Construction

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    $21,700,000 Construction-to-Perm Loan for Self-Storage Project; Santa Clarita Valley, CA

    May 20, 2020

    Transaction Description:
    George Smith Partners successfully secured a high leverage $21,700,000 non-recourse, Construction-to-Perm loan to develop a six-building, 966-unit, climate controlled, Class-A self-storage facility near Stevenson Ranch in the Santa Clarita Valley, California.

    Challenges:
    The Sponsor, while very experienced in other asset classes, engaged GSP to source the full capital stack (debt, equity and carve-outs guarantor) for his first self-storage project. New Building & Safety codes that took effect in 2020 resulted in increased costs and delays. In order to obtain certified pads by the end of 2019, the entitlements in-place had to be vetted and the horizontal work needed to start prior to securing construction financing. The impacts of Covid-19 resulted in multiple delays from subcontractors, County inspectors, and in pulling permits due to County offices being closed.

    Solutions:
    GSP was able to source an investor from its pool of strong relationships who provided the equity. GSP focused on the market necessity for storage units in the desirable and growing community of Santa Clarita Valley, and successfully negotiated an agreement with Public Storage to operate the facility. GSP identified a capital provider to not only extend the financing commitment multiple times, but also to execute a structured, non-recourse, low-rate loan with the same terms agreed upon prior to Covid-19.

    Rate: 4.75% Fixed
    Term: 1 + 5 (12 Months Construction, then 5 Years Perm)
    Amortization: 3 Years I/O then 30 Years Amortization
    LTC: 80%
    Guaranty: Completion Guarantee

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    $7,025,000 Non-Recourse 77% LTC Adaptive Re-Use Construction to Perm; 3.50% Fixed for 10-Years; Southern California

    April 29, 2020

    Transaction Description:

    George Smith Partners arranged $7,025,000 in non-recourse construction to permanent financing for the adaptive re-use of an existing vacant bank branch building to a medical office building. Located in a prime Southern California submarket and sized to 77% loan to cost, the construction facility consists of an initial funding of $4,825,000 with future draws of $2,200,000 to complete the reposition of the Property. The non-recourse loan is fixed for 10-years at a rate of 3.50% with three years of interest only then converting to a 30-year amortization schedule for the remaining loan term. The loan is structured with a step-down pre-payment schedule of 4%,3%,2%,1% and open thereafter with no pre-payment penalty for added flexibility.

    Rate: 3.50% Fixed
    Term: 10-Years
    Amortization: 3-Years Interest Only, 30-year amortization thereafter
    LTC: 77%
    Prepayment: 4%, 3%, 2%, 1%, 0%
    Guaranty: Non-Recourse

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    $19,100,000 Construction Financing to 92.5% LTC on a 111-Unit, Class-A Apartment Community; St. Louis City, Missouri

    April 8, 2020

    Transaction Description:

    George Smith Partners successfully placed $19,100,000 in construction financing, which funded 92.5% of the total project cost for the construction of a 111-unit second phase of a larger mixed-use multifamily and retail project located in the trendy St. Louis City neighborhood of The Grove. The financing structure included a senior loan to 85% LTC and a preferred equity investment with last-dollar exposure to 92.5% of total project cost. The preferred equity investment is non-recourse and the senior loan provides for only a 50% repayment guarantee that burns down to 25% upon certificate of occupancy. Additionally, the Lender and preferred equity investor gave credit for a lift in land value above the Borrower’s actual cost due to the Sponsor having owned the land since 2016 and it being the second phase of a larger project. GSP leveraged its expertise of the St. Louis market, long-standing lender relationships, and capital markets creativity to achieve the Sponsors goals of minimizing cash equity invested into the project due to how much value is being created in this phase of the project.

