Bridge Loans and Financing

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    Cash-Out Bridge Loan for Medical Office Building, Laguna Niguel, CA

    November 25, 2020

    Transaction Description:

    George Smith Partners secured a senior bridge loan for a 21,303 square foot office building in Laguna Niguel, CA. The Subject Property was unencumbered; hence the entire loan was comprised of cash-out proceeds which the Borrower is utilizing for a separate project they are developing. The loan represents approximately 60% of the original purchase price and was structured with a 1-year initial term with interest only payments. The loan allows for open prepayment and carries two 6-month extension options.

    The loan was collateralized by a recently renovated 21,303 square foot office building. The building had recently upgraded the facade, landscaping, parking lot, entrance, lobby, bathrooms, HVAC and other interior finishes. A new roof and solar system had also been installed. The building was 47% occupied at loan funding. The first-floor single tenant had vacated at lease expiration several months prior leaving limited debt service coverage and unusually high vacancy compounded by other COVID related issues.

    GSP selected a lender that was able to move incredibly quick to accommodate the Borrower’s development timeline. The Lender’s credit department approved the loan one-week post submission and did not require an appraisal to close. The Lender underwrote to the stabilized asset value, closed with no debt service reserve and no personal recourse.

    Rate: 5.90%
    Term: 12 months
    Amortization: Interest Only
    Loan Fee: 1.0%
    Prepayment: Open
    Options: Two 6-Month Extensions; 0.50% Fee
    Personal Guaranty: None

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    $44,000,000 Non-participating Bridge Financing for Industrial Acquisition and Reposition, 95% LTC, West Coast

    November 25, 2020

    Transaction Description:

    George Smith Partners successfully arranged $44,000,000 in non-recourse, non-participating bridge financing at 95% of cost for the lease-up and repositioning of a 5-property, 650,000 SF, industrial complex located on the West Coast. The Sponsor purchased the complex vacant and the seller carried the first mortgage for 4 months. From the open of escrow with the Seller, to the closing of this loan, there was over 82% of the available space leased making up 77% of rent with letters of intent for the remainder of the space. Although this was during the COVID-19 pandemic, and there was considerable deferred maintenance and capital expenditure required to get the properties rent ready, the space leased quickly due to the Sponsor expertise and relationships and a strong submarket.

    The loan provides funds for the deferred maintenance, the capital expenditures, the tenant improvements, leasing commission and carry until the tenants are in and paying rent. Additionally, there is an earn-out of $2,000,000 after the 18th month as the asset has other potential value-add attributes.

    Rate: LIBOR + 3.95% with a floor on LIBOR of 50 basis points
    Term: 3 years interest only
    Amortization: Two 1-year extensions with 30-year amortization
    LTC: 95%
    Guaranty: Recourse, Completion of deferred maintenance and Cap-Ex, “bad” acts and environmental
    Lender Fees: 1% origination and 0.25% exit fee

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    $4,700,000 Non-Recourse, Bridge Financing for Mid-Construction Apartment Project; Pico-Robertson Area of Los Angeles, CA

    November 18, 2020

    Transaction Description:

    George Smith Partners arranged $4,700,000 in non-recourse, bridge financing for an 85% complete, 13-unit apartment project in the Pico-Robertson area of Los Angeles, CA. Despite marketing this deal as a construction take-out loan for an 85% complete project during the global pandemic, GSP successfully engaged a debt fund to take out the existing construction loan with additional funds to complete construction. The non-recourse bridge facility was priced at an interest-only rate of 5.90% with a 12-month term plus a 12-month extension option. Thanks to GSP’s long-standing relationship with this debt fund, we were able to close this transaction in just 8 business days.

    Rate: 5.90% Interest Only
    Term: 1 + 1
    LTC: 80%
    Guaranty: Non-Recourse

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    $13,340,000 Acquisition/Bridge Loan for Six-Property Multifamily Portfolio; Long Beach, CA

    November 18, 2020

    Transaction Description:

    George Smith Partners identified a national balance sheet lender with an intimate knowledge of the submarket and arranged $13,340,000 in acquisition/bridge financing for the purchase and reposition of a six-property multifamily portfolio located in Long Beach, CA. The Sponsor placed the portfolio under contract during the COVID-19 pandemic.

