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Bridge Loans and Financing

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    $47,000,000 Bridge Acquisition Financing for 624-Unit Multifamily, 80% LTC; Houston, TX

    November 17, 2021

    Transaction Description:
    George Smith Partners secured $47,000,000 for an acquisition bridge loan for a two multifamily property portfolio in Houston, Texas. To meet the sellers 30-day closing requirement, GSP used its experience and relationships to quickly identify and close this 80% interest- only financing within the required timeline. GSP was able to execute the Sponsors business plan and secure a high leveraged bridge loan at L+ 3.95 (4.05% coupon). The loan was cross collateralized with both properties, which totaled 624 Units. The Properties were operating at a going-in 5% debt yield when we closed. This interest-only loan included 100% of the capital needed for rehab.

    Challenge:
    There were multiple challenges regarding timing, leverage, sponsorship experience and property specific issues. Some lenders were not able to quote the transaction in the short timeframe we had to market, identify, and close this transaction. GSP aided a local family office, an international fund and a strong local operating partner who teamed up to purchase this asset in their first effort together. In addition, several lenders were over allocated in the Houston market and could not handle the size of this portfolio.

    Solution:
    GSP focused on the top three best lenders for this asset type. Due to our great relationships, we were able to quickly pick the best lender and expedite the application process. GSP assisted the Sponsorship team in developing a strong business plan. This included proving the benefits of the multiple sponsorship structure, as well as getting the Lender comfortable with the local partners to operate the properties. GSP understood the dynamics of each sponsorship team and helped the Lender upstand the strategy of operating the Properties as one asset. GSP knew by bundling the two properties together and creating a larger transaction that it would be more appealing to lenders. This would enable lenders to increase proceeds and decrease pricing as compared to financing two separate smaller transactions. GSP ultimately utilized one of our relationship lenders who was willing to invest the upfront time and place aggressive bridge financing, with appealing leverage, proceeds, and terms of 3 years interest-only.

     

    Rate: Libor + 3.95% (4.05% Coupon)
    Term: 3 Years, with 2 – 1 Year Options
    Amortization: Interest Only
    LTV: 80%
    Guaranty: Non-Recourse
    Prepayment Penalty: 18 Month
    Lender Fee: 1% in / ½% Exit

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    $10,000,000 Acquisition Loan to Purchase Hotel for Multifamily Conversion; Mountain States

    November 3, 2021

    Transaction Description:

    George Smith Partners successfully brokered both the sale and acquisition financing for an extended stay hotel conversion located in the Mountain States region. The Seller, initially intending to undertake the Project, engaged GSP to source bridge financing for the 126-apartment conversion. Most of the conversion will be cosmetic changing the feel from hotel to residential. The hotel had been closed due to COVID, but the Sponsor needed to cancel the Management Agreement with the Operator and vacate the hotel. Because the hotel was in foreclosure, the Seller put the asset in bankruptcy before the trustee sale. This complicated the transaction and resulted in closing the deal two weeks from court approval.

    GSP found a buyer with experience in hotel conversions who understood the Property’s value proposition and the bankruptcy process. With limited time, GSP represented the Sponsor in sourcing $10,000,000 of 3-month Gap financing for the purchase while concurrently working on inexpensive bridge financing. No appraisal was required for the Gap loan. This was an extremely complicated financing with exceptionally short time constraints. GSP was able to serve the needs of both Buyer and Seller and successfully secure financing.

    Rate: 7.95%
    Term: 3 Months
    LTV: 68% Loan to Purchase Price
    Guaranty: Non-Recourse

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    $11,300,000 Acquisition Bridge Loan for 76-Unit Multifamily Property, 70% LTC, 6.5% Stabilized Debt Yield; Salt Lake City, UT

    October 27, 2021

    Transaction Description:

    George Smith Partners secured $11,300,000 in proceeds for the acquisition of a 76-unit multifamily property in a tertiary market outside of Salt Lake City, UT. The bridge loan is structured as $10,795,000 at close and $505,000 in future funding. The fully funded proceeds represent 70% LTC. The loan floats at a rate of LIBOR + 3.15% with a 0.10% floor on LIBOR.

    GSP encountered several challenges when discussing the deal with capital providers. Some lenders quoted a spread as high as 3.65% over LIBOR. Other lenders quoted proceeds less than $10,000,000 because they require a 7.5% exit debt yield. Some lenders considered the market to be too small.

    GSP was able to source a lender that provided very competitive pricing, an exit debt yield of only 6.50%, and an easy close process. The loan closed in about 60 days without any changes to the signed term sheet.

