West Los Angeles SFR Acquisition and Construction/Reposition Financing

Transaction Description:

George Smith Partners sourced an acquisition loan for a newly constructed 10-unit multifamily property in Florida. The borrower closed on the vacant property just after Certificate of Occupancy was received. Although the loan went into application several months ago, the seller was delayed in obtaining the C of O. Despite fluctuations in the capital markets, the lender held the fixed rate of 10.25%. The loan has a 9-month term with one 3-month extension option. A small interest reserve was structured to cover the initial payments while the property leases up.

Transaction Description:

George Smith Partners successfully placed $14,050,000 in construction financing, which funded 89% of total project cost, for the acquisition and reposition of a 79-unit, mixed-use property in a desirable and historic St. Louis City neighborhood. GSP was engaged by the Borrower when its original lender, a national REIT, was forced to re-trade the Borrower on loan terms due to the COVID-19 pandemic. Upon being engaged, GSP was able to source the replacement debt and equity in time to close the transaction without a material delay. The financing structure included a senior loan to 81% loan-to-cost and a preferred equity investment with last-dollar exposure to 89% of total project cost with a 4.90% blended cost of capital. GSP leveraged its expertise of the St. Louis market, long-standing lender relationships, and capital markets creativity to achieve the Borrower’s goals of minimizing cash equity invested into the Project so that it can keep a substantial cash reserve to pursue additional projects which are expected to present themselves during the COVID-19 pandemic.

Transaction Description:
George Smith Partners secured $8,700,000 of non-recourse, bridge acquisition financing for a 45,000 square foot retail center located in Richardson, TX. The Center, which was built in 1985, has a diverse mix of regional tenants and sits on the corner of two of the main thoroughfares in the area.

Challenges:
The Sponsor purchased the Property with the intent to add value through two approaches: (1) increasing rents for tenants that are rolling and paying below-market rates, and (2) constructing an additional 12,000 square feet on undeveloped land within the parcel. There were complications with parcelizing the existing building and the land, which meant that a single lender needed to fund the entire project. The large renovation and construction budget also resulted in only 41% of the total loan being funded at closing.

Solution:
George Smith Partners identified a lender that could structure the financing to have two holdback reserves, one for the CapEx and TI/LC’s for the existing space and the other dedicated to funding the construction of the new building. The separate reserves allow the Sponsor to pursue both value-add opportunities simultaneously, which drastically reduces the project timeline and maximizes the Sponsor’s IRR. Our capital source was able to get comfortable with the construction component by requiring 75% of the space to be pre-leased prior to funding.

George Smith Partners placed the 77.5% loan-to-cost acquisition and construction financing for a speculative single family residence in West Los Angeles.  The loan was structured to include $471,000 for future funding, transforming the 1,100 square foot 3-bedroom/1-bathroom residence into a 2,500 square foot main house featuring 4-bedrooms/5-bathrooms and a 500 square foot detached guest house.  Fixed at 9.25% for 12 months, the loan offers two extension periods.