    The loan includes a future funding component in which interest is not charged on the holdback until funds are drawn. This Capital Provider also structured and capitalized an interest reserve to cover the shortfall of cash flow during repositions. The three-year bridge loan is interest only for 36 months and carries a floating rate of LIBOR + 5.00% and includes two extension options for up to a term of five years. Our Sponsor’s business plan included a strategy to sell specific assets during the hold period as allowed for by the favorably structured release provisions.

    Rate: LIBOR + 5.00%
    Term: 3 Years
    Amortization: Interest Only
    Loan-to-Cost: 76%
    Prepayment: 12 months
    Loan Fee: 0.75% in / 0.75% exit

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    $8,152,500 Conversion to Co-Living, 68% LTC, Heavy-Lift Bridge-to Perm Loan; San Francisco, CA

    November 11, 2020

    Transaction Description:
    George Smith Partners placed the $8,152,500 bridge-to-mini perm loan for the conversion of an existing 12-unit multi-family community into a 17-unit 44-bed co-living community. The 68% LTC bridge loan converts to a 5-year mini-perm loan fixed at CMT + 2.5% with a 3.75% floor.

    Challenge/Solution:
    The Project came to GSP half-way through construction and was being funded by a lender that had filed bankruptcy with proceeds that were insufficient to complete the new business plan. GSP put the loan under application pre-COVID with a new business plan that included (as a condition in closing) approvals for a 4th floor penthouse/useable roof top level. While in application, the construction and the penthouse level approval process came to a halt due to COVID causing stress on both the existing loan (nearing maturity) as well as the new loan underwriting. The challenges associated with co-living as a new asset class resulted in additional scrutinization from the new lender as well as the appraisal which had a negative impact on value. GSP was able to resolve the valuation issues by successfully arguing the merits of the Project as well as successfully negotiating a waiver of the exit fee on the previous loan which resulted in zero impact to the loan proceeds and the Borrower’s out of pocket cash required at closing.

    Construction Loan:

    Rate: Prime plus 1% with 5% floor
    Term: 18 Months
    LTC: 68%
    LTV: 65%

    Mini-perm Loan:

    Rate: CMT + 2.25% with 3.75% floor
    Term: 5 Years
    Amortization: 30 years
    Prepayment: 5, 4, 3, 2, 1 open

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    $23,500,000 Bridge Loan for New Mixed-Use Project; Santa Clarita, CA

    November 11, 2020

    Transaction Description:

    George Smith Partners secured a $23,500,000 bridge loan for a brand-new mixed-use project located in Santa Clarita, CA. The non-recourse loan will be utilized to refinance the Project’s construction debt and capitalize outstanding TI/LC’s. The loan represents 80% loan to value and is structured with a 1-year initial term with interest only payments. The loan allows for open prepayment and carries two 6-month extension options.

    The loan is secured by a recently constructed mixed-use development comprised of 47 Class-A apartment units situated above 20,918 SF of street level retail. This transformative project is a focal point for the continued modernization of the City of Newhall. The Project’s design is indicative of the times where enhancements to public transit connects renters in search of larger amenity filled accommodations with the further suburban pockets of the greater LA Metro. The Subject is shadow anchored by the highly anticipated seven-screen Laemmle Theater and a newly built 372 stall public parking structure which serves the popular Downtown Newhall district.

    The loan was placed with many COVID related shutdowns in effect. GSP was able to secure a lender that underwrote to the stabilized NOI, closed with no debt service reserve, no recourse, and funded while several retail tenants were completing their buildouts. GSP selected a lender than could move quickly. The Lender did not require an appraisal and funded within three weeks after issuing an application.

