Bridge Loans and Financing

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    High Leverage Custom Program for Quick Close Bridge Financing of Multi-Family Buildings; Los Angeles, CA

    November 6, 2019

    Transaction Description:

    George Smith Partners arranged acquisition bridge financing for a value-add, multi-family property in Los Angeles, California. One of our more experienced multi-family owner/operators has become experienced in sourcing opportunities to quickly close on troubled multi-family properties. His ability to act quickly often allows him to become the chosen Buyer, purchasing these Properties at a large discount.

    GSP worked with a local REIT to develop a program that includes a first and second mortgage of up to 85% of acquisition price. The loan is designed to provide the same surety of close as an all-cash buyer, with no appraisal needed and the ability to close as fast as 5 business days. The loan is non-recourse and has no prepayment penalty.

    These loans are cheaper and easier than equity partners and allow the Sponsor to take advantage of smaller opportunities using very little cash. With less than $400,000 of equity, the Sponsor was able to purchase a $2,015,000 building. At close the Subject Property was worth close to $2,500,000, allowing the Sponsor to quickly flip the Property. This is the third time GSP has used this custom created loan program to procure financing for our client.

    Blended Rate: 8.00%
    Loan to Purchase Price: Up to 85% (83% on this transaction)
    Term: 12 Months
    Guaranty: Non-Recourse

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    $13,155,000 Non-Recourse Cash-Out Refinancing of a Retail Shopping Center; Orange County, CA

    October 23, 2019

    Transaction Description:
    George Smith Partners successfully arranged $13,155,000 in non-recourse bridge financing for a 20,000 sf shopping center in Orange County, CA. The Sponsor has invested over $10,000,000 in renovating the Property and it now it is currently 91% occupied.

    Challenge:
    The Subject Shopping Center has undergone significant reposition in tenant makeup and revenue. As of the date of funding the Center was 91% leased, but several of the tenants were in the process of building out their TIs and had not moved into the Property. Banks, insurance companies, CMBS lenders and credit unions requested more seasoning from our Sponsor. Debt funds and hard money lenders did not want to provide enough proceeds. The financing was too early for a perm lender who would want to see the seasoned cash-flow, and too late for most bridge lenders who would want to fund the actual construction and renovation without releasing cash out to the Sponsor.

    Solution:
    The Sponsor had many goals which included the reposition of the center, the sale of the center, and financing that allowed the Sponsor to pull cash out to sustain him during the sale process allowing him to receive back some of the value added to the Property. GSP was able to provide a solution for the Sponsor with a Midwest-based debt fund that allowed cash out for working capital of over $3,000,000 in less than 15 days. With GSP’s help, the Lender understood the ultimate value of the Property, was able to get comfortable with the large cash-out and give the Sponsor what they needed to complete the final stages of their plan and sell the Property.

    Rate: 8.9% fixed
    Term: 2 Years
    Amortization: Interest Only
    LTV: 80% / LTC: 90%
    Prepayment: None – 6 month minimum
    Guaranty: Non-Recourse

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    Acquisition Bridge Loan for an 11-Unit Multifamily Property; 72.5% Loan to Cost; Arlington Heights Area of Los Angeles, CA

    October 16, 2019

    Transaction Description:

    George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in the Arlington Heights Neighborhood of Los Angeles, California. The 11-unit, 1960’s vintage property had significant deferred maintenance and below market rents. The Sponsor’s business plan was to reposition the Property, buyout tenants and release the units at market rents. Sized to 72.5% of total project cost, the loan includes 100% of future funding for tenant buyouts, a full gut renovation of unit interiors and an exterior upgrade.

    The two-year bridge loan is interest only and floats at a rate of Prime plus 0.50% (5.75% today) with no floor rate, which is important in a declining interest rate environment. The loan carries no prepayment penalty, and interest is not charged on the holdback until funds are drawn. The lender fee was negotiated down to 0.5%.

    Rate: Prime + 0.5%
    Term: 2 Years
    Amortization: Interest Only
    LTC: 72.5%, including 100% of future funding
    Prepayment Penalty: None
    Recourse: Full Recourse
    Lender Fee: 0.5%

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    $3,350,000 Bridge Loan for Purchase of 13-Unit Multifamily Property; 70% LTC; LIBOR+3.65%; Los Angeles, CA

    October 16, 2019

    Transaction Description:

    George Smith Partners secured $3,350,000 in proceeds for the purchase of a 13-unit multifamily property located in an infill area of Los Angeles. The loan is structured as $1,963,000 at closing and $1,387,000 in holdbacks for capital expenditures and interest reserves. Six of the thirteen units were vacant at close. The fully funded loan represents 70% of the project capitalization.

    The Sponsor requested a loan with both low pricing and non-recourse execution. Several challenges were encountered in meeting both goals. The small size of the loan ruled out almost all debt fund lenders, who typically seek financings larger than $10,000,000. While banks offered rates in the 5% range, they required the Sponsor to sign full recourse. Private money lenders quoted the deal with prohibitive interest rates above 8.0%.

    The selected Capital Provider was the only one to provide non-recourse execution with a rate in the 5’s. The loan did not stipulate a required debt yield based on the stabilized cash flow. Additionally, the Lender released additional money at closing for expenses the Buyer incurred while in escrow. This amount totaled $260,000 in reimbursements for soft costs. The loan closed about 45 days from the signed application.

