Bridge Loans and Financing

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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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    $59,000,000 Non-Recourse Refinance of a Regional Power Center in a Tertiary Midwest Market

    September 4, 2018

    George Smith Partners secured $59,000,000 in non-recourse bridge debt to refinance out an existing construction loan currently in forbearance due to a maturity default. The maturity default was due to a longer-than-expected construction period to convert the former 1,000,000 square foot enclosed regional mall, located in a tertiary Midwest market, into an open-air, 750,000 square foot power center. The Property lost a few anchor tenants to bankruptcy, requiring the Borrower to re-lease those spaces in addition to the lease-up of new retail suites created by the power center conversion. The Property is now 91.5% leased but 85% occupied, and due to lease co-tenancy violations a major tenant is currently paying percentage rent in lieu of base rent. Loan proceeds repaid the existing construction loan, 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 3.70% over One-Month LIBOR and offered full term interest only payments.

    Rate: One-Month LIBOR + 3.70%
    Term: Two years plus three one-year extension options
    Amortization: Full-term interest only
    Loan to Cost: 77%
    Loan to Stable Value: 70%
    Guarantee: Non-recourse
    Lender Fee: 1.00%
    Prepayment: 15-month spread maintenance

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    Acquisition Bridge Loan for Multifamily Property in South Los Angeles, CA; 70% Loan to Cost at a 5.25% Rate

    August 29, 2018

    George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in the Mid-City neighborhood of Los Angeles, California, a gentrifying urban submarket. The 9 unit, 1960’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 property renovation, which includes 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% (5.00% today) with no prepayment penalty. Interest is not charged on the holdback until funds are drawn, and the loan was structured with an interest reserve to mitigate the property’s weak cash flow during the renovation period. The lender fee was negotiated down to 0.5%.

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

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    $9,096,000 Fixed Rate Bridge Refinance on 1920’s Downtown Los Angeles Brick-Built Multifamily Property

    August 15, 2018

    GSP arranged the $9,096,000, 80% loan to value first mortgage on a 1920’s vintage multifamily asset in Downtown Los Angeles. The Property was previously burdened by unforeseen operational challenges which prevented the Sponsor from maximizing Property cash flow and limited eligibility for competitive financing terms. GSP identified a regional balance sheet lender to provide a five-year loan that includes funding for capital expenditures to complete the Sponsor’s renovation plan. The loan has a fixed coupon to eliminate interest rate risk during the term and includes two years of Interest Only payments to maximize cash flow during the renovation. The loan includes an interest reserve to cover debt service during the peak reposition period, and the recourse obligation burns off upon the Property’s achievement of predetermined debt service coverage hurdles.

    Rate: 6.50%
    Term: Five Years
    Amortization: 24-months interest only, 40-year amortization thereafter
    Loan to Value: 80%
    Prepayment: 2%, 1%, open
    Guarantee: Partial Recourse (burns off once Property achieves debt coverage hurdles)
    Lender Fee: 1.00%

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    10-Day Close Acquisition Bridge Loan Financing for a Four Unit Property Adjacent to USC Los Angeles

    August 8, 2018

    George Smith Partners arranged a quick close acquisition bridge loan for a partially vacant 4-plex in South Los Angeles adjacent to USC and Expo Park. The Sponsor approached GSP with an extremely tight closing time frame of 10 days and a property that had significant vacancy and deferred maintenance. The Sponsor valued certainty of execution above all else, so he could close on the property in short order. GSP identified a non-bank private investor willing to make the loan with no origination free. Sized to 80% of purchase with no holdback requirement for interest reserve or capital expenditures, the loan carries a 12-month term, interest-only payments at a 9.5% rate and a 3-month prepayment penalty.

    Rate: 9.5% Fixed
    LTV: 80% of Purchase / 65% of Stabilized Value
    Term: 12 Months
    Amortization: Interest-Only
    Guarantee: Recourse
    Prepayment Penalty: Three Months
    Lender Fee: None

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    78% Loan to Cost Acquisition Bridge Financing for 8-Unit Apartment in Leimart Park, CA

    July 18, 2018

    George Smith Partners placed an acquisition bridge loan for an 8-unit property in Leimart Park, California. The property was operating at below-market rents and the Sponsor’s business plan included increasing rents at market rates and renovating the property’s exterior and interior build. While the lender’s underwriting fully supported the low acquisition basis for the property located in the quickly developing market of Leimart Park, the Borrowers’ track record was not sufficient to sustain the high leverage loan request. GSP worked closely with the lender to get them confident on the group’s growth potential. Sized to 78% of total project cost, the interest-only loan carries a 12-month term and no prepayment penalty.

    Rate: 8.50% LTC: 78%
    Term: 12 months with extension options
    Fee: 1.5%
    Prepayment: None

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    83% Loan to Total Project Cost Acquisition Bridge Financing for Apartments near the University of Southern California

    June 13, 2018

    George Smith Partners arranged an acquisition bridge loan for a property near the University of Southern California. At the time of purchase, the property was operating at below-market rents. The borrowers include a foreign national and first time real estate investors, so GSP identified a lender that was willing to rely on the sponsors’ strong credit histories and experiences managing and owning SFR and Condo units to get comfortable with the high leverage loan. Sized to 83% of total project cost with no hold back requirements for an interest reserve or capital expenditures, the loan carries a 12-month term, interest only payments at a 8.75% rate and a 4-month prepayment penalty.

    Rate: 8.75%
    Term: 12 months with extension options
    LTC: 83%
    Lender Fee: 1.5%
    Prepayment: 4 months minimum Interest

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