$9,450,000 Acquisition Bridge Financing for Vacant Special Use Building; Two Week Funding @ 95% of Purchase

Transaction Description:
George Smith Partners arranged $4.5 million in bridge financing for the acquisition and condominium conversion of Patio del Moro, a seven-unit, historically designated trophy apartment property located in the heart of West Hollywood just one block south of the Sunset Strip. The sponsor’s business plan contemplates converting the apartment property built by famed developers Arthur and Nina Zwebell in their signature Spanish Courtyard style into a condominium complex and selling off units individually as condominiums to end users. This transaction was structured with a $3,500,000 initial advance and a $1,000,000 holdback with no negative arbitrage for condominium conversion fees, property rehab and interest reserve. Sized to 64% of total cost, the bridge loan is interest only and floats at Prime plus 0.5% for its 18-month term. The loan carries no prepayment penalty. Partial releases are subject to a 125% of par pay down and are not subject to a full cash flow sweep. The lender fee was a low 35 basis points.

Challenges:
West Hollywood is among the most challenging submarkets for re-entitlement in all of Southern California. Moreover, the property is historically designated, adding an additional layer of required approval, and is under-parked based on current condominium parking requirements. The project is also one of the first condominium conversions to occur since the Great Recession, so there is no recent precedent to fall back on. Finally, the project’s total cost is estimated at $7,000,000 equating to a high basis of $1,000,000 per door.

Solution:
George Smith Partners compiled a sales survey demonstrating robust demand for high priced condominiums in West Hollywood and surrounding areas, including recent sales in other Zwebell projects that were condominium converted over a decade ago. Moreover, George Smith Partners also highlighted the sponsor’s significant condominium conversion and real estate investment experience outside of Southern California. By demonstrating these items and leveraging its extensive capital markets relationships, George Smith Partners was able to identify a low cost capital provider that was comfortable with the deal’s entitlement risk and high basis per door.

Transaction Description
George Smith Partners secured a $4,000,000 non-recourse acquisition loan to purchase a partially developed SFR project in Bel Air. The spec house development project had halted, and the previous developer was forced to sell the project. Our sponsor became involved in a competitive bid process and needed a quick close loan to purchase the property. George Smith Partners was able to identify a private money lender who not only closed in 5 days, but also gave the sponsor the necessary proceeds to take down the property. The interest only loan is priced at 7.99% and represents 50% of the property’s current value. The loan has a 1-year term with a 1-year extension option and no prepayment penalty.

George Smith Partners arranged $3,500,000 in quick-close acquisition bridge financing for a waterfront Newport Beach multifamily property.  The sponsor approached GSP with an extremely tight closing time frame and a property with one down unit. The sponsor valued certainty of execution above all else, so he could close on the property in short order. GSP identified a non-bank lender with a long history of providing quick close bridge execution, familiar with the location and comfortable with the property’s weak in place cash flow.  Sized to 65% of purchase with no hold back requirement for interest reserve or capital expenditures, the loan carries a 9-month term, interest only payments at a 7.00% fixed rate and no prepayment penalty.  The loan also includes two 3 month extensions and a 1.5% lender fee.

Transaction Description: Poor management and the economic downturn led an iconic San Diego Bar and Restaurant into bankruptcy. The bankruptcy court would only consider quick close, all cash offers to liquidate the real estate. The existing lender was also trying to obtain relief from stay and foreclose. For the project to be successful, an experienced restaurateur with vast market experience and access to immediate cash would be required to take this out of bankruptcy to stabilization. With ample experience working through bankruptcy courts, Mr. Shaffer assisted his client with the bankruptcy laws and developed a capital solution that enabled a quick close, 6 month, acquisition loan that funded in 10 days of the judge’s order. The bridge loan provided 70% of the purchase price at an 8.6% interest only rate.

Challenge: In addition to the timing as mandated by the bankruptcy court, there was no in-place cash flow, significant deferred maintenance and code issues for this special purpose single tenant asset. Certainty of execution was required for this non-operating restaurant in order to preserve the Borrowers’ cash deposit.

Solution: Understanding the challenges of the bankruptcy, GSP quickly demonstrated the intrinsic value of the land as well as the experience and skills of the Sponsors. The primary focus was placed on the sales value of the asset and not the potential cash flow. Our Sponsor had recently achieved a 500% return on a prior transaction in this market for an asset acquired out of bankruptcy.

Transaction Description: GSP structured and arranged the 73% Loan to Cost non-recourse bridge loan for the renovation of a boutique retail property and its adjoining marina. The project includes a 47-boat slip marina and a 372-space parking structure in addition to 91 on-grade parking spaces. The 123,000 square foot mixed use water front property consists of first and second story office and retail spaces in 14 separate structures with connected marina including 47 boat slips. The Sponsor plans to renovate the buildings and re-tenant the property to create an exciting retail environment that will comprise a mix of retail, restaurant, entertainment and other uses that will reach both the local customer demographic as well as draw regionally, utilizing the waterfront location. Of the 17 legal parcels, 13 parcels are owned in fee and 4 parcels located along the marina front are held as lease-hold interests. The 73% of cost non-recourse loan is priced at LIBOR+7.50% but offers a 50 basis point spread reduction as new leasing hurtles are met. The Borrower has 36 months until the initial maturity date with options to extend the loan for an additional 12 months.