Rate: 9%
Term: 18 months with 2 extensions
Loan to Cost: 75%
Prepayment Penalty: none
Recourse: Yes
Loan Fee: 2.5%

George Smith Partners successfully arranged a $20,000,000 construction loan for a luxury condominium project in Beverly Hills. Since the borrower had owned the land for over two decades, most of the equity in the transaction was from imputed land value.  As a result, banks were not able to get to the requested loan amount as it did not meet HVCRE requirement which requires 15% or more cash equity in the project.  Banks were also constraining LTV by underwriting sales prices lower than the Sponsor’s pro forma sales prices. Since the Sponsor intends to compete at the top of the market, many lenders were unable to recognize the demand for the luxury segment.  GSP was able to locate a private lender that was able to lend 75% of project cost which required minimal additional equity from the Sponsor.  Although the rate was higher than a bank, the length of the term was relatively short due to the business plan to sell out the condos.  The Sponsor decided to take a higher loan amount and invest the additional capital in future projects.

Advisors

Steve Bram Managing Director & Principal / GSP Co-Founder

David R. Pascale, Jr. Senior Vice President

Allison Higgins Senior Vice President

Rate: 11%
Term: 18 Months
Amortization: Interest Only
Loan To Cost: 65%
Prepayment Penalty: 9 Months Minimum Interest
Lender Fee: 2.25%
Guaranty: Recourse

George Smith Partners successfully placed the $4,080,000 adaptive re-use bridge loan for the conversion of a former chapel to a 10 unit Bed & Breakfast (B&B) in Napa, CA. When the property was purchased in 2015, our sponsor, a local developer, saw that a B&B would be the highest and best use due to its prime location, being in the heart of downtown Napa. After a year of getting the property entitled and permitted, GSP was hired to fund the conversion.

Challenge: Our sponsor initially requested a SBA loan due to its competitive rate and high leverage bridge and permanent debt. However, since the subject property was purchased with other parcels under one note, SBA took into account those other parcels in their occupancy calculation and the property became below SBA’s 51% “owner-occupied” threshold. In addition, the seller’s note used to purchase the property was ineligible for SBA refinance.

Solution: In order to prime this transaction for a SBA take out, GSP used this bridge loan to (1) refinance the subject property with a loan that is separate from the other parcels, fulfilling the 51% “owner-occupied” threshold (2) replace the ineligible seller note, allowing SBA to refinance the debt, (3) complete the conversion and make the deal more compelling since there will be no construction risk for the SBA lender.  Sponsor anticipates to taking out this bridge loan after the 9 month construction period with an SBA permanent loan already arranged by GSP.

Term: 1 Year
Amortization: Interest Only
Rate: 7.99%
Loan To Value: 65% of purchase price
Prepayment Penalty: None
Origination Fee: 1%
Guaranty: Non-Recourse

George Smith Partners secured acquisition financing within 5 days of application for a Fix and Flip property located in Hollywood Hills, CA.  The loan is fixed for one year with additional extension options available as needed.  The sponsor received a special price as long as they were able to close in 5 days. GSP used its experience and relationships to identify a lender who could close in that time frame and provide 65% of purchase price. The sponsor acquired the property to renovate and lease out and the lender was able to quickly underwrite the business plan.