Equity Terms: Details shall remain confidential.
Debt Terms: Details shall remain confidential.

George Smith Partners negotiated and arranged $40,000,000 in JV Equity Financing and facilitated an additional $82,000,000 in Non-Recourse Bridge Financing for the repositioning and conversion of two adjacent historic buildings in Downtown Los Angeles into Class-A Creative Office spaces. At the time of closing, there was little to no pre-leasing of the 250,000 square feet of future office space. The century-old buildings will undergo a metamorphosis highlighting aspects of the original construction while simultaneously infusing modern design elements. The properties are strategically located at the border of the Fashion District and the Historic Core. Both areas are experiencing a remarkable transformation with considerable real-estate investment across asset classes.

George Smith Partners is uniquely positioned to advise on transactions of this nature; transactions requiring a consistent advisory team providing an “Outsourced-CFO Desk”. One of the two buildings was already well into the rehabilitation process, thus requiring an equity recapitalization of existing partners, adding further complexity to the transaction. The George Smith Partners team worked hand in hand with the Sponsor and JV Equity Partner to negotiate and structure a JV Equity Financing agreement providing mutually favorable terms while capitalizing an aggressive business plan.

Advisors

Evan Kinne Managing Director, GSP; CEO, AXCS Capital

Rate: 7.50% at closing (1 Month LIBOR + 6.2644%)
Term: 18 Months
Amortization: Interest Only
LTC: 70% of lender approved costs
Guarantee: Completion Guaranty; Repayment Guaranty capped at $5,000,000
Lender Fee: 1.5% at closing and 0.75% at payoff

GSP successfully placed $15,150,000 in first mortgage financing for the construction of a shovel-ready luxury single-family residence in Beverly Hills. The loan funds up to 70% of lender-approved costs and the interest rate floats at 1-Month LIBOR plus 6.2644% (7.50% at closing). The 18-month initial term has two three-month extension options with a 0.375% fee payable per extension, with Interest Only payments during the life of the loan. Lender made one third of the 2.25% loan origination fee due at payoff in order to increase upfront Sponsor funds and offered the potential for Sponsor to take on mezzanine debt at closing subject to minimum equity hurdles. The Canadian Sponsor provided a completion guarantee and a repayment guarantee capped at $5,000,000.

Advisors

Nick Rogers Vice President

Rate: 6.5% to 5.5% at Stabilization
LTC: 80%
Term: 2 Years Construction 5 years Mini Perm
Amortization: Interest Only during Construction, 30 year amortization thereafter
Guarantee: Recourse
Prepayment Penalty: None

Transaction Description:

George Smith Partners successfully arranged the $4,000,000 construction financing for a senior home care facility in Northern California. The complex will function as an assisted living facility and is comprised of four contiguous houses accommodating six patients each. California Law states that any care facilities accommodating six patients or less do not require a license to operate. By building four contiguous smaller facilities, the sponsors will realize a greater upside, while still abiding by California regulations. Fixed for two years at 6.5%, the 80% of cost interest only loan will convert to a 5-year mini-perm with a fixed rate of 5.5% and a 30-year amortization. There is no prepayment penalty.

Challenges:

To obtain the required leverage to complete the project, it was critical to demonstrate the stabilized value of the property as a commercial care facility rather than as four single family residences. The Sponsors decided to build smaller contiguous care facilities because the California law does not require a license for operations. While this regulation substantially accelerated and simplified the predevelopment process, it also made financing the project significantly more difficult. Conventional lenders could not become comfortable with this subset class of an operationally dependent and niche asset. Because of the complex asset type, the Sponsors requested a mini-perm structure where they had a guaranteed takeout of the construction loan.

Solution:

GSP identified a capital source to underwrite the project’s stabilized value as a commercial care facility rather than as four single family residences. In order to provide additional comfort to the Borrower, GSP structured the term to have an automatic mini-perm feature upon stabilization. The tremendous upside in the project, with no prepayment penalty ensured the Sponsors the ability to capture the upside and maintain flexibility.