Bridge Loans and Financing

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    Acquisition Bridge Loan, 73% Loan to Cost for a 13 Unit Multifamily Property in South Los Angeles, CA

    June 12, 2019

    Transaction Description:

    George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in the Westmont Neighborhood of South Los Angeles, California. The 13 unit, 1950’s vintage Property had significant deferred maintenance and below market rents. The Sponsor’s business plan was to reposition the Property and release the units at market rents. Sized to 73% of total project cost, the financing includes 100% of future funding for a full gut renovation of unit interiors and an exterior upgrade.

    The two year bridge loan is interest only and floats at Prime plus 0.5% (6.00% today) with no prepayment penalty. Interest is not charged on the holdback until funds are drawn. The Lender only required a recourse obligation from the general partner who represented 10% of the equity, even though there were limited partners representing over 25% of the equity. The lender fee was negotiated down to 0.5%.

    Rate: Prime + 0.5%
    LTC: 70% / 65%, including 100% of future funding
    Term: 2 Years
    Amortization: Interest Only
    Prepayment Penalty: None
    Recourse: Full Recourse
    Lender Fee: 0.5%

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    Acquisition Bridge Financing for a 12 Unit Multifamily Property in South Los Angeles, CA; 70% LTC

    May 29, 2019

    Transaction Description:

    George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in the Hyde Park Neighborhood of South Los Angeles. The 12 unit, 1940’s vintage property had significant deferred maintenance and below market rents. The Sponsor’s business plan was to reposition the Property and release the units at market rents. Sized to 70% of total project cost, the loan includes 100% of future funding for a full gut renovation of unit interiors and an exterior upgrade.

    The two year bridge loan is interest only and floats at Prime + 0.5% (6.00% today) with no prepayment penalty. Interest is not charged on the holdback until funds are drawn. The Lender also only required a recourse obligation from the General Partner, who represented only 10% of the equity, even though there were limited partners representing over 25% of the equity. The lender fee was negotiated down to 0.5%.

    Rate: Prime + 0.5%
    LTC: 70% / 65%, including 100% of future funding
    Term: 2 Years
    Amortization: Interest Only
    Prepayment Penalty: None
    Recourse: Full Recourse
    Lender Fee: 0.5%

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    10 Day Close on Retail Bridge Recapitalization Loan to prevent Bankruptcy

    May 22, 2019

    Transaction Description:

    GSP sourced a two year bridge loan on a small 50% occupied shopping center in Los Angeles for a family trust embattled in disputes for control of the asset. The loan was closed in 10 days, to prevent the sponsorship from filing for bankruptcy and provided capital needed to pay off creditors, buyout family members and allow one of the family members to hold the asset long term.

    Challenges:

    The estate heirs of the estate were involved in a two year lawsuit over control and over the same time period some of the major tenants moved out with occupancy dropping below 50%. The lawsuit created a need for cash and impacted the heirs’ credit. Between the credit and occupancy issues, it was impossible to find conventual financing. In addition, the lack of cashflow lowered the capitalized value of the property and the lawsuits were pushing the sponsorship into Bankruptcy.

    Solution:

    The Shaffer team at GSP understood the diverse family dynamics, the overall value of asset and developed the strategy to quickly payoff the current debt and provide cash out to pay all the debts and buyout family members. Using GSPs expertise in equity recapitalizations, we were able to work out the disputes between the partners/family members and arraigned a quick five day bridge refinancing. We demonstrated to the capital provider that the long term value of the asset was only 65% of value even though the loan was 90% of the property’s capitalized value. In the end, the loan provided capital to buyout the family members, settle all legal claims and allow one of the heirs to hold the shopping center long term.

