Rate: 10 Year Swaps + 2.30% (4.41% Coupon)
Term: 10 Years
Amortization: 5 Year Interest Only – 30-Year Amortization Thereafter
LTV: 70%
Guaranty: Non-Recourse
Prepayment Penalty: Defeasance

Transaction Description

George Smith Partners secured a $33,700,000 refinancing loan for two multifamily properties in Southern California. The 10 year loan with 5 years interest only, priced at 10 Year Swaps + 2.30 (4.41% coupon), replaced expensive high leveraged bridge debt. The loan was cross collateralized with both properties, which totaled 397 units. The two very different properties consisted of a 97 unit trophy asset overlooking the ocean and a less well located 300 unit property with a higher cap rate.

Challenge

For the 97 unit trophy asset, the sponsor’s proceeds requirement to refinance the preceding high leveraged bridge debt could not be met by a conventional lender, including agency lenders. This was because the property’s extremely low cap rate and debt yield constrained the potential loan size, therefore hindering the property’s ability to refinance its current debt.

Solution

GSP understood the diverse property dynamics of each asset and developed the strategy of cross collateralizing the two assets. GSP recognized the upside in presenting the properties as a “package deal”, particularly as it related to solving the debt yield challenge. By crossing the two properties, GSP synthetically created a debt yield in the sweet spot of most lenders. At the same time, lenders became more comfortable with the less well located building because it was being bundled with a trophy asset with an irreplaceable location. Additionally, GSP knew by bundling the properties together and creating a larger transaction that lenders would be prone to increase proceeds and decrease pricing, as compared to two separate smaller transactions. GSP ultimately was able to identify and place incredibly aggressive bond financing, which was appealing because of its leverage, proceeds, and 5 years of interest only.

Rate: 3.51%
Term: 5 Years
Amortization: 25 years
LTV: 60%
Prepayment Penalty: Yield Maintenance
Origination Fee: Par; No Third-Party Costs
DCR: 1.40

Transaction Description
George Smith Partners secured $9,050,000 of refinance loan proceeds with a national balance sheet lender for a 47,000 square foot medical office building in the San Gabriel Valley, approximately 25 miles east of downtown Los Angeles. Fixed at 3.51% for five years and sized to 60% of value, the loan will amortize over 25 years and carries a yield maintenance prepayment penalty. There was no origination fee and the portfolio lender paid for all third party reports.

Challenge
The property is owned under a Tenants-In-Common (TIC) structure, precluding most capital providers from funding the non-single purpose borrower. The TIC ownership also created a need for extensive documentation on all investors. Our secondary market location and nearest hospital located eight miles from the subject added additional drag on the refinance request.

Solution
Our balance sheet capital provider accepted the TIC structure subject to underwriter all individuals with ownership over 20%. Historical financial data documented the remarkable stability of cash flow with medical office tenants despite not being adjacent to a hospital. GSP surveyed the market and demonstrated that although the property was not located near a hospital, it offered medical providers and services that were unique to the area. This resulted in high patient volume and long-term tenants.

Advisors

Matthew Kirisits Director

Rate: 9.5% Fixed
Term: 12 Months
Amortization: Interest Only
LTV: 80% of Purchase / 65% of Stabilized Value
Guaranty: Recourse
Prepayment Penalty: Three Months
Origination Fee: Par

Transaction Description
George Smith Partners arranged a quick close acquisition bridge loan for a 5-unit property in South Los Angeles. The sponsor approached GSP with an extremely tight closing time frame of 5 days and a property with weak cash flow due to two down units. The sponsor valued certainty of execution above all else, so he could close on the property in short order. GSP identified a non-bank private individual willing to make the loan with no origination free. Sized to 80% of purchase with no hold back requirement for interest reserve or capital expenditures, the loan carries a 12-month term, interest only payments at a 9.5% rate and a 3-month prepayment penalty.