    Rate: Floating at 1 Month LIBOR + 3.65%
    Term: 2+1+1
    Amortization: Interest Only
    Fees: 1.0% in/0.5% out
    Prepayment Penalty: None
    LTC: 70%
    LTV: 75%
    DY: None
    Guaranty: Non-Recourse

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    5 Day Close on 84% Loan to Purchase Price for Multifamily Asset; West Hollywood, CA

    September 3, 2019

    Transaction Description:

    George Smith Partners arranged a quick close acquisition bridge loan for an 8-unit property in West Hollywood. The Sponsor approached GSP with a need for 80%+ leverage, which can be tricky with low cap rates and rent control. GSP utilized their experience to arrange a first and second capital provider on the loan. We ensured that the Sponsor would receive his required leverage and guaranteed that he could close on the Property quickly. With this structure the owner can increase rents and stabilize the cashflow. This will allow him in the future to place a much larger permanent loan on the Property at a lower interest rate. Sized to 84% of purchase with no hold back requirement for interest reserve or capital expenditures, the loan carries a 12-month term, interest only payments at 8.5% and no prepayment penalty.

    Rate: 8.5%
    Term: 12 Months
    Amortization: Interest only
    LTV: 84%
    Prepayment: None
    Guaranty: Non-Recourse
    Lender Fee: 1%

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    $3,700,000 Bridge Financing for a Recently Completed Mixed-Use Development Office & Retail; Temecula, CA

    August 14, 2019

    Transaction Description:

    George Smith Partners secured a $3,700,000 bridge loan to refinance an existing construction loan for a recently completed mixed-use development in Temecula, CA. The Property is a 14,939 square foot, 3-story office and retail commercial building located in the Old Town Temecula District. The spec development included the use of EB-5 equity in a tertiary market and required a lender who understood the Property’s unique location and ownership characteristics.

    TERMS CONFIDENTIAL

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    $3,500,000 Pre-Development Non-Recourse Bridge Loan; San Fernando, CA

    July 31, 2019

    Transaction Description:

    George Smith Partners placed the cash-out non-recourse refinance of an improved San Fernando Valley lot that had been vacated while the Developer moves forward on an up-zone re-entitlement. Our Sponsor will double the available units on this over-sized lot bringing needed housing to this dense in-fill tract. Proceeds beyond the existing payoff will be used to cover soft costs and will be invested back into the site development. The exit will be via a ground-up construction loan to be funded late 2019. Closing occurred within two weeks from executed application to funding. No appraisal was required for funding. Fixed at 7.50%, the non-recourse loan does not carry a prepayment penalty.

    Rate: 7.50%
    Term: 12 months
    Amortization: Interest Only
    Loan Fees: 1.0%
    Guaranty: Non-Recourse
    Prepayment Penalty: None

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    $13,600,0000 Bridge to Stabilization Financing for a Newly-Built 75 Unit Multifamily Property; Ontario, CA

    July 31, 2019

    Transaction Description:

    George Smith Partners placed $13,600,000 in bridge financing on a newly constructed 75 unit multifamily property in Ontario, CA, shortly after the Property obtained it’s certificate of occupancy. Due to construction cost escalation, which has been a pervasive industry challenge, the Sponsor incurred significant cost overruns during the course of construction. This resulted in a large number of mechanics liens filed on the Property as well as open trade payables and a lender that was threatening to file a notice of default. To further complicate matters the construction lender was an esoteric form of bond financing with a very narrow payoff window. Failure to repay within the window would result in significant penalties. Property occupancy was less than 10% at the time of engagement.

    By emphasizing the Property’s excellent location in West Ontario in close proximity to the airport and convention center as well as the submarkets strong fundamentals and low vacancy rate, GSP was able to source a lender who provided a fully funded loan representing 75% of total cost. The loan carries an interest rate of 1Month Libor + 2.50%, which is near institutional level pricing for a middle market sponsor and has no going in debt yield or DCSR requirements. The loan has a holdback for interest reserve so no additional out of pocket costs will be incurred for debt service. The loan term is 24 months and there is no prepayment penalty or exit fee, allowing the Sponsor to sell or refinance at stabilization at no additional cost. The loan closed in just 60 days from the signed application.

    Rate: Floating at 1 Month LIBOR + 2.50%
    Term: 2+1
    Amortization: Interest Only
    Fees: 0.5% in/0% out
    Prepayment Penalty: None
    LTC: 75%
    Guaranty: Recourse

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    $18,600,000 Bridge Financing for Purchase of 112 Unit Multifamily Property; 80% LTC; LIBOR+2.55%; 4+1 Term; Seattle, WA

    June 26, 2019

    Transaction Description:

    George Smith Partners secured $18,600,000 in proceeds for the purchase of a 112-unit multifamily property located in the Seattle metro area. The fully funded loan represents 80% of the project capitalization. The loan provides $15,400,000 at close, with an additional $3,200,000 in future funding for capital expenditures. When discussing the transaction with bridge lenders, GSP found that most capital sources offered a 3+1+1 term with in/out fees of 1%/0.5%. The selected lender provided a unique program featuring a 4+1 term, 1% origination fee, and 0% exit fee. Instead of using boilerplate loan docs, the lender began with pre-negotiated docs from a previous transaction with a similar borrower. This helped to greatly reduce legal fees for the Sponsor. Although the going-in debt yield was about 3%, the Lender did not stipulate a minimum at closing. Rather, GSP structured an Interest Reserve since it was below a 1.0 DCR going in. While all lenders required a cash management account, the selected lender did not have a debt coverage ratio test until the 25th month after closing. The loan closed in just 40 days from the signed application.

    Rate: Floating at 1 Month LIBOR + 2.55%
    Term: 4+1
    Amortization: Interest Only
    Fees: 1% in/0% out
    Prepayment Penalty: 24 months minimum interest
    LTC: 80%
    Guaranty: Non-Recourse

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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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