    Rate: Confidential
    Term: Twenty-four-month initial term with one, 12-month extension option
    Amortization: Interest only
    LTC: 92.5%
    Prepayment: Nine-months minimum interest
    Guaranty: 50% repayment guarantee that burns down to 25% repayment guarantee upon certificate of occupancy (on senior loan only; does not apply to the non-recourse preferred equity investment)

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    $4,500,000 Non-Recourse Self Storage Adaptive Reuse Construction Financing Fixed at 4.75%; Orlando, FL

    March 25, 2020

    George Smith Partners placed $4,500,000 in non-recourse construction financing for the adaptive reuse of a big box retail furniture store to convert to a 1,250-unit state of the art self-storage facility. The Property is located in Orlando, Florida, within a Qualified Opportunity Zone (QOZ) and was capitalized with a QOZ equity partner. Deal requirements included a non-recourse bank execution and best possible rate given the low leverage ask resulting from the QOZ equity partner’s significant investment in the Project.

    GSP identified a bank lender that understood self-storage construction and found the institutional sponsorship attractive. The Capital Provider was willing to offer a simple, non-recourse execution and a swap product that resulted in a 4.75% fixed rate for the duration of the loan. A four-year initial term was offered to accommodate for the longer lease-up velocity common among self-storage properties.

    Rate: 4.75% fixed (Swapped out 1 Month Libor + 315 at closing)
    Term: 4 years with a 2-year extension
    Amortization: Interest only for the initial term; 25-year amortization thereafter
    Prepayment Penalty: None (apart from Swap breakage)
    LTC: 45%
    Guaranty: Non-Recourse

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    $12,375,000 Construction Loan for the Development of a 34-Unit Multifamily Property; 75% LTC; LIBOR+2.45%; Los Angeles, CA

    March 25, 2020

    Transaction Description:

    George Smith Partners secured $12,375,000 in proceeds for the development of a 34-unit multifamily property located in the Greater Wilshire/Hancock Park area of Los Angeles. The proposed development will consist of 31 market rate units and 3 affordable units for very low-income households that are to remain affordable for a period of 55 years. Building plans were approved prior to loan funding; construction is scheduled to commence in March 2020 with an estimated completion date of approximately August 2021, resulting in an 18-month construction period.

    The loan has a term of 24 months from closing with two 6-month extension options. The recourse loan will be secured by the land and the to-be constructed building. The fully funded loan represents 75% of the total project capitalization. The loan will be interest only for the 24-month term floating at 30-Day LIBOR + 2.45%. Upon completion the development will represent excellent quality multifamily units in an in-fill Los Angeles neighborhood. There are several projects currently under-construction in immediate proximity that will be competitive with the Subject Property. GSP selected a capital provider that was knowledgeable about the project’s location and the Sponsor’s experience to mitigate the new supply concerns.

    Rate: Floating; 30-Day LIBOR + 2.45%
    Term: 24 months plus two 6-month extension options
    Amortization: Interest only
    LTC: 75.0%
    Fees: .75%
    Guaranty: Recourse

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    $30,000,000 Development Loan for Institutional Sponsor, Boise, ID

    February 19, 2020

    Transaction Description:

    George Smith Partners secured a $30,000,000 loan for the construction of a 161-unit, Class A mixed use development in downtown Boise, Idaho. The Project is positioned to become the premiere development site in Boise and will serve the continued growth of the greater Treasure Valley. As one of the fastest growing MSA’s in the U.S., Boise has seen an increased demand for more housing to meet its population growth.

    Due to the location, architecture, and amenities, the 8-story project was underwritten to a valuation which included rents 20% above market. This provided a challenge when marketing the transaction as the market, despite the rapid expansion, is less than 750,000 people and only recently started to see an influx of institutional capital. Sized to 60% LTC and 50% LTV the asset ultimately received best-in-class pricing over a three-year term with two, one-year extensions. The high net worth sponsorship was comfortable with recourse in order to obtain a loan from a national institution with flexible capital.

    Rate: L + 235
    Term: 3 years + 1 + 1
    Loan-to-Cost: 60%
    Guarantee: Top 50% only

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    $23,500,000 Construction Loan Take-Out of the 30-Acre FBO and Airplane Hangars Adjacent to the Van Nuys Airport

    February 12, 2020

    Transaction Description:

    George Smith Partners placed a $23,500,000 construction loan take-out for the 30-acre development of the piston driven airplane hangars and FBO (Fixed Base Operations) adjacent to the Van Nuys Airport. Although not yet completed and four or five months from the final certificate of occupancy, our perm lender agreed to fund without the requirement of a hold-back due to the ample cash flow in place at the time of the loan funding.

