Financings

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    Multifamily

    December 5, 2018

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    Construction Loans California | $3,820,000 Single-Tenant Construction Financing at LIBOR plus 5.00%; 95% LTC

    November 21, 2018

    Transaction Description:
    George Smith Partners arranged a $3,820,000, 95% LTC construction of an 11,500 square foot NNN DaVita Dialysis center in a tertiary market of California. The Borrower entity was a joint venture between a developer and the land owner.

    Challenges:
    The Property is located in a tertiary market and also in a predominately residential neighborhood. The Sponsor was unable to contribute cash equity to the Project. Many lenders require 15% of the as-complete value to be in the form of cash equity. Lastly, while the tenant is somewhat well known in the capital markets, the Property is rated as sub-investment grade.

    Solution:
    George Smith Partners identified a lender who recognized the strength of the tenant and the lease terms relative to the market. The Lender accepted the as-is value of the land which, after the entitlements were achieved, was significantly more than the limited partner’s cost. The Lender proceeded with the loan without any Sponsor cash equity in the deal, reimbursed the Developer for out of pocket costs to date and gave them additional proceeds as a result of excess value in the land. Because the Lender allowed the land to be contributed at as-is value, the loan amount resulted in a loan to cost ratio of 88%. Given the original cost of the land by the Limited Partner, the actual loan-to-cost ratio was closer to 95%.

    Rate: 1 month LIBOR + 500
    Term: 15 Months + three 3 month extensions
    Amortization: Interest Only
    Loan to Cost: 88% LTC
    Lender Fee: 1.25%
    Prepayment Penalty: None
    Guarantee: Recourse

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    $4,200,000 Acquisition and Reposition Financing Including $1.4MM of Future-Funding on a Multifamily Property in Long Beach, California

    November 21, 2018

    Transaction Description:

    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
    Guarantee: Non-recourse
    Lender Fee: 1.00%

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    Cash Out Apartment Refinance for Foreign Investors

    November 14, 2018

    Transaction Description:
    George Smith Partners arranged a cash out permanent refinance of an apartment building in Burbank, California. The Sponsors moved abroad and had a difficult time getting their lender of 28 years to refinance their investment property. GSP worked diligently to find the Sponsors a new lender who was comfortable with having Sponsors living overseas.

    Challenge:
    Most lenders were not able to finance this transaction due to the fact that they didn’t have a warm body in the States. The Sponsors also had low credit scores with recent late payments on their credit report as well, which deterred numerous lenders. The Sponsors also had no liquidity in the States and most lenders like to see around 10% of liquidity to loan amount.

    Solution:
    George Smith Partners worked with a lender to get them comfortable working with foreign investors and pre-arranged the signing of loan documents with the U.S Embassy. GSP explained in great detail why the Sponsor’s credit scores were low, and why there were recent late payments on the Sponsor’s credit report. GSP demonstrated a plan to both the Lender and the Sponsors where everyone felt comfortable and closed the loan in 34 days.

    Rate: 5.25%
    Term: 5 Years Fixed, 30 Year Term
    Amortization: 30 Years
    Recourse: Full Recourse
    Prepayment Penalty: 5,4,3,2,1
    Lender Fee: None: 5.25%

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    $8,700,000 Non-Recourse Predevelopment Land Loan in Los Angeles’s Hollywood Neighborhood; 14-Day Close

    November 14, 2018

    Transaction Description:

    GSP arranged the $8,700,000 non-recourse first mortgage from a REIT to refinance a maturing bridge loan on a recently entitled retail site located along a major thoroughfare in Los Angeles. The loan provides an additional 12 months of term while the Borrower evaluates whether to re-entitle the site for a mixed-use project, or move forward with in-place entitlements. Although the loan is non-recourse, the Lender did not require an appraisal or other third-party reports, nor did it require an interest or carry reserve despite insufficient cash flow to cover debt service. Sized to 60% of value, the loan priced at 6.90% fixed for the 12-month loan duration.

    Rate: 6.90% Fixed
    Term: 12 Months
    Amortization: Interest Only
    Loan to Value: 60%
    Lender Fee: 1.00%
    Prepayment: Open Full Term
    Guarantee: Non-Recourse

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    $2,795,000 Bridge Financing for a 48% Occupied, Un-Anchored, Strip-Retail Center in Norwalk, CA

    November 7, 2018

    Transaction Description:

    George Smith Partners arranged a $2,795,000 ($267/Building SF) bridge loan to finance the acquisition and re-positioning of a 48% occupied, 10,480 sf strip retail center in Norwalk, CA. The proceeds will be used to acquire the asset and to sub-divide and re-tenant a 6,500 sf, vacant, former automotive space.

