Rate: 5.74%, Fixed
Term: 10 years
Amortization: 3 Years Interest Only; 30 Year Amortization thereafter
Loan to Value: 85%
Prepayment: Defeasance
Lender Fee: None

Transaction Description:

GSP successfully placed $32,700,000 of non-recourse, ten-year, fixed-rate debt for the acquisition of 33 newly-constructed freestanding retail buildings 100% leased to Dollar General. The individual assets have 15-year lease terms and are located primarily in the Upper Midwest and Southern United States. GSP executed the financing concurrent with construction completion and sourced a lender who, due to Dollar General’s investment grade credit rating (S&P: BBB) and the geographic diversity of the assets, was able to achieve 85% leverage financing (including a mezzanine debt component) on the portfolio at a 5.74% blended fixed coupon plus three years of Interest Only payments on the ten year loan term, despite an absence of sales history and concurrent tenant lease terms expiring five years after loan maturity. This structure minimized the equity required to close the transaction and provides additional cash flow to the Sponsor during the first three years of the loan term. The loan structure also provides the Sponsor flexibility to release properties from the loan collateral in the event of sale after year three of the loan term, and allows the Sponsor to release up to 30% of the individual assets from the mortgage collateral and substitute like kind properties through year nine of the term.

Rate:5.8%
Term: 10 Years
Amortization: 25 Years
LTV: 75%
Guarantee: Non-recourse with Yield Maintenance
Lender Fee: None

Transaction Description:
George Smith Partners placed the first major four property/228 unit Multifamily portfolio financing in Odessa/Midland, Texas.  The non-recourse, fixed rate loan is priced at 5.8% fixed for 10 years at 75% LTV.

Challenge:
In 2013, Odessa was one of the fastest growing multifamily markets because of the oil/energy industry, even though it is one of the smaller MSAs in the country. In 2014 downward pressure on oil/natural gas caused a downturn in employment and real estate markets. Because of the market volatility only a limited number of lenders felt comfortable with the Odessa market. Before the rebound in 2018, apartment building values had fallen by over 20%.

Solution:
GSP highlighted market potential based on the rebound in housing and employment and was able to identify a capital provider who was comfortable with this tertiary market and its’ recent rebound. Because of GSP’s extensive market knowledge we were able to lock-in a rate of 5.80% fixed for 10 years. GSP did research in the oil market and the MSA of the subject property and was able to prove to the Lender the future stability of the properties’ cashflows.

Rate: 10.0%
Term: 12 months + 6 + 6
Amortization: 30 years
LTV: 65%
Prepayment Penalty: None
Lender Fee: 2.5%

Transaction Description:
George Smith Partners secured $7,650,000 in proceeds for the acquisition of a 12.66 acre parcel of undeveloped and unentitled land in a major city in the Western United States. The proceeds represent 65% of the appraised value of the land. The loan carries a 12 month term with two, 6 month extensions available. The loan is fixed at a rate of 10% annually and is prepayable at any time.

Challenges:
GSP surveyed the market and found that many lenders would only finance the acquisition at 50% LTV. Other lenders could meet the Sponsor’s desired leverage but quoted an interest rate in the low teens. Some capital providers were concerned about the Sponsor’s ability to secure a takeout construction loan next year, and would only finance the purchase if pre-leasing was in place. The Sponsor intended to sell a small portion of the land shortly after closing. The parcel is located in a market that is growing rapidly, but experienced a large downturn during the last recession. There is still a lot of undeveloped land in the immediate area.

Solutions:
GSP provided extensive comparable data that demonstrated the Sponsor’s acquisition price per acre was well supported by the market. Since national lenders were hesitant to provide sufficient leverage, GSP focused on local lenders that know the market well. Emphasis was placed on the enormous amount of new development currently underway in the same market as the subject, including a new big box retail store slated to open later this year. The Sponsor had already successfully developed a mixed-use project in the same submarket, demonstrating their ability to execute a complete business plan. The Lender provided a release provision that allows part of the parcel to be sold to a third party without the requirement of any additional pay down from the Sponsor. The third party appraisal supported a value higher than the purchase price, validating the Lender’s cost basis and resulting in them increasing the loan amount while we were under application.

Advisors

Matthew Kirisits Director