    Van Nuys is the busiest general aviation airport (non-scheduled flights) with over 800 operations daily (take-off or landing). It services LAX as an over-flow for smaller turbine and all piston driven air traffic. This location is vital to the City Department of the Los Angeles World Airports (LAWA) that administers this airport and owns the land surrounding all sides of the two runways.

    At funding, the loan floats at Prime less 1.25% but 75% of the outstanding balance will be SWAPed at a future date; currently at 3.58% for the full 16-year term. The remaining 25% balance will continue to float. Structured as a self-liquidating loan, it will amortize over 15 years after the first year of interest only. The loan is open for future advances during the IO period if requested.

    Rate: P-1.25%; 75% to be SWAPed currently at 3.58% Fixed for 16 years
    Term: 16 Years
    Amortization: 1 Year IO; 15 Years thereafter
    Prepayment: SWAP breakage
    Fee: 25 Basis Points

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    $9,400,000 Construction Financing for Luxury Apartment Development; Los Angeles, CA

    February 5, 2020

    Transaction Description:
    George Smith Partners successfully arranged $9,400,000 in non-recourse construction financing for the development of a 15-unit luxury apartment building in West Los Angeles. The Property will be comprised of a mix of 1-bedroom and 2-bedroom units and will include 28 parking spaces. The Class A asset sits in a prime location that adjoins some of Los Angeles most sought-after submarkets. Upon completion tenants will have world class views and easy access to major thoroughfares of the City.

    Problem:
    The Sponsor has owned the site for over twenty years and after relocating existing tenants to make way for the construction of the new luxury building, he raised an existing 16-unit apartment building. Despite the low land basis, at a total cost at over $1 million per door, it was difficult to find comparables to justify the completed value in support of the requested loan amount.

    Solution:
    GSP accessed its extensive lender network to identify a best-in-class construction lender to provide non-recourse construction financing for the Sponsor. GSP’s longstanding history with this lender allowed for a flexible and streamlined closing process that was favorable to the Sponsor’s project timeline. GSP was able to demonstrate to the Lender that as a family owned, multi-generational asset, the tight spread between development cost and value was a less important metric than for a merchant builder-built building, particularly with a significant equity investment.

    Rate: 1-Month LIBOR + 7.50%
    Term:
    28 Months
    Amortization:
    Interest Only
    LTC:
    56%
    Lender Fee: 1% in / 1% out
    Guaranty:
    Non-Recourse

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    The Orchard: $55,000,000 Non-Recourse Ground-Up Mixed Use Construction to 80% of Cost; Azusa, CA

    January 29, 2020

    Transaction Description:

    George Smith Partners placed the ground-up development financing for a 163 unit/31,700 square foot mixed use development in Azusa, California. The Transit Oriented Development was previously owned by the City of Azusa and awarded to the Developer via an RFP in 2016 and will include restaurants and a 3,500 square foot Laemmle art house Theater. The Orchard will be the latest project along Metro’s Gold Line which serves the San Gabriel Valley and connects the Valley to Downtown Los Angeles via a 42-minute commute through Pasadena, offering residents a lower cost of housing with ease of transit to employment centers. The Orchard will be a low-cost alternative to commuters considering similar TOD sites in Sierra Madre and Pasadena, amplifying housing options for the healthcare professionals at City of Hope and Kaiser, and providing relief to pent up student housing demand at Azusa Pacific University and Citrus College.

    Sized to 80% of total cost, which included an increase in land and covered imputed equity once permits were ready-to-issue (RTI). Priced at LIBOR + 7.125%, the non-recourse construction loan limits all carve-outs and a capped completion guarantees to an entity. There are no “warm-body” signatures on any component of the financing. The three-year term allows for two additional nine-month options. Prepayment is limited to a minimum interest payment calculation and a 1-point exit fee.

