Rate: Prime + 0.5%
LTC / LTV: 70% / 65%, including 100% of future funding
Term: 2 Years
Amortization: Interest Only
Prepayment Penalty: None
Recourse: Full Recourse
Lender Fee: 0.5%
George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in the West Adams submarket of Los Angeles. The 10 unit 1970s vintage property was being delivered vacant and with significant deferred maintenance. The Sponsor’s business plan was to optimize the unit mix by reconfiguring the mostly two-bedroom one-bathroom units into a majority two-bedroom two-bath units. This would maximize square footage by enclosing the tuck under parking, which also eliminates the need for a soft story retrofit. Sized to 70% of total project cost, the loan includes 100% of future funding for a full gut renovation of unit interiors and an exterior upgrade. The two year bridge loan is interest only and floats at Prime plus 0.5% (5.75% today) with no prepayment penalty. Interest is not charged on the holdback until funds are drawn. Although the Lender’s appraisal came in weak and could have resulted in lower loan proceeds, GSP was able to work with the Lender to demonstrate the strength of market sales and rent comps to preserve the loan amount agreed to in the term sheet. The Lender fee was negotiated down to 0.5%.
Senior Vice President
$46,000,000 Non-Recourse Acquisition & Renovation Financing a 4-Property Apartment Portfolio in the DFW Metroplex
February 13, 2019
George Smith Partners successfully arranged $46,000,000 of non-recourse, bridge financing to acquire and renovate a 4-property multifamily portfolio, consisting of 692-units, in the Dallas-Fort Worth Metroplex. Although the Properties were well occupied (97%), rents were below market because the Seller self-managed and the Property lacked recent common area renovations. The units were well maintained but dated and will benefit from Sponsors renovation plan.
This financing was unique because it had four different multifamily properties within one single portfolio. While there were efficiencies in working with one lender, each property was evaluated on its own merits and diligence had to be collected accordingly. We marketed the attributes of each Property and the sub-markets. Two of the properties are located in Irving, one in Grand Prairie and one near Fort Worth. Each market has different economic demand drivers (example: Irving is home to several major corporate headquarters including Exxon and McKeeson). Moreover, the Lender required an minimum capital investment of $6000 per unit (slightly higher than the Sponsor’s original budget) and GSP worked with the Lender to coordinate the information for securitization. There was a timing aspect in order to securitize the portfolio properly.
George Smith Partners worked with the Sponsor to increase their renovation budget and worked with the Lender to increase leverage accordingly. This retained the Sponsors original equity participation and should result in better returns. We closed the four loans nearly simultaneously (3 loans closed on a single day).
January 23, 2019
George Smith Partners arranged $13,600,000 of bridge acquisition financing for a 199-unit apartment complex located in Mesa, Arizona. The Property, which was built in 1970, features a pool, bbq area, and playground. The units range from studios to 3-bedrooms and are currently 97% occupied. The Sponsor plans to renovate the exterior area to improve the overall appeal of the Property and address some deferred maintenance . The 3-year loan is sized to 75% LTC and has an interest rate that floats at 3.45% above 1-Month LIBOR. The non-recourse financing has 24 months of yield maintenance and has a 1.0% origination and 0.5% exit fee.
January 23, 2019
George Smith Partners secured a $34,000,000 permanent loan for the acquisition of a 273 unit Class A multifamily property in Dallas, TX. The 10 year loan is priced at 5.15% and fixed for ten years, with full term interest only. The Borrower executed their purchase and sale agreement in October 2018 as part of a 1031 exchange. While in due diligence the cash flow declined due largely to new construction coming on-line. In addition property taxes were re-assessed at a higher rate. GSP worked with the lender as well as the rating agencies to demonstrate the historical occupancy (95%+) and mitigate the loss in net cash flow from the rise in operating costs. The borrower was able to rate lock at an all-in rate less than applied for, with full proceeds, during the last week of 2018. The transaction closed once business commenced in full in 2019.
$4,200,000 Acquisition and Reposition Financing Including $1.4MM of Future-Funding on a Multifamily Property in Long Beach, California
November 21, 2018
George Smith Partners arranged a $4,200,000 first mortgage for the acquisition of a value-add multifamily asset located within one of Long Beach’s trendiest neighborhoods. The national balance sheet lender provided a non-recourse loan to 65% of total project cost which includes $1,400,000 to 100% of capital expenditures for property improvements. Interest on future proceeds is not incurred until funds are drawn. A short spread maintenance schedule provides maximum flexibility to allow the Borrower to quickly execute its value-add strategy, prior to taking out financing with permanent debt or a sale. Cash flow is maximized as the loan is interest only during the initial three-year term and priced at 3.55% over 30-Day LIBOR. Due to low going-in cash flow, the Lender structured an interest reserve to cover debt service during the reposition period.
Rate: 30-Day LIBOR + 3.55%
Term: 36 months plus two 12-month extensions
Amortization: 36 months interest only
Loan to Cost: 65%
Prepayment: 12-month spread maintenance; open thereafter
Lender Fee: 1.00%
$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
GSP arranged the $10,000,000 first mortgage on a 1990’s vintage, 64-unit multifamily value add property. The National Balance Sheet Lender provided a non-recourse loan at 80% of total project cost including 100% of future CapEx funds totaling $15,000 per unit. Furthermore, the Lender sized the stabilized proceeds to a 7.35% As-Stabilized Debt Yield. Interest expense is not incurred on CapEx funds until drawn, and sponsor cash flow is maximized as the loan is interest only during the initial three-year term. The 30-Day LIBOR plus 3.50% coupon requires interest rate risk protection and in order to minimize associated sponsor cost the lender structured the interest rate cap with a two year duration at closing plus an obligation to renew for the third year of the initial term. 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 + 3.50%
Term: Three years plus two 12-month extensions
Amortization: 36 months interest only
Max Loan to Cost: 80%
Prepayment: 18-month minimum interest period
Lender Fee: 1.00%