Rate: 6.50%
Term: Five Years
Amortization: 24-months interest only, 40-year amortization thereafter
Loan to Value: 80%
Prepayment: 2%, 1%, open
Guarantee: Partial Recourse (burns off once Property achieves debt coverage hurdles)
Lender Fee: 1.00%

GSP arranged the $9,096,000, 80% loan to value first mortgage on a 1920’s vintage multifamily asset in Downtown Los Angeles. The Property was previously burdened by unforeseen operational challenges which prevented the Sponsor from maximizing Property cash flow and limited eligibility for competitive financing terms. GSP identified a regional balance sheet lender to provide a five-year loan that includes funding for capital expenditures to complete the Sponsor’s renovation plan. The loan has a fixed coupon to eliminate interest rate risk during the term and includes two years of Interest Only payments to maximize cash flow during the renovation. The loan includes an interest reserve to cover debt service during the peak reposition period, and the recourse obligation burns off upon the Property’s achievement of predetermined debt service coverage hurdles.

Advisors

Nick Rogers Vice President

Rate: 4.55% fixed for 7 YRS, then 2.25% over 6-mo LIBOR
Term: 30 years
Amortization: 30 Years
Prepayment Penalty: 5,5,4,4,3,2,1
LTV: 65%
DCR: 1.15
Guarantee: Non-Recourse

Transaction Description:
George Smith Partners secured $7,000,000 for the cash out refinance of three stabilized multifamily buildings in West Hollywood containing a total of 53 units. Constructed in the late 1930s and late 1940s these buildings are situated on one of the most sought after streets in West Hollywood and in close proximity to popular restaurants, bars and entertainment. Fixed at 4.55% for seven years, the non-recourse loan floats at 6 month LIBOR + 2.25% for the remaining 23-year term. The non-recourse loans are fully amortizing and have a 5,4,3,2,1 step down prepayment penalty.

Challenges:
Many of the buildings have long term residents who have lived at the properties for over a decade. The long term residency leaves the owner with dozens of units with uncaptured market rents, ultimately affecting the amount of loan proceeds.

Solution:
GSP worked with a lender who understood the strength of these assets and was able to underwrite to a 1.15x DCR at the actual note rate. Our Capital Provider was comfortable with the future upside of the properties as the Sponsor has plans to raise units to market rent as tenants vacate.

Advisors

Matthew Kirisits Director

Rate: Prime plus ½
Term: 5 Years
Amortization: Interest only for the first six months than fully amortized
Recourse: Full Recourse
Prepayment Penalty: None

George Smith Partners arranged bridge financing for the acquisition of an 8-unit multifamily property in Mar Vista, California. The Property was operating at below-market rents and the Sponsor’s business plan included increasing rents to market rates, renovating the Property’s exterior and interior build, and a complete rehab to a detached home in the back of the Property. At time of loan application, the Subject Property was operating at a 75% occupancy rate, but by the time the appraiser went out to inspect the building the occupancy level dropped to 62% with no notice given. GSP worked closely with the Lender and the Appraiser to get them confident with the Sponsor’s ability to rehab the vacant units quickly and lease them up within the first 6 months of the loan.