    Rate: Interest only 7.9%
    Term: 2 years
    LTV: 65% of Sale Value/90% Capitalized Value
    Amortization: Interest Only
    No Prepay

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    $17,600,000 Bridge Financing for a Portfolio in Los Angeles, CA

    May 15, 2019

    Transaction Description:
    George Smith Partners secured a $17,600,000 bridge loan for the acquisition and renovation of three separate commercial and retail buildings in the Los Angeles area. The first building is located in DTLA. Proceeds from the financing will be used for the purchase and adaptive reuse of this 43,000 SF mixed-use building. The second and third buildings are located in the San Fernando Valley and South LA, respectively. Proceeds from the financing will be used for major remodels on both buildings. The building in the San Fernando Valley will undergo a full repositioning of a flower shop into a new state-of-the-art, standalone coin-laundromat. The South LA mixed use asset is 75% complete. It is comprised of a two-story commercial building containing a 9,000 sf laundromat on the ground level with two residential units on the second floor. The entire Property was taken down to the studs, and a portion of this financing will cover the remaining cost of completion.

    Challenges:
    Despite the strength and experience of the Sponsor, we faced four major issues in obtaining financing for our Sponsor. The first challenge was unresolved past title issues. The second challenge we were up against were maturing interim loans. Next, due to the high volume of projects in the City of LA, power connection to one of our sites was delayed. Lastly, the initial financing request was for 85% LTC. After GSP’s full analysis, we discovered that the financing needed to payoff existing liens and provide the working capital needed for a successful execution was closer to 100% LTC.

    Solutions:
    GSP worked with a private balance sheet lender that provided a tailored bridge loan for the full capital stack. The initial term is for 12 months plus extensions. Because of GSP’s past experiences with this lender, we were confident in their ability to navigate such a complicated structure and their certainty of execution.

    Rate: 10%
    Term: 12 months + 6 month extensions
    Amortization: I/O
    LTC: 100%
    Guaranty: Full Recourse
    Prepayment: 6 months minimum interest on DTLA and San Fernando. Open prepay on South LA
    Lender Fee: 3 points

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    $6,500,000 Bridge Refinance of Vacant Apartment Building with No Cash-Flow in Los Angeles, CA

    May 1, 2019

    Transaction Description:

    GSP recently arranged a $6,500,000 bridge loan on a vacant 30-unit apartment community near the Los Angeles CBD. The Property had structural issues and was red tagged by the City. The owner took the 1913 building down to the studs and completely rebuilt the Property. In order to reduce cost and finalize construction, the ownership requested bridge financing.

    With no cash flow and no signed leases several lenders were concerned about repayment. Using GSP’s relationships and market expertise we were able to place a Libor floating rate bridge loan. This financing provided the Sponsor the ability to payoff of the current loan. In addition, there was enough capital left over for completion construction and an interest reserve for lease-up.

    This take-out financing replaced more expensive financing and provided the Sponsor with the capital needed to finalize the renovation and move to permanent financing. With no prepayment premium and no interest rate cap, it was a very affordable way to bridge between the loans.

    Rate: 5.05 % – 30 Day Libor+ 255bps – No Rate CAP Required
    Term:
    2 Years
    Prepayment Penalty:
    None
    Lender Origination Fee:
    1%

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    $25,000,000 Bridge Financing for a Recently Completed 150-Room Hotel Located in the Southwest

    April 24, 2019

    George Smith Partners successfully placed $25,000,000 financing on a 150-room recently completed hotel in the Southwest. Despite ongoing construction arbitration on the Property, GSP sourced a lender who understood the seasonality of the market and the MSA. The Property is the first new-build luxury hotel in this community in over 30 years. Proceeds from the loan were used to pay off the construction financing and provide working capital.

    Rate: One-Month LIBOR + 5.00%
    Term: Two years + One, 1-Year Extension
    LTC: 59%
    LTV: 66%
    Guaranty: Non-Recourse

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    $43,500,000 Bridge Financing for Nearly-Vacant Industrial Building in Secondary Market

    April 17, 2019

    Transaction Description:

    George Smith Partners secured $43,500,000 in bridge financing collateralized by a 95% vacant, 2.2MM square foot industrial building in a secondary Midwestern market. The building was constructed through the 1950s and 1960s by a major retailer and used for many years as a major distribution center. As internet retail ate into the tenant’s business, the building slowly lost its business importance to the prior owner. The Borrower, a well known owner and operator in the area bought the Property off market unoccupied approximately one year ago and has been improving the property and been in leasing talks with an array of strong tenants. The lease that occupies 5% of the building is attributed to a third party logistics subsidiary of the Borrower.