    Rate: 5.75% Fixed
    Term: 1 Year
    Amortization: Interest Only
    Extensions: Two 6-Month Options
    Recourse: Non-recourse
    Prepayment: Open

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    $4,700,000 Refinance with Cash-Out for Single-Tenant Manufacturing Industrial; El Cajon, CA

    November 4, 2020

    Transaction Description:
    George Smith Partners placed a $4,700,000 refinance loan with cash-out for a single-tenant industrial property in El Cajon, San Diego County. This highly specialized facility is one of only two locations in the US that is approved to manufacture key components and assemblies for military and commercial aircraft currently in service.

    The Sponsor acquired the Property in 2018 with a bridge acquisition loan. In March 2020, GSP was engaged to refinance the maturing bridge loan with permanent financing including cash-out proceeds. However, the California “stay-at-home” order was issued soon thereafter resulting in a challenging lending market for the Property.

    GSP helped the lenders become comfortable by focusing on the low leverage, the strength of the Sponsor and the Tenant, and the fact that the Property continued to operate at full capacity without interruption due to be a critical Department of Defense supplier. In addition, the Tenant recently exercised its third extension option to the existing lease with an increased cash flow closer to market rents, thereby continuing its long-term commitment to the Facility.

    While holdback reserves are increasingly common in the current environment, GSP negotiated to have reserve payments deferred until the fourth year of the loan and on a monthly schedule instead of the typical lump sum holdback at closing.

    Rate: 4.65%
    Term: 7 Years
    LTV: 51%
    DSCR: 1.30x
    Prepayment: None

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    $4,200,000 Loan for Unentitled Land, 5.9% Interest Rate; Pasadena, CA

    October 21, 2020

    Transaction Description:
    GSP secured a $4,200,000 bridge loan for unentitled land in Pasadena, CA. The site is proposed to be developed into 59 luxury townhomes. The loan is fixed at 5.9% for a 12-month term with two 6-month extensions. The proceeds represent 45% of the total cost to purchase the land and entitle it.

    Challenges:
    The Sponsor acquired the Property in 2015 and has been working with the City to receive entitlements to develop the townhome plot since property acquisition. The land remains unentitled; however, the Sponsor expects to receive Ready-to-Issue (RTI) in 6 months which would provide significant value appreciation. The Sponsor had a loan coming due on the Property and needed to refinance. Given the economic situation due to the COVID-19 pandemic, many lenders were hesitant on providing financing.

    Solutions:
    GSP demonstrated that the location of the Property and market are very strong, and the specific neighborhood is undergoing a revamp. The Sponsor is an experienced Los Angeles developer who is familiar with the entitlement process and the Property is less than six months away from receiving RTI.

    Rate: Fixed at 5.90%
    Term: 12 months, 2,6 month extension options
    Amortization: Full Term Interest Only
    LTC: 45%
    Guaranty: Non-Recourse

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    $16,100,000 Non-Recourse Acquisition Bridge Financing for a 30-Unit Trophy Multifamily Value-Added Project; West Los Angeles, CA

    October 14, 2020

    Transaction Description:

    George Smith Partners arranged $16,100,000 in non-recourse, acquisition bridge financing on a 30-unit trophy multifamily property in West Los Angeles, California. The Property featured significant below-market rents, deferred maintenance, and physical vacancy (in part due to roommates that decided to downsize in light of COVID-19). The value-add business plan will involve a large capital expenditure budget to renovate the Property’s exterior and units, and reposition the asset utilizing a specialist property manager focused on providing family-oriented housing product with amenities like technology integration, childcare services, and community programming. The Sponsor’s expertise coupled with the Property’s trophy location created a competitive lending environment despite the ongoing pandemic. GSP ran a robust process including marketing the deal to over 70 lenders and fielding multiple lender proposals. The non-recourse financing was sized to 70% LTC and featured a rate of 1-Month Libor plus 500 basis points for a three-year term plus extensions.