    Rate: Floating at LIBOR+3.15% with a 0.10% LIBOR floor
    Term: 2+1+1+1
    LTV: 71% in/67.5% stabilized
    LTC: 70%
    Debt Yield: 4.75% in/6.50% out
    Guaranty: Non-Recourse

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    $21,700,000 Acquisition Bridge Loan for Multifamily Complex; Phoenix, AZ

    October 27, 2021

    Transaction Description:

    George Smith Partners secured $21,700,000 of bridge financing for the acquisition of a 136-unit multifamily complex in Phoenix, AZ. The Sponsor plans to increase the value of the asset with exterior improvements and interior upgrades as units turn organically. The Property is in the Uptown submarket of Phoenix, which is an up-and-coming area in the Valley that has seen tremendous rent growth in the last few years. Uniquely, there is a disproportionate amount of three-bedroom units compared to one- and two-bedroom units. There is a lack of three-bedroom inventory in the market that the Sponsor believes will help to increase demand at the Property. The non-recourse financing is priced at LIBOR+3.20% and is sized to 70% of total project cost. It carries a three-year initial term and has a yield maintenance period of 15 months.

    Rate: 30-Day LIBOR + 3.20% (0.25% LIBOR Floor)
    Term: 3 Years with Two 12-Month Extensions
    Loan-to-Cost: 70% LTC
    Origination Fee: 0.825%
    Exit Fee: 1.00% (Waived if Refinanced with Same Lender)
    Amortization: Interest-Only
    Guaranty: Non-Recourse with Standard Carveouts

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    $22,070,000 Bridge Loan on 100% Vacant Office Property; West Los Angeles, CA

    October 13, 2021

    Transaction Description:

    George Smith Partners successfully placed $22,070,000 in bridge financing for a vacant, 34,000 SF office building in West Los Angeles. Considering the negative effects of COVID on the office leasing market, capital providers were hesitant in financing a vacant building. The Sponsor envisioned two potential business plans: leasing the building to a single user or a mixed-use scenario where the ground floor would be converted to restaurant/retail. Supported by a strong Sponsor and backed by collateral with a high parking ratio centrally located in Los Angeles’s premier office market, GSP found a lender willing to finance both scenarios. The loan held back funds for tenant improvements, leasing commissions and capital expenditures. This provided flexibility to cope with the uncertainties of the COVID-era office leasing market. With optionality and competitive pricing, GSP negotiated a flexible loan agreement at the desired level of proceeds. Although COVID has turned office into a difficult asset class to finance, GSP guided the deal to a successful closing.

    Rate: L+500
    Term: 3 Years
    LTV: 70% LTC, 65% Loan to Stable Value
    Guaranty: Non-Recourse

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    $35,000,000 Bridge Financing Secured for Hotel-to-Micro Apartment Conversion; Salt Lake City, UT

    October 6, 2021

    Transaction Description:

    George Smith Partners successfully arranged a $35,200,000 construction financing for the first phase of a hotel-to-multifamily repositioning and transformation in downtown Salt Lake City’s trendy Granary District. The financing capitalized renovation costs related to the adaptive reuse of the iconic property’s south tower with plans to transform it into a 184-micro unit multifamily asset with boutique-quality amenities. The Project’s north tower is planned to be renovated as part of a future phase.

    Located on a coveted 5-acre site, the Project offers approximately 2.7 acres of excess development land, allowing for the future mixed-use infill opportunities onsite.

    The Sponsorship team acquired the former hotel with visions of redevelopment in December 2019, creating a unique opportunity for a transformative mixed-use asset in Salt Lake City’s employment and social epicenter. GSP was able to identify a top-tier lender who not only understood the current demand for multifamily housing in Salt Lake City’s urban core, but also understood the significant value and future opportunity afforded by the excess developable land.

    All Terms Confidential

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    $4,030,000 Non-Recourse Bridge Acquisition Financing for 44% Occupied Retail Center; Tempe, AZ

    September 29, 2021

    Transaction Description:

    George Smith Partners secured $4,030,000 of bridge financing for the acquisition of retail shop space in Tempe, AZ. The collateral encompassed approximately 30,000 sf of in-line retail space and an outparcel pad within a larger anchored retail center. At purchase, the collateral was only 44% occupied. The Sponsors believe that a new leasing strategy will be able to drive tenants to the Center. The Property is located on one of the corners of a major intersection that sees over 65,000 cars per day and is less than two miles from Arizona State University, one of the largest universities in the country. The capital provider structured the financing to have a holdback for future property improvements, leasing costs, and interest payments. Priced at 30-Day LIBOR + 7.00%, the non-recourse loan was sized to 68% of total cost and carries a two-year term with extensions. The Lender was also able to include partial releases if only a portion of the collateral is sold.

    Rate: L + 7.00% (0.25% LIBOR Floor)
    Term: 2 Years with Two 6-Month Extensions
    Loan-to-Cost: 68% LTC
    Amortization: Interest Only During Initial Term
    Guaranty: Non-Recourse with Standard Carveouts

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    $25,818,000 Bridge Loan Refinance of Vacant 51-Unit Multifamily Property; 85% LTV;5.2% Stabilized Debt Yield; Los Angeles, CA

    September 1, 2021

    Transaction Description:

    George Smith Partners secured $25,818,000 in proceeds for the cash-neutral bridge loan refinance of a 51-unit multifamily property in Los Angeles. The Lender provided proceeds of 85% of appraised value and underwrote to a 5.2% stabilized debt yield. The new loan refinances both the construction loan and the preferred equity that were part of the original financing. The loan is floating at LIBOR + 6.00% with a 6.65% floor.

