Non-Recourse $73,000,000 Bridge Loan above 80% of Cost for Creative Office Building in Seattle

Rate: LIBOR + 6.75%
LTC: 80%+
Term: 2 Years + 1 Year
Amortization: Interest Only
Prepayment Penalty: 18 months spread maintenance

Transaction Description:
George Smith Partners successfully arranged $73,000,000 in non-recourse, bridge financing for the conversion, renovation, and stabilization of the Seattle Design Center. The design center, comprised of two buildings in the Georgetown submarket of Seattle, Washington, historically served as a well-known destination for high-end home furnishings and design services. After acquiring the property in 2014, the Sponsor renovated the first 157,000 square-foot building. Upon completion, the Sponsor continued to operate the asset as the Seattle Design Center and consolidated the showroom/design tenants from the second building into the newly renovated building. Once the second building was vacated, the Sponsor began repositioning the 280,000 square-foot building from showroom space into creative office space. Upon completion, the building will have expansive 60,000 square-foot floorplates, exposed ceilings and concrete floors, glass walls for natural light, unobstructed views of downtown Seattle and Mt. Rainier, and full-service amenities, including an upscale fitness center and conference center. Pre-leased to 45% occupancy, Sponsor needed additional proceeds to complete the project. GSP identified a Lender who recognized the value of the project, supported by low supply and increasing market demand for creative office from tenants in the technology sector. Sized to 80%+ of total project costs, the $73,000,000 non-recourse loan was priced at LIBOR + 6.75% for a 24-month term with one, 12-month extension option. $49,000,000 of total proceeds was funded at closing with an additional $24,000,000 future funding allocated toward completion of the renovation, construction, tenant improvements and leasing commissions.


Related Financings

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    $5,500,000 Acquisition Bridge Loan for a 70% occupied Los Angeles Office

    April 26, 2017

    Transaction Description:
    George Smith Partners arranged $5,500,000 in acquisition proceeds on a 15,122 square foot Los Angeles office building. Floating at Prime + 0.5%, the 3 year loan is interest only for 18 months before amortizing over 25 years for the balance of the term. Sized to 65% of the purchase price, there is no prepayment penalty for this loan.

    Despite the prime location, the subject had somewhat aged interiors and exteriors and was just 70% occupied when our Sponsor executed the purchase contract.  The income was below break-even debt coverage on the proposed loan. Most of the in-place tenants were paying well below market rent. One tenant was under a month to month lease and several others were facing lease roll in the next six months. On-site property management was charging an above market rate. Actual historical cash flow was well below potential.

    GSP researched comparable rent and competitive operating data that proved out our Sponsor’s pro forma rents and business plan. Our Sponsor’s considerable success adding value to similar office properties over the past several years supported the business plan for the loan request. An aggressive lease campaign was initiated during due diligence, securing letters of intent from multiple tenants that would bring occupancy to 95%. A small debt service reserve was structured until the tenants took occupancy to cover all operating loss and mortgage expenses in the short interim.

    Term: 3 years
    Rate: Prime + 0.5%
    Amortization: 18 months IO; 25 years thereafter
    Prepayment Penalty: None
    LTC: 65% maximum
    Origination Fees: 0.5%

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    $34,400,000 Non-Recourse Mixed-Use Retail and Office Refinance of a Leasehold Interest

    January 4, 2017

    George Smith Partners successfully placed the $34,400,000 non-recourse bridge loan, sized to 92% of total cost, for a 238,000 square foot retail shopping center and 67,000 square foot Southern California office building. This 1960s vintage property is well-located and sits on a 17 acre parcel with a traffic count of over 60,000 vehicles per day. Proceeds will be used to satisfy the existing term loan and a majority of the $17,400,000 in planned renovations, tenant improvements, leasing commissions, and other capital expenditures. Retail occupancy includes four value oriented chains, several local retailers, a future grocer and a national fitness/gym chain. The office building will be renovated to feature street level retail pre-leased to regional and national restaurant chains including Chipotle, Five Guys Burgers, and Ono Hawaiian BBQ. Office occupancy of the upper three floors will include a mixture of full floor tenants and local businesses. Several of the office tenants are currently leased month to month, but is supported by a strong occupancy history. Subject to several ground-leases executed in the 1950’s, all leases were recently restated and extended. Floating at 545 over 30 day LIBOR, the non-recourse loan provides for carve-outs executed at the entity level only with no warm body guarantor. The three-year term has one 12 month extension with interest paid current monthly; there is no interest reserve or amortization.

