Rate: Libor + 5.62%
LTV: 85% As-Is
Term: 24 Months
Amortization: Interest Only
Recourse: None
Lender Fee: 1%

Challenge: The Sponsor required a highly leveraged structure to assure accretive equity returns. The 71,000 SF office building, while located in one of the best office markets in the country was being acquired as the largest asset in the sponsor’s portfolio from an institutional seller. Additionally, from the time escrow opened the financing was required to close in 60-days or less.

Solution: George Smith Partners successfully closed a bridge financing facility by canvassing the market for the appropriate lender who not only understood the market, but also recognized the strength of the asset within that market. This allowed us to push towards 85% leverage. From the time we started the capital marketing effort, we were in application in approximately 3-weeks and closed within the short escrow period. This assured a smooth acquisition for our client with a very sophisticated seller.

Advisors

Evan Kinne Managing Director, GSP; CEO, AXCS Capital

Rate: Fixed at 4.25% for 36 months; converting to an ARM for next 7 years at 2.75% over the 3-year treasury
Term: 10 years
Amortization: 30 Years
Interest Only: 3 years
Prepayment Penalty: 2,1
LTC/LTV: 90% LTC/ 70% LTV
Origination Fee: Par
Guarantee: Recourse

Transaction Description:
George Smith Partners arranged $5,750,000 in bridge financing for the acquisition of a retail building and the refinance of five contiguous office and retail buildings. Together these buildings form half a city block in Burbank, CA. The loan not only allowed for the consolidation of properties, but also provided predevelopment and entitlement capital for the future redevelopment of the city block into a large mixed-use development. Because of the future plans, the Sponsor was charging below market rents and a low cash-flow to value. The 10 year 90%/70% LTC/LTV loan has a fixed interest rate of 4.25% for the first 36 months of the term. Subsequently, the loan transitions to a 1-year ARM set at 2.75% over the 3-year treasury benchmark through maturation. The recourse loan has no prepayment penalty.

Challenges:
The Sponsor required the highest proceeds possible in order to complete the acquisition of the retail building and have enough capital for predevelopment and entitlement expenses for the future mixed-use development. However, the current in-place cash-flow on the five contiguous office and retail buildings severely limited the proceeds most lenders could become comfortable with providing. Additionally, with the impending redevelopment, the Sponsor wanted a loan with no prepayment penalty. Finally, the Sponsor had a tight window to close on the acquisition of the retail building.

Solution:
George Smith Partners understood based on the in-place cash flow of the five contiguous office and retail buildings, most lenders could not get to the desired proceeds required by the borrower. GSP ultimately utilized its relationships to identify an unconventional lender who used the actual rate rather than an underwriting rate when working through their internal underwriting constraints. As a result, this lender became comfortable with the proceeds number required by the Sponsor. GSP was able to structure the loan to have no prepayment penalty and close the loan timely for the impending acquisition.

Rate: 3.87% Fixed for 7 years; 6 Month LIBOR + 2.35% thereafter
Term: 30 years
Amortization: 30 Years
Prepayment Penalty: 5,4,3,2,1
LTV: 50%
DCR: 1.15
Guarantee: Non-Recourse
Origination Fees: Par

George Smith Partners secured $2,300,000 for the cash-out refinance of a 23-unit stabilized multifamily property in Cypress, CA. Constructed in 1988 the property is located in close proximity to Cypress College. Fixed at 3.87% for seven years, the non-recourse loan floats at 6-month LIBOR + 2.35% for the remaining 23-year term. The non-recourse loan is fully amortizing and has a 5,4,3,2,1 step down prepayment penalty.

Advisors

Matthew Kirisits Director