Construction

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    $16,300,000 Non-Recourse Construction Loan for Development of a 115-Key Hotel; West Sacramento, CA

    October 8, 2019

    Transaction Description:

    George Smith Partners arranged $16,300,000 in non-recourse construction financing for the ground-up development of a 115-key select-service, extended-stay hotel in West Sacramento, California. The Project is located across the bridge from Downtown Sacramento on a main thoroughfare and within direct proximity to the newly built West Sacramento City Hall. The Project is well positioned as an economic alternative to travelers and a convenient option for long-term local guests. The financing allows the Sponsor to break ground on their third hotel under development in the greater Sacramento metropolitan area.

    GSP identified a capital provider who was intent on securing a long-term relationship with the Sponsor, recognizing their extensive hospitality experience and ability to execute both on the construction and on the overall business plan with a high-degree of surety. Forming this relationship earned them a highly leveraged deal, sized to north of 80% of total project costs. The interest only, non-recourse construction loan is priced at a spread of 1 Month LIBOR plus 750 basis points, with a three-year term and two 12-month extension options. GSP highlighted the submarket’s various economic drivers, demonstrating its appeal as a pioneering and cost-effective market with tremendous growth potential.

    Rate: 1 Month LIBOR + 7.50%
    Term: 36 Months with Two 12-Month Extensions (3+1+1)
    LTC: 80%
    Amortization: Interest Only
    Guaranty: Non-Recourse

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    $14,000,000 in JV Opportunity Zone Equity Financing and $23,000,000 in Non-Recourse Construction Financing for the Development of a 127 Unit Multifamily Property; Vancouver, WA

    September 25, 2019

    Transaction Description:

    George Smith Partners advised on $14,000,000 in Joint Venture QOZ (Qualified Opportunity Zone) Equity Financing and $23,000,000 in non-recourse senior construction financing for the ground-up development of a 127 unit multifamily property in Vancouver, Washington, a suburb of Portland, Oregon. The Property sits across the street from the Vancouver Waterfront, which is undergoing a $1.5B dollar public/private master plan redevelopment. The 6-story, 173,000 square foot property will feature a landscaped third floor courtyard, a community room, balconies, two levels of parking, bike storage and excellent views of the Columbia River and Mount Hood.

    Challenges:

    Due to of the Project’s location in a QOZ, the Sponsor sought a QOZ financing partner who had the ability to place capital for the required 10-year horizon as per the QOZ guidelines. Moreover, many capital sources also expressed reservations related to supply concerns in the greater Portland market.

    Solutions:

    GSP focused on the Vancouver submarket’s strengths, including very limited new supply in contrast to downtown Portland, no state income tax, the more relaxed lifestyle, the proximity to PDX airport, and the Project’s location in very close proximity to the waterfront. Additionally, GSP highlighted the Sponsor’s ability to execute by showcasing its recent Class A multifamily delivery in Vancouver that fielded a large number of offers and traded at a record low cap rate. Ultimately, an opportunity zone JV Equity financing partner was selected who recognized the strength of the location and Sponsor’s best-in-class development history. These attributes also resulted in GSP securing non-recourse construction financing at 60% loan to cost with an interest rate of 1 Month Libor + 3.65%.

    Rate: Floating at 1 Month LIBOR + 3.65%
    Term: 3 Years with Two (1) Year Extensions
    Construction Loan LTC: 60%
    Amortization: Interest Only
    Guaranty: Non Recourse

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    $11,760,000 Construction Financing to Develop a 14 Unit Small Lot Subdivision Project in the Silver Lake Submarket; Los Angeles, CA

    September 11, 2019

    Transaction Description:

    George Smith Partners placed $11,760,000 in ground up construction financing to develop a 14 unit small lot subdivision project in the trendy Silver Lake submarket of Los Angeles, CA. The Project is extremely well located within Silver Lake and is walking distance to Sunset Junction. The per unit exit price is projected to represent a 30%+ discount to the cost of single family residences with similar footprints, offering an affordable alternative in an attractive and supply constrained market. Challenges included a sponsor seeking full leverage but requiring an extremely low interest rate, and many lenders refusing to offer competitive bids (or any bids at all) given the Project’s for-sale exit to homeowners.