    Rate: LIBOR+5.45%
    Term: 3 Years + One-Year extension
    Amortization: Interest Only
    LTC: 92%
    Prepayment Penalty: 18 Month Minimum Interest
    Recourse: Non-Recourse; Carve-Outs to Entities
    Lender Fee: 1.00%

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    Four Day Acquisition for Vacant Office to 60% of Purchase

    June 29, 2016

    Transaction Description: George Smith Partners secured an acquisition bridge loan for a vacant office building in Long Beach, California. Application to funding occurred in four business days. Our Sponsor’s business plan is to convert the vacant office building into a 6-unit multifamily rental. Permits to convert were expected to be in hand by the expiration of the escrow period but had not yet been secured, precluding the institutional lender from funding the acquisition. A quick-close loan was structured to close on the purchase and refinance once permits are issued. Fixed at 8.60% for 6 months, the loan was sized to 60% to acquisition price and was funded within four business days on the escrow’s due date. There is no prepayment penalty.

    Rate: 8.60%
    Term: Six Months
    Amortization: Interest Only
    Lender Fee: 1%

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    $20,690,000 Non-Recourse Reposition for Vacant Hollywood Creative Office

    May 31, 2016

    Transaction Description: George Smith Partners secured a $20,690,000 non-recourse bridge loan for the reposition and lease-up of superbly located, 58,894 square foot vacant office building in Hollywood, California. The renovation plan calls for extensive interior and exterior work to reposition this iconic asset from a traditional office use to Class-A creative space. Our sponsor is an experienced developer and required a capital partner who was able to provide flexible funding post close for this 100% vacant asset. GSP identified a national bridge lender with a local presence that underwrote the strong sub-market and Sponsor strength to become comfortable with the physical reposition and lease-up risk. Floating a LIBOR+465, the three year non-recourse loan was sized to 65% of total capitalization inclusive of capital upgrades and tenant improvements.

    Rate: LIBOR + 4.65%
    Term: 36 Months
    Amortization: Interest Only
    LTC: 65%
    Lender Fee: 1%

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    $30,000,000 Mixed Use Office & Multifamily Pre-Development Bridge Financing

    April 20, 2016

    Transaction Description: George Smith Partners secured $30,000,000 for the recapitalization of a vacant 68k square foot office building and pre-development site entitled for future multifamily development. The two-year loan term allows for staged funding to cover tenant improvements, capex, and construction of a new parking garage. A release for the multifamily parcel was structured to allow for future construction debt. Priced at Prime plus 25 basis points, there is no interest rate floor.

    Rate: Prime+ 0.25%
    Term: Two Years + One Year Option
    LTC: 42%

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    $25,328,000 Bridge Acquisition Financing for Vacant Denver Office to 65% of Cost

    August 20, 2015

    Transaction Description: George Smith Partners arranged the acquisition financing for a brand new 78,000 square foot office building in the Platte River sub-market of Downtown Denver. The Sponsor had an executed lease for 65% of the building at closing, with an option to take the remainder of the space. Sized to 65% of total cost, the capitalization consists of a $25,700,000 purchase price and $10,300,000 TI/LCs including carry cost. Floating at LIBOR + 475, the non-recourse loan carries a 3 year term before options.

    Challenge: Per the purchase contract, the newly constructed office building would be delivered as a warm shell, with an extensive TI build-out ($130/SF) still to be completed. With 14 months of no cash-flow and the TI build-out to be completed for a startup tenant, the financial market struggled to underwrite the business plan.

    Solution: GSP documented the tenants’ impressive capitalization and national expansion plan. The Denver Office Market is prime for this tenants’ business model and the sub-market strength added to our underwriters’ comfort level.

    Rate: LIBOR + 475
    Term: 3 Years + Two – 12 Month Exts
    Amort: Interest Only
    LTC: 65%