    At the time of financing the Property was 95% complete but still short of a temporary certificate of occupancy. In addition, the leverage on the loan precluded several lending sources from achieving the necessary proceeds. The Sponsor desired to completely pay off the original construction financing, which was originated at 85% loan to cost. Only a few lenders could get the requested leverage and the market quoted pricing in the high single digits. Lastly, Koreatown experienced Covid related collection issues which affected the rental underwriting. GSP provided rental and sales comps that proved out the strength of the market. As a result, the selected Lender became comfortable with the location and the Sponsor’s ability to lease up the new Property.

    Rate: Floating at LIBOR+6.00% with floor of 6.65%
    Term: 12 months + one 12-month extension
    LTV: 85%
    Debt Yield: 5.2%
    Guaranty: Non-Recourse at Certificate of Occupancy

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    $42,400,000 (80% LTC) Bridge Financing for a 26-Property Portfolio of Walmart Shadow-Anchored Shopping Centers; Located Throughout the Midwest and South

    August 25, 2021

    Transaction Description:

    George Smith Partners successfully placed $42,400,000 in non-recourse bridge debt financing, which funded 80% of total project costs for the acquisition and value-add business plan of an off-market, 26-property retail portfolio spread across 19 midwestern and southern states. Although financing retail value-add business plans during COVID is challenging, the portfolio is comprised of a diversified rent roll including 20% of gross potential rent derived from investment-grade tenants. Furthermore, each asset within the portfolio is shadow anchored by strong performing corporate owned Walmart grocery shopping centers.

    GSP leveraged its lender relationships and capital markets expertise to source a lender who understood the business plan and product type, who was willing to invest the time and effort to underwrite a large retail portfolio spread throughout 19 different states, and in markets with average populations below 30,000; during COVID.

    Rate: L + 5.05% (5.10% floor)
    Term: 3+1+1
    Amortization: 24-months I/O, 25-year amortization thereafter
    LTV: 76% As-stable loan-to-value
    Lender Fee: 1% in / 1% out (waived if CMBS exit through Lender)
    Prepayment: 18-months minimum interest with pre-negotiated release provisions for each property and with open prepayment on certain assets identified prior to close
    Guaranty: Non-recourse

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    $3,000,000 Bridge to Permanent 5-year Loan for a Vacant Single Story 50,000 SF Warehouse; Western States

    August 4, 2021

    Transaction Description:

    George Smith Partners successfully placed a $3,000,000 bridge to permanent loan to fund the purchase, tenant improvements, leasing commissions and carry (real estate taxes, insurance, and debt service) for a vacant 50,000 SF single-story warehouse. The deal presented a couple challenges; the Sponsor had credit issues and the building was 100% vacant. The strong sponsorship experience, low vacancy in the market and the building’s high-level of quality ameliorated these issues. Lastly, the transaction had to be completed within the tight time constraints of a 1031 exchange.

    Rate: 4.25% During Construction, Five-year Treasury + 3.25% During Term
    Term: 5 Years
    Amortization: 25 Year
    Prepayment: Term Period: 3%,2%,1%,0%

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    $25,500,000 Bridge Financing for a 42k SF Landmark Retail Asset; Koreatown, Los Angeles

    August 4, 2021

    Transaction Description:

    George Smith Partners successfully secured $25,500,000 in non-recourse bridge financing for a destination dining and retail center nestled in the heart of Los Angeles’ Koreatown. The 42,000 square foot property is one of Koreatown’s most trafficked retail centers and maintained stable collections throughout 2020. The recapitalization retired the existing debt and provided future funding for capital expenditures, tenant improvements and leasing expenses with no new equity required from the Sponsor.

    The Los Angeles-based sponsorship team acquired the Property in 2016, identifying the asset as a generational heirloom and a unique opportunity to create substantial value. Despite market volatility and COVID-19 related challenges in the retail sector, GSP was able to identify a lender with local knowledge and expertise that understood the importance of this asset within the context of the neighborhood, and the long-term viability of the business model.

     

    All Terms Confidential

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    Non-Recourse Bridge Acquisition Financing for Industrial Building; Gardena, CA

    July 21, 2021

    Transaction Description:

    George Smith Partners successfully arranged a bridge acquisition financing for a single-tenant industrial building in Gardena, CA. The Property is 9,300 SF on an approximate 18,731 SF parcel. The previous owner occupied the space, and the building is now vacant. There was an existing environmental issue that limited the pool of interested capital providers. However, GSP leveraged its market expertise and relationships to identify a lender comfortable with the Property and Sponsor, who is a repeat client. GSP secured a 12-month, non-recourse bridge loan at 7.90% fixed with interest-only payments and no prepayment penalty. This will provide the Sponsor time to resolve the environmental issue, lease the Property and season it for permanent financing. The financing closed within 12 days of term sheet issuance.

    Rate: 7.90% Fixed
    Term: 12 months, with Extension Options
    Amortization: Interest Only
    LTP: 40%
    Prepayment: None
    Guaranty: None