    Challenges:

    The Existing Tenant is paying a rental rate that the capital markets perceived to be at market but below the sponsor’s pro-forma rental rates for the vacant spaces. Furthermore, the Appraiser also concluded a market rate at the lower end of the spectrum. This resulted in a lower appraised value and stabilized cash-flow. The Sponsor had a signed LOI at their pro-forma rental rate in hand, but would not be converted into a signed lease until near the escrow closing date.

    Solution:

    George Smith Partners was able to identify operating expenses in the appraisal that could be adjusted down resulting in a higher net operating income and value. GSP was also able to convince the Lender to raise their LTC constraint given the Sponsorship’s track record of successful retail projects. The final result was a loan amount reflective of the Lender’s term sheet.

    Rate: Prime + 0.50%
    Term: 3 Years
    Amortization: Interest Only
    Loan to Value: 68.7% LTC
    Lender Fee: 0.50%
    Prepayment: None
    Guarantee: One fund-level guarantee and two individual guarantees.

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    $6,100,000 Cash-Out Refinance at 4.375% Fixed for Seven Years

    October 31, 2018

    Transaction Description:

    George Smith Partners secured $6,100,000 for the cash out refinance of a 25,378 square foot owner-user medical office building in Oxnard. Constructed in 1990, this building was recently modernized and is fully occupied. The Borrower was able to rate lock at application an interest rate of 4.375% fixed for seven years. The loan has a 30-year amortization and a 5,4,3,2,1% step down prepayment penalty.

    Challenges:

    The asset is a 51% owner-occupied medical office building that leased the remaining non-owner occupied suites to specialized medical professionals. The building is one of the premier office buildings in Oxnard and has a true medical tenant base. Given the niche nature of the asset and tenant base, it was difficult to find comparable properties in this sub-market. Further, the owner-occupied suites have rental rates that are slightly above market and were marked-to-market during the valuation process. The Borrower was seeking maximum leverage to recapitalize equity invested in capital improvements as well as pay off an existing SBA loan, thus the valuation of the asset was a critical component to the loan structure.

    Solution:

    GSP worked with a Capital Source that understood the strength of the asset and the Sponsor as well as the value of the owner-user component. The Lender saw the opportunity to expand the relationship beyond this one financing. Extensive upfront market data was required to fully understand and support the property valuation during the appraisal process due to the lack of comparable assets. GSP was also able to receive approval for a higher LTV than originally negotiated and secure a 2nd trust deed in order to deliver the total commitment amount that was determined in the LOI. Our Sponsor was able to benefit by receiving a very low 7YR fixed rate with the cash-out proceeds projected for their business plan with no leases required for the owner-user suites or any TI/LC Reserves.

    Rate: 4.375% Fixed for 7 years
    Term: 7 Years
    Amortization: 30 Years
    Prepayment Penalty: 5,4,3,2,1%
    LTV: 70%
    Origination Fees: 0.50%

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    $7,125,000 Cash Out 50-Unit Multifamily Refinance Sized to 1.15 DCR on an Actual Mortgage Constant

    October 31, 2018

    Transaction Description:

    George Smith Partners secured $7,125,000 in proceeds for the refinance of a 50-unit multifamily property located in Los Angeles. Fixed at 4.515% for a period of 5 years, the loan self-liquidates at 6 month LIBOR plus 2.25% for the remaining 25 year term; there is no balloon date. Two years of Interest Only payments precede loan amortization. Sized to a 1.15 Debt Coverage Ratio, proceeds were coverage constrained. Prepayment steps down from 3% with no penalty after the third year.

    Although the Building was previously retrofitted, several capital providers required a new PML earthquake risk assessment study due to the masonry construction. As cap rates continue their compression, cash flows are often the limiting constraint for sizing loan proceeds. Industry standard DCR constraints are limited to 1.20x or 1.25x and often use an inflated rate over the actual indexed note rate.