    Rate: 1-Month Libor + 500 basis points
    Term: 36-month term with two 6-month extension options (6.00% floor rate)
    LTV: 70%
    Guaranty: Non-Recourse

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    $26,000,000 Bridge Loan for a 65-unit New Multifamily Property, 100% LTC, No DCR Test; Los Angeles, CA

    August 19, 2020

    Transaction Description:

    George Smith Partners secured $26,000,000 in proceeds for a bridge loan refinance of a 65-unit multifamily property located in Los Angeles, CA. The loan is floating at LIBOR + 5.45% with a 1.0% LIBOR floor. The Lender provided proceeds of 75% of appraised value, 100% of cost, and did not require any Debt Coverage Ratio test on underwritten cash flow.

    The Property was newly constructed and began lease-up towards the end of last year. In early 2020, the COVID-19 pandemic began, and the State issued a safer-at-home directive. As a result, leasing halted for several months with the Property at 60% occupancy. Since the in-place loan was coming due, the Borrower required a bridge loan to provide additional time to reach stabilization.

    When initially discussing the transaction with lenders in April, many capital providers were out of the market entirely. Those that quoted the deal provided proceeds of 65% LTV and interest rates around 8%, but these terms did not make economic sense for the Borrower. As the capital markets improved, GSP continued to discuss the transaction with lenders. In June, the selected lender entered the market with a new market-leading bridge loan program. The team quickly signed up the transaction and the loan closed in just 35 days.

    Rate: L+5.45% with a 1.0% LIBOR floor = 6.45%
    Term: 24 months + one 6-month extension
    LTV: 75%
    DCR: none
    Fees: 0.5% in/0.5% out
    Guaranty: Non-Recourse

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    $4,300,000 Acquisition/Bridge Loan for 18-Unit, Multifamily Property; Long Beach, CA

    August 5, 2020

    Transaction Description:

    George Smith Partners arranged $4,300,000 in acquisition bridge financing for the purchase and reposition of an 18-unit multifamily property located in Long Beach, CA. The Sponsor put the Property under contract during the COVID-19 pandemic. The Property has several vacant units which represents an opportunity for the Sponsor to immediately add value and commence their value-add business plan.

    The loan includes future funding for an extensive renovation of unit interiors and an exterior upgrade. The three-year bridge loan is interest only for the first 18 months and carries a floating rate of Prime + 0.50% with a 4.00% floor. Interest is not charged on the holdback until funds are drawn. The lender fee was limited to a 0.50% origination fee with no exit fee. The loan structure has no prepayment penalty, providing the Sponsor with ultimate flexibility.

    Rate: Prime + .50% with 4.00% Floor
    Term: 3 Years
    Amortization: 18 Months Interest Only
    Loan-to-Cost: 73%
    Prepayment: Open Prepay
    Loan Fee: 0.5% in / No exit fee

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    $5,891,700 Value-Add, Bridge, Refinance for a Multifamily Property; Santa Barbara, CA

    July 29, 2020

    Transaction Description:

    George Smith Partners placed a $5,891,700 recourse loan for the refinance and recapitalization of an approved mixed-use conversion back to 100% multifamily use. The Sponsor acquired the mixed-use office and multifamily project in early 2019. They negotiated the early termination of several long-term office leases and obtained approvals to convert the entire Property back to multifamily. The Sponsor will add kitchens to the office units and converted a large multi-story penthouse unit with ocean views into smaller units increasing the unit count to 23. Soft demolition began in early 2020 with insufficient funds available in the existing acquisition/bridge loan to complete the revised business plan.

    GSP placed the original acquisition/bridge loan. Even though the current loan went under application at the start of the COVID-19 pandemic, the only delay was as a result of the appraisal process. The value and the loan were not negatively impacted by the change in market conditions due to the COVID-19 pandemic. GSP identified a bank lender who underwrote to the new business plan and was able to provide capital at less than half of the previous loan cost while providing an additional 40% in proceeds. The bridge loan has an 18-month term at Prime + 0.75%, interest only, with the ability to convert to a 5-year term.

    Rate: Prime + 0.75% with a 4% Floor
    Term: 18 months
    Recourse: Full Recourse
    Amortization: Interest only
    Fees: 0.5%
    Prepayment: None during construction period

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