George Smith Partners successfully arranged $32.4 million in financing for the ground-up development of a 250-room, 35-acre, casitas-style resort IHG Hotel Indigo in Coachella. The financing included both a $24.4 million senior construction loan and an $8.0 million PACE funding for the hotel. This hotel will be the closest hotel to the Empire Polo Club – the site of many famous music festivals held annually. The property includes a 13,000-sf convention center, 10,000 square-foot salt water pool with a summer cooling system and a DJ booth/cat walk, an 11-acre ‘playground’ to host music related events, wellness retreats and corporate/private events. The 250 guestrooms, which has private entrances and in-suite bathrooms, are located in spacious 2, 4 and 6 bedroom casitas with living rooms and social areas for entertaining options. The hotel also provides a restaurant, spa, gym and yoga/pilates studio.

In today’s lending environment, hotel construction is a challenge to finance, but with GSP’s deep relationships, they were able to find a lender who was excited about the concept. Also, this is the first-ever PACE-financed new construction hotel project in California. The PACE equity, essentially an energy loan, finances the energy-efficient HVAC, which gives the Sponsor the ability to finance the high-end, environmentally friendly resort hotel they envision. The City of Coachella has also enthusiastically supported the project by providing a $25 million tax abatement and approving Mello Roos bond financing for the infrastructure.

By communicating the Sponsor’s proven track record of developing and operating hotels, as well as their strong connections to A-list performers and music labels available for future concert performances, GSP was successful in proving the Sponsor’s unique ability to make this resort a ‘go to’ destination during the area’s many music festivals.

ALL TERMS CONFIDENTIAL

Advisors

Steve Bram Managing Director & Principal / GSP Co-Founder

David R. Pascale, Jr. Senior Vice President

Rate: 5.44% Fixed

Term: 10 Years

Amortization: 1 Year IO; 30 Years Thereafter

Prepayment: Step-down from 10%

Origination Fee: Par

Recourse: Carve-Outs

Transaction Description:

George Smith Partners placed non-recourse financing to take-out an existing construction loan on a 59,375 square foot multi-tenant flex industrial building located in an Austin suburb.  In addition to paying off the recourse construction loan, the Sponsor received a notable return of equity.  Located adjacent to a residential housing PUD, the commercial real estate is subject to the Homeowners Association’s CC&Rs.  Fixed at 5.44% for ten years, prepayment steps-down from 10%.  Amortization commences after the first year of interest only and is spread over 30 years.

Challenges:

During due diligence, it was determined the CC&Rs were not securitizable without a material modification precluding the HOA from inhibiting specific tenant uses on the subject property.  Our bank ordered MAI appraisal value was below expectations.  One tenant representing 12% of the net rentable went into monetary default and vacated the premises but did not turn the space back to management.

Solutions:

GSP identified a portfolio lender who became comfortable with the use subject to receiving an estoppel from the HOA.  Although the potential remains for future changes/impediments from the HOA board, the lender obtained a high level of comfort that the current uses were grandfathered in and the HOA would not play an active role in their neighbor’s operations.  The Sponsor, Lender and GSP provided additional sale comparables to support a higher value.  The lender agreed to raise their LTV constraint by 3 percentage points to maintain proceeds.  A tenant Improvement & lease commission reserve was funded at close to be reallocated for releasing the dark space.

Advisors

Matthew Kirisits Director

Rate: 4.48% rate

LTV: 65%

Term: 5 year fixed; 20 year term

Amortization: 3 years of IO; 30 year amortization thereafter

Prepayment Penalty: 5-4-3-2-1 Prepay

Guarantee: Non-recourse

George Smith Partners arranged the cash-out refinance of a 3-property, 28-unit multifamily portfolio in South Los Angeles and Inglewood, California.  The Sponsor had purchased all three workforce housing properties in the past five years and had existing debt on each property that was not maturing.  The impetus for the refinance was to secure long term fixed rate financing to hedge against rising interest rates.  Maximum proceeds and maximum interest only were requirements.  The location of the properties, which are in growth corridors but have yet to gentrify, posed challenges for many lenders and the quotes were scarce.

GSP leveraged its strong relationships to identify a lender willing to quote the deal with maximum proceeds.  Initially, the Lender was only comfortable with one year of interest only.  However, GSP was ultimately able to secure 3 years of interest only for the entire portfolio by emphasizing the Sponsor’s strong track record and large operating portfolio.  Interest rates rose about 50 basis points in the 70 day period from application to closing, but the lender was willing to hold the application rate. Fixed for 5 years at 4.48%, the non-recourse loan is sized to 65% LTV and carries a flexible, step-down prepayment structure.

Advisors

Evan Kinne Managing Director, GSP; CEO, AXCS Capital