George Smith Partners successfully closed a construction take-out and bridge refinance for a 131-key luxury/lifestyle hotel located in the heart of the trendy Mid-Market neighborhood of San Francisco. The proceeds were used to refinance costlier construction financing, including a large mezzanine facility. The loan featured an interest reserve, T&I reserve, and a working capital reserve. Additionally, the existing capital stack included Historical and New Market Tax Credits, and EB-5 Capital – adding to the overall complexity of the Transaction.

GSP’s mandate was to source a lender who not only had the existing wherewithal to understand the complex existing capital stack, but also one who would recognize the value in the unique and strategic positioning of the Hotel. From non-traditional lodging options, to significant Food and Beverage offerings, the Hotel stands out from the traditional hotel offering by spanning over multiple lodging markets: luxury and lifestyle. The seasoned Sponsorship group has a proven track record of developing and operating hotels of similar caliber.

The selected lender was able to recognize the unique positioning of the property’s offering and the strong sponsorship involved in the project.

All Terms Confidential

Advisors

Evan Kinne Managing Director, GSP; CEO, AXCS Capital

Rate: One-Month LIBOR + 7.25%
Term: Two years plus one, one-year extension option
Amortization: Interest only
Loan to As-Is Value: 75%
Prepayment: 12-month yield maintenance

GSP arranged the $21,025,000 ($175/Land SF), non-recourse first mortgage from a debt fund for the acquisition of an infill 2.76-acre land parcel located adjacent to a major Southern California university. The acquisition loan will be taken out with a construction loan upon receipt of entitlements for a large-scale student housing redevelopment. GSP worked with borrower and lender to tailor a unique loan structure that provides financing during the entitlement period via an interest and carry reserve. The lender was able to provide a high-leverage loan on an unentitled parcel that provides no cash flow due to the project’s streamlined “by right” entitlement process, experienced sponsorship, and strong market fundamentals. Sized to 75% of as-is value, the acquisition loan priced at 7.25% over One-Month LIBOR for the 24-month loan duration.

Advisors

Nick Rogers Vice President

Rate: 7.90%
Term: One Year Term With (2) – One Year Options
Amortization: Interest Only
LTC: 85% Loan to Cost / 70% Loan to Value
Guarantee: Non-Recourse

Transaction Description:
George Smith Partners secured a $9,200,000 private money bridge loan to enable the renovation and re-tenanting of an unanchored retail shopping center in Orange County, California. The loan included $850,000 for future tenant improvements, renovations, and leasing commissions. The non-recourse interest only loan closed in 5 days.

Challenges:
The renovation of the shopping center had experienced significant construction cost overruns and needed another $850,000 for completion. Several tenants were in the process of significantly upgrading their spaces and had unfinished renovations in place. The sponsors also needed to close the loan within a 2-week time frame.

Solution:
GSP used its experience and relationships to identify a lender who could understand the greater value of the project and was able to demonstrate both the inherent value of the property due to its extraordinary location as well as the future value of the project as completed. As a result, the lender became comfortable with the loan’s basis per square foot and closed the loan in 5 days.