    Sized to 80% of stabilized value, proceeds from the bridge loan take out the Borrower’s original acquisition loan and bought out an institutional Preferred Equity investor. The Borrower now owns the property free of all third-party equity investors. Additional loan proceeds will also be used to cover closing costs and fund future work, including CapEx and leasing costs associated with repositioning the 60-year-old building. The financing secured by GSP not only allowed the Borrower to recap out their equity partner and claim exclusive ownership rights to the asset, but also gave them the final renovation dollars required to attract new tenants and eventually bring to Property to stabilization.

    Rate: One-Month LIBOR + 5.50%
    Term: Two years plus two one-year extension options
    Loan to Value: 80% (121% of Purchase Price / New Basis is 140% of Purchase Price)
    Amortization: Interest only during the loan term
    Guarantee: Non-recourse
    Lender Fee: 1.00%
    Prepayment: 1% for first 12 months; Open thereafter. Waived if lender does take-out.

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    $101,300,000 in Financing for 375,000 SF, 37-Acre Shopping Center in La Habra, CA

    March 27, 2019

    Transaction Description:

    George Smith Partners secured $101,300,000 in non-recourse bridge debt to refinance out an existing senior loan and mezzanine loan for a regional Southern California shopping center. The Property is a 373,000 square foot open-air, dual grocery anchored shopping center currently midway through a center-wide reposition. The Property is 96% leased but requires additional funds to complete the stabilization, including the construction of a new pre-leased pad building. The Center required a major leasing and re-leasing effort to modernize the 37 acre site into a true lifestyle center. Loan proceeds repaid the existing financing, covered closing costs, and will fund 100% of future CapEx, tenant improvement, and leasing commission costs associated with stabilizing the Property. The loan offers a 24-month initial term plus three extension options with durations of one year each, which provide the Borrower maximum flexibility. The non-recourse floating-rate loan priced at 3.20% over One-Month LIBOR and offered full term interest only payments.

     

    Rate: One-Month LIBOR + 3.20%
    Term: Two years plus three, one-year extension options
    Amortization: Full-term interest only
    Loan to Initial Value: 75%
    Loan to Stable Value: 70%
    Guaranty: Non-recourse
    Lender Fee: 0.75%
    Prepayment: 15-month spread maintenance

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    $4,235,000 Acquisition Bridge Financing for a 19 Unit Mixed-Use Property in Santa Barbara, CA

    March 20, 2019

    Transaction Description:

    George Smith Partners arranged $4,235,000 of acquisition/bridge financing for a 19 unit residential mixed-use property in Santa Barbara, CA. The Property, originally constructed as a 10 unit apartment building in 1951, was converted to mixed-use with a second and third floor office and residential penthouse addition in 1973. The change in use was a response at the time to demand for office given the Property’s close proximity to the popular State Street retail corridor just a block away. The Borrower plans to seek approval to convert the 1973 office addition portion of the project back to residential use and lease all but two front commercial units with long term leases. The challenge was finding a Lender that could underwrite the business plan and get comfortable with take-out financing of this mixed-use residential/office project. GSP was successful in identifying a lender that could get comfortable with the uncertainty of the Borrower’s ability to convert the project to mostly residential.

    Rate: 9.25% Fixed
    Term:
    2 year term with Two, 6-month extension options and 50 bp extension fee
    Amortization:
    Interest Only
    Loan to Value:
    68% max LTV “as complete”
    Loan to Cost:
    75%
    Yield Maintenance:
    24 months
    Loan Fee:
    1%
    Guaranty:
    Non-Recourse

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    $8,700,000 Acquisition Bridge Loan for Renovation of Strip Retail Center and New Pad Construction

    December 5, 2018

    Transaction Description:
    George Smith Partners secured $8,700,000 of non-recourse, bridge acquisition financing for a 45,000 square foot retail center located in Richardson, TX. The Center, which was built in 1985, has a diverse mix of regional tenants and sits on the corner of two of the main thoroughfares in the area.