    The selected lender did not require any additional structural reports. Our underwriter allocated credit to our Sponsor for their success in fulfilling their business plan over the past two years; the balance sheet basis was not an underwriting factor. Net cash flow included the Property’s higher rental income as well as previously unreported RUBs income, parking income, and laundry revenue. A quoted competitive spread of 160 basis points over the 5 year swap rate demonstrated the Capital Provider’s belief in this location and sponsorship. Our 1.15 DCR constraint resulted in proceeds above the rest of the market.

    Rate: Fixed for 5 years @ 4.515%; floating @ 6 Month LIBOR+2.25%
    Term: 30 years
    Amortization: 30 years after 2 Years of Interest Only Payments
    Prepayment Penalty: 3,2,½
    LTV: 65%
    DCR: 1.15x

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    $9,200,000 Non-Recourse Predevelopment Land Loan in Los Angeles’s Beverly Grove Neighborhood; 14-Day Close

    October 31, 2018

    Transaction Description:

    GSP arranged the $9,200,000 non-recourse first mortgage from a REIT to refinance two separate maturing bridge loans on two non-contiguous, recently entitled land parcels totaling 24,725 square feet located along a major thoroughfare in Los Angeles. The loan repaid existing debt, covered 100% of closing costs, and repatriated equity to the borrower. The loan provides an additional 12 months of term while the borrower pre-leases the project and finalizes construction drawings. Although the loan is non-recourse, the lender did not require an appraisal or other third-party reports, nor did it require an interest or carry reserve although there is no in-place cash flow on either parcel. Sized to 60% of value, the loan priced at 6.90% fixed for the 12-month loan duration.

    Rate: 6.90% Fixed
    Term: 12 Months
    Amortization: Interest Only
    Loan to Value: 60%
    Lender Fee: 1.00%
    Prepayment: Open Full Term
    Guarantee: Non-Recourse

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    $4,250,000 Refinance of Multi-Tenant Shadow Anchored Retail Center

    October 24, 2018

    Transaction Description:

    George Smith Partners successfully arranged a $4,250,000 mini perm to refinance an existing bridge loan collateralized by a 2007 constructed, 25,000 square foot shadow anchored shopping center located in the Inland Empire. The prior loan, also sourced by GSP, enabled the Sponsor to restructure the ownership entity plus take advantage of a discounted payoff dating back to the last recession. The most significant challenge was attributed to rising interest rates that ultimately governed the final loan sizing. After evaluating the firm’s extensive lending relationships, GSP sourced a community lender who became comfortable with this location and tenant mix as well as the Sponsor’s financial strength, track record, and personal guarantee. The new loan has a flexible prepayment structure that is open to repayment at any time.

    Rate: Confidential
    Term: Five years
    LTV: 70%
    DSCR: 1.20x (global)
    Guarantee: Recourse
    Lender Fee: 0.50%

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    $10,100,000 Acquisition Bridge Financing for 90 Condo Unit Assemblage

    October 17, 2018

    Transaction Description:

    George Smith Partners secured bridge financing for the acquisition and renovation of 90 condominium units to be operated as a multifamily rental property. Our Sponsor was involved with the initial assemblage of the units. The collateral is part of a 105-unit development that was built in the 1960’s in the Phoenix metro market. The 90 units are contiguous, almost all are 2 bedroom, one story casitas style units with 2 units per building. All units have exterior access in a well landscaped setting. The Sponsor was able to purchase the units for a below-market per unit value and is planning a major renovation for both the exterior of the Property and interior of the units. There is some deferred maintenance, including roofing and HVAC, that will be addressed during the rehab. The Lender structured the loan to provide 75% financing for the acquisition and included a significant holdback for the repairs. A major challenge to the financing was a lack of operating history. The units were being operated by several owners, some owning as little as 1 or 2 units. GSP and the Sponsor created a pro-forma operating budget that the Lender was able to accept due to the Sponsor’s extensive experience in the market. The total debt is sized to 75% loan-to-cost and has an interest rate that floats at 1-month LIBOR + 3.90% for the 2-year term.

    Rate: 1-Month LIBOR + 3.90%
    Term: 2 Years with an additional 12-month extension
    Amortization: Interest Only throughout the term of the loan
    Prepayment: Yield Maintenance for 9 months, open thereafter
    Fees: 1.0% Origination, 0.5% Exit
    Guarantee: Non-Recourse

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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%