    Rate: LIBOR + 7.125%
    Term: 36 months + 2 nine-month options
    Fees: 1 in/1 out
    Recourse: No warm bodies; capped at entity level.
    Prepayment: Minimum interest based on lender calculation

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    $51,750,000 Senior Construction Financing & $16,200,000 Mezzanine Debt Placement for the Development of a Grocery Anchored Shopping Center; Kona, Hawaii

    January 15, 2020

    Transaction Description:

    George Smith Partners advised on the placement of $51,750,000 and $16,200,000 Senior Debt and Mezzanine debt respectively for the ground-up development of an institutional quality 204,275 SF outdoor shopping center that will be located along Kuakini Highway, one of the island’s most trafficked thoroughfares. The Property, which sits on a rare fee-simple 20-acre site, will provide patrons with easy access to both Henry Street and Palani Road and over 700 parking spaces (representing a parking ratio of 4:1,000 SF).

    Challenges:

    Although the Sponsors who partnered with a major life company, had extensive prior career experience in the field of commercial real estate development, the Project represented the Sponsor’s largest development to date. The development of the Project had already commenced adding another layer of complexity to the transaction.

    Solutions:

    GSP focused on the lack of new retail development on Kona and specifically the anchor tenant’s commitment to relocate their store from an adjacent shopping center (less than 0.50 miles). In addition, GSP was able to convey to capital sources the immense value of the fee simple ownership of the site – a rare occurrence in Hawaii where most land is leased from the State. Ultimately GSP was able to identify two lenders who not only understood the value of the fee simple ownership of the site but also understood the lack of new retail space and the subsequent demand.

    All Terms Confidential

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    $11,200,000 Ground-Up Construction Financing for a High-End, 5-Unit, Mixed-Use Condominium Project; 75% Loan to Cost; North Laguna Beach, CA

    December 4, 2019

    Transaction Description:

    George Smith Partners secured an $11,200,000 ground-up construction loan for the development of a high-end, 5-unit, mixed-use condominium project in North Laguna Beach, California. The Sponsor purchased the Property over two years ago and successfully entitled it. The completed project will feature two residential units with expansive ocean views over three ground-floor commercial units and includes 30 subterranean parking spots, critical in parking constrained North Laguna Beach. The Sponsor sought maximum leverage, including land lift, and a lender comfortable with both the project’s high basis per unit ($2,240,000) and the Property’s environmental history. Certainty of execution in a short timeframe was also paramount as the Sponsor’s building permits faced a near term expiration.

    After an extensive marketing effort, GSP sourced a construction lender comfortable providing 75% loan to cost financing and valuing the land at market, which considerably exceeded the Sponsor’s cost basis. Significant time was spent gathering sales comps supporting the Project’s profitability despite the units’ high cost basis, and a soil removal plan was put in place to mitigate the site’s environmental history. The financing successfully closed prior to the expiration of the Sponsor’s building permit, allowing for an immediate ground-breaking.

    Rate: 8.99% Fixed
    Term: 24 Months (with two 3 month extensions)
    Amortization: Interest Only
    LTC: 75%
    Prepayment: None
    Guaranty: Recourse

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    $12,000,000 in Joint Venture Equity and $23,900,000 in Non-Recourse Construction Financing for a 185 –Single Family Build-To-Rent Community; Western U.S. Secondary Market

    November 27, 2019

    Transaction Description:

    George Smith Partners successfully advised on $12,000,000 in joint venture equity financing and $23,900,000 in non-recourse senior construction financing for the ground-up development of a 185- home build-to-rent community. Single-family-for-rent communities are a newer asset class and this project was among the first in the market. These communities offer the experience of living in a single-family home with the ease and cost of living in an apartment building. The Sponsor expects the project to be well received as there are distinct competitive advantages over the existing apartment product in the market place for several reasons including the new construction, low density and both interior and exterior privacy.

    Rate: LIBOR+5.00%
    Term: 3+1+1
    Leverage: 64% LTC
    Guaranty: Non-Recourse

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