Rate: LIBOR + 6.75%
Term: 2 Years + 1 Year
Amortization: Interest Only
Prepayment Penalty: 18 months spread maintenance
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.
Senior Vice President
Assistant Vice President
$5,100,000 Non-Recourse Bridge to Reposition an Industrial Building to Creative Office for a Single, Non-Credit Tenant
June 21, 2017
George Smith Partners arranged $5,100,000 of non-recourse, bridge financing to complete the conversion of a 26,000 square foot, 100% vacant, 1920’s vintage, industrial building into creative office space in a major Southwestern city. The property is well-located near a central business district and is 100% preleased to a single, non-credit-rated tenant. Although not investment-grade, GSP was able to source a Capital Provider comfortable with the tenant’s financial history and business operations. The sponsor acquired the property with cash and proceeds will be used to complete the conversion, taking advantage of the growing creative office market.
70% Leverage Non-Recourse Refinance of a 65% Occupied Office Complex with Single Tenant Concentration and Rollover Risk at Loan Maturity
May 3, 2017
GSP arranged $16,510,000 in non-recourse first mortgage financing from a national debt fund on a 65% occupied Class A office complex in North San Diego County, California. A credit tenant with a 2022 lease expiration accounts for over 90% of current property income and the vacancy is mostly comprised of a single 26,000 square foot contiguous space.
GSP marketed the transaction by filtering out vacant spaces that were not competitive with the subject property and highlighted the lack of large customizable available spaces in the market which the subject property possessed. GSP sourced a lender familiar with the local office inventory and recognized the leasing potential of a large customizable floor plate in a market with increasing demand for corporate headquarter space.
In order to maximize Sponsor cash flow, the loan is structured as interest only with a three year initial term and two one-year extension options. To mitigate rollover risk at loan maturity, a cash flow sweep commences if the existing credit tenant does not exercise an early lease renewal by month 30 of the loan term. $14,750,000 in loan proceeds funded at closing with an additional $1,760,000 funding for lease-up related tenant improvements and leasing commissions to be disbursed prior to month 24 of the loan. Interest on the future funding is not charged until the earlier of disbursement of proceeds or month 24 of the loan. The first mortgage debt priced over one-month LIBOR and required a LIBOR cap with a 3.00% strike price for the initial term.
Term: Three years plus two 12-month extensions
Amortization: Interest Only (initial term and extensions)
Max Loan to Value: 70% Initial, 65% stabilized
Prepayment: 15 months spread maintenance, open thereafter
Lender Fee: 1.00%
April 26, 2017
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.
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.
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.
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.