FINfacts™ XXIV – No. 142 | October 31, 2018

MARKET RATES
Prime Rate 5.25
1 Month LIBOR 2.30
6 Month LIBOR 2.80
5 Yr Swap 3.13
10 Yr Swap 3.21
5 Yr US Treasury 2.98
10 Yr US Treasury 3.15
30 Yr US Treasury 3.39

RECENT TRANSACTIONS
$23,000,000 Construction to Perm Financing at 74% LTC Fixed Rate, Lone Tree, CO

Rate: 5.25%
Term: 24-month construction period rolling into a 5-year permanent loan
Amortization: 36-month Interest Only then 25 years
LTC: 74%
Lender Fee: 1.0%

Transaction Description:

George Smith Partners secured $23,000,000 in proceeds for the ground up construction of an 80,000 square foot medical office property in Lone Tree, Colorado. The Property consists of a 4.8-acre site located directly across from a hospital campus (Sky Ridge Medical Center). The total project cost is a little over $31M and the loan represents 74% LTC. The Property is only 10% preleased, but it has drawn in a great deal of interest, from potential tenants. The Project is now under construction. This loan was high leverage on a spec deal; 5.25% fixed rate locked at application with 7-year term and non-recourse at stabilization.

Challenges and Solutions:

The first challenge was proving Sponsor’s rent proforma which was much higher than the comps which ranged between $21-24 NNN. With the help of the Appraiser and the Sponsor, GSP was able to get the Lender comfortable with the higher proforma. This was achieved due to the Property’s proximity to the Hospital. This location offers the tenants the ability to be close to the hospital without being subject to hospital use restrictions, approval and oversight. The second challenge was starting the Project prior to the rain and snow season. The Lender was able to fund 2 weeks earlier than originally planned enabling the start of construction.

Advisors

Antonio Hachem
Principal
Wendy Wang
Vice President

$9,200,000 Non-Recourse Predevelopment Land Loan in Los Angeles’s Beverly Grove Neighborhood; 14-Day Close

Rate: 6.90% Fixed
Term: 12 Months
Amortization: Interest Only
Loan to Value: 60%
Lender Fee: 1.00%
Prepayment: Open Full Term
Guarantee: Non-Recourse

Transaction Description:

GSP arranged the $9,200,000 non-recourse first mortgage from a REIT to refinance two separate maturing bridge loans on two non-contiguous, recently entitled land parcels totaling 24,725 square feet located along a major thoroughfare in Los Angeles. The loan repaid existing debt, covered 100% of closing costs, and repatriated equity to the borrower. The loan provides an additional 12 months of term while the borrower pre-leases the project and finalizes construction drawings. Although the loan is non-recourse, the lender did not require an appraisal or other third-party reports, nor did it require an interest or carry reserve although there is no in-place cash flow on either parcel. Sized to 60% of value, the loan priced at 6.90% fixed for the 12-month loan duration.

Advisors

Gary E. Mozer
Principal/Co-Founder
Katie H. Rodd
Senior Vice President
Michael Anderson-Mitterling
Senior Vice President
Kyle Howerton
Senior Vice President
Akash Rohera
Assistant Vice President

$6,100,000 Cash-Out Refinance at 4.375% Fixed for Seven Years

Rate: 4.375% Fixed for 7 years
Term: 7 Years
Amortization: 30 Years
Prepayment Penalty: 5,4,3,2,1%
LTV: 70%
Origination Fees: 0.50%

Transaction Description:

George Smith Partners secured $6,100,000 for the cash out refinance of a 25,378 square foot owner-user medical office building in Oxnard. Constructed in 1990, this building was recently modernized and is fully occupied. The Borrower was able to rate lock at application an interest rate of 4.375% fixed for seven years. The loan has a 30-year amortization and a 5,4,3,2,1% step down prepayment penalty.

Challenges:

The asset is a 51% owner-occupied medical office building that leased the remaining non-owner occupied suites to specialized medical professionals. The building is one of the premier office buildings in Oxnard and has a true medical tenant base. Given the niche nature of the asset and tenant base, it was difficult to find comparable properties in this sub-market. Further, the owner-occupied suites have rental rates that are slightly above market and were marked-to-market during the valuation process. The Borrower was seeking maximum leverage to recapitalize equity invested in capital improvements as well as pay off an existing SBA loan, thus the valuation of the asset was a critical component to the loan structure.

Solution:

GSP worked with a Capital Source that understood the strength of the asset and the Sponsor as well as the value of the owner-user component. The Lender saw the opportunity to expand the relationship beyond this one financing. Extensive upfront market data was required to fully understand and support the property valuation during the appraisal process due to the lack of comparable assets. GSP was also able to receive approval for a higher LTV than originally negotiated and secure a 2nd trust deed in order to deliver the total commitment amount that was determined in the LOI. Our Sponsor was able to benefit by receiving a very low 7YR fixed rate with the cash-out proceeds projected for their business plan with no leases required for the owner-user suites or any TI/LC Reserves.

Advisors

Shahin Yazdi
Principal/Managing Director
Jonathan Lee
Principal/Managing Director
Olga Alworth
Senior Vice President
David Stepanchak
Senior Vice President
Matthew Kirisits
Vice President
Samuel Sarshar
Assistant Vice President

SPEAKERS CORNER

Gary Tenzer, Principal/Co-Founder of GSP was a guest on the Trail Technology Litigation Support Podcast with Robb Helt of DeFacto Trialworks. Gary handles the litigation support practice for GSP; he has extensive experience as an expert witness having been retained in over 300 matters and over 100 cases, nationwide.

Click here to listen to the podcast.

Click here to read the transcript from the podcast.


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HOT MONEY
Mezzanine Financing for Affordable Housing

George Smith Partners identified a private commercial real estate finance company that provides non-recourse mezzanine financing for the acquisition, renovation and development of multifamily properties (with at least 20% of the units classified as affordable) located in the Western U.S. The financing is structured as a tax-exempt private activity housing bonds or 501(c)(3) bond. They can be used on mixed use 80/20 projects, for non-profit corporations, can be subordinate to HUD and Rural Development Loans and can be repaid from the sale of tax credits. With the ability to advance 90% of mezzanine loan programs range from $5,000,000 to $15,000,00. Interest-Only pricing for Acquisition / Rehab ranges from 8% – 10%, compounded monthly and Development ranges from 10% – 12%, compounded monthly.

More Hot Money ›

If you have an inquiry regarding George Smith Partners’ commercial real estate financing, please contact your GSP representative or Todd August, Chief Operating Officer (310) 867-2995 or TAugust@GSPartners.com


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