    Challenges:
    The Sponsor purchased the Property with the intent to add value through two approaches: (1) increasing rents for tenants that are rolling and paying below-market rates, and (2) constructing an additional 12,000 square feet on undeveloped land within the parcel. There were complications with parcelizing the existing building and the land, which meant that a single lender needed to fund the entire project. The large renovation and construction budget also resulted in only 41% of the total loan being funded at closing.

    Solution:
    George Smith Partners identified a lender that could structure the financing to have two holdback reserves, one for the CapEx and TI/LC’s for the existing space and the other dedicated to funding the construction of the new building. The separate reserves allow the Sponsor to pursue both value-add opportunities simultaneously, which drastically reduces the project timeline and maximizes the Sponsor’s IRR. Our capital source was able to get comfortable with the construction component by requiring 75% of the space to be pre-leased prior to funding.

    Rate: 1-Month LIBOR + 410
    Term: 36 Months + Two, 12-Month Extensions
    Amortization: Interest Only
    Loan to Cost: 76% LTC
    Lender Fee: 1.0% Origination Fee
    Prepayment: 12 Months of Yield Maintenance
    Guarantee: Non-Recourse

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    5-Day Close $6,350,000 Non-Recourse Bridge Refinance of a Multi-Tenant Retail Center in Northern California

    November 7, 2018

    Transaction Description:

    George Smith Partners successfully arranged a $6,350,000 bridge refinancing for a fully occupied un-anchored, 7-tenant retail center located in downtown San Mateo, California. The Property has a total net rentable area of 13,303 SF. Tenants include a convenience store and local restaurants. The Sponsor will utilize a portion of the loan proceeds to pay off existing lenders, and the rest of the proceeds will be invested into other investments. The Sponsor’s preferred exit is to sell the Subject Property through a 1031 exchange.

    Challenges:

    All tenants are on short-term or month-to-month leases by the time of funding. Although lacking a strong cash flow, the Sponsor requested maximum cash out. As a result of rising interest rates, several capital providers passed on this opportunity because the Property’s cash flow becomes tighter after applying a higher underwriting rate. The underwritten value was affected by a high debt service coverage ratio as the Property is classified as “un-anchored”. In addition, capital providers challenged the Property’s low capitalization rate given it is located on a busy corner with a signal in a downtown area.

    Solution:

    GSP identified an asset based private money lender who offers simple and quick closing without requiring an appraisal or third party reports. GSP worked with the Lender to structure a 24-month loan, fixed at 6.90% (months 1-12) and 7.90% (months 13-24), interest only payments, no upfront TI/LC holdbacks and on-going reserves. There is no prepayment penalty.

    Rate: Months 1-12 at 6.90%, Months 13-24 at 7.90%
    Term: 24 Months
    Amortization: Interest Only
    Loan to Value: 51.5%
    Prepayment: None
    Guarantee: Non-Recourse
    Lender Fee: 2%

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    Bridge Loans Los Angeles – Bridge Loan for a 17 Unit Multifamily Property in South Los Angeles, CA; 75% Loan to Cost at a 5.50% Rate

    September 12, 2018

    Transaction Description:

    Bridge Loans Los Angeles – George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in south Los Angeles, California. The 17 unit, 1950’s vintage Property had significant deferred maintenance and below market rents. The Sponsor’s business plan was to reposition the Property and release the units at market rents. Sized to 75% of total project cost, the loan includes 100% of future funding for a full gut renovation of unit interiors and an exterior upgrade. The two year bridge loan is interest only and floats at Prime plus 0.5% (5.50% today) with no prepayment penalty. Interest is not charged on the holdback until funds are drawn. Although the Property had sub 1.0x debt coverage (0.7x), an interest reserve was not required. The Lender also only required a recourse obligation from the general partner, who represented only 10% of the equity, even though there were limited partners representing over 25% of the equity. The Lender fee was negotiated down to 0.5%.

    Rate: Prime + 0.5%
    Term: 2 Years
    Amortization: Interest Only
    LTC / LTV: 75% / 65%, including 100% of future funding
    Prepayment Penalty: None
    Recourse: Full Recourse
    Lender Fee: 0.5%

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