthetic that the younger tenant base in the immediate area expects for newly renovated units.

    GSP worked with a Lender who understood the client’s successful track record renovating and adding value to similar projects in the area. The Lender had comfort in the business plan for this project and was able to underwrite to a 1.20x DCR on the exit using proforma rents. The $30M loan provided 65% of the acquisition cost. The Lender was also able to offer non-recourse for this bridge loan.

    Rate: Prime + 1.25% for 5 years; 5.50% Floor Rate
    Term: 5 years
    Amortization: Interest Only 12 months, then 30 YR AM thereafter
    Prepayment Penalty: 2,2,0%
    LTV: 65%
    DCR: 1.20
    Guarantee: Non-Recourse
    Origination Fees: 0.50%