    GSP secured a capital provider that was comfortable with the Property’s central, urban location and the favorable per unit cost basis relative to both single family homes and the limited number of local competing condominium projects. The loan represents 72.5% of total cost and carries an interest rate of One Month Libor + 2.75%, which is near institutional level pricing for a middle market sponsor. The loan term is 24 months with two six month extensions. It allows for partial release of individual units without a prepayment penalty or exit fee, allowing the Sponsor to sell units at its discretion.

    Rate: Floating at 1 Month LIBOR + 2.75%
    Term: 2 Years with Two (6) Month Extensions
    Amortization: Interest Only
    LTC: 72.5%
    Fees: 1%
    Prepayment Penalty: None
    Guaranty: Recourse

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    $25,500,000 Bridge Loan for VACANT Newly Constructed 65 Unit Multifamily Property; 100% LTC; Fixed at 4.95%; Los Angeles, CA

    September 11, 2019

    Transaction Description:

    George Smith Partners secured $25,500,000 in proceeds for the refinance of a construction loan on a newly constructed 65-unit multifamily property located in Los Angeles. The loan represents 100% of project capitalization and is fixed at 4.95%. The Property had recently received Certificate of Occupancy, but was still completely vacant at close. The bridge loan is intended to give the Sponsor time to lease up the property to stabilization. The fixed rate is unusual for a bridge loan; most capital providers offered floating rate financing and required the purchase of a cap.

    Because the Property was still vacant, the Sponsor’s proforma rents were not yet proven out by signed leases. This was a challenge because the rents are several hundred dollars higher than those of typical multifamily properties in the submarket. GSP was able to overcome this challenge by pointing out that the brand new units at the Subject Property were considerably larger than those in the comp set. This provided support for the premium rents. Another hurdle was the 90% loan-to-cost constraint imposed by most capital providers. The selected lender allowed for 100% of cost, subject to a 7.0% debt yield on the stabilized cash flow.

    Rate: Fixed at 4.95%
    Term: 12 months with one 6 month extension option
    Amortization: Interest Only
    Prepayment Penalty: None (no required minimum interest)
    LTC: 100%
    LTV: 73%
    Stabilized DY: 7.0%
    Fees: 1% in/0% out
    Guaranty: Non-Recourse: None (no required minimum interest)

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    $11,450,000 in Permanent Financing for a 56 Hangar Private Airport; Torrance, CA

    September 3, 2019

    Transaction Description:

    George Smith Partners secured $11,450,000 of life-company debt to refinance an existing senior loan for a regional private airport facility in Southern California. The Property is a 133,490 square foot, 10 building, 56 hangar private airport facility on a ground lease to the City of Torrance. The remaining term of the ground lease is only 23 years, which created limitations for the amortization of the senior loan. GSP worked with a lender that allowed for an amortization that equaled 80% of the remaining years of the ground lease. Loan proceeds repaid the existing senior loan, covered closing costs, and provided a return of equity to the Sponsor. The financing is an 18 year term loan that maximizes cash flow for the Sponsor. The recourse fixed-rate loan is priced at 4.75%.

    Rate: 4.75% Fixed
    Term: 18 years (fixed for the first 5 years, then rate adjusts)
    Amortization: 18 Years
    Loan-to-Value: 75%
    Guaranty: Recourse
    Prepayment: Yield Maintenance

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    $42,700,000 Construction Financing for 286-Unit Garden-Style Multifamily Project; Portland, OR

    September 3, 2019

    Transaction Description:

    George Smith Partners secured $42,700,000 in non-recourse construction financing for the development of a ten-building residential community in the Clackamas County submarket of Portland, OR. The nearly 13-acre site, which is a 20-minute drive from the city, offers an affordable alternative to Portland’s ever-increasing rental rates, as well as an exemption for inclusionary zoning, requiring no affordable units.

    By leveraging the strength of the Sponsor’s local experience, coupled with the city’s need for housing alternatives to the urban infill product, GSP was able to find a non-recourse lender who was comfortable with the fact that the area had seen little development in recent years and offered no comparable product. The loan was priced at 30-Day LIBOR + 3.55% and was sized to 65% LTC, which is aggressive leverage considering the pricing and the non-recourse structure. As costs rose approaching the final budget, the Lender ratably increased the proceeds of their loan to minimize additional Sponsor dollars in, which ultimately showed a commitment to a long-term relationship; this was their second time working together, the first being another Portland development GSP sourced in 2017.

    Rate: Floating at 30 Day LIBOR + 3.55%
    Term: 3 Years with Two (12) Month Extensions
    Amortization: Interest Only
    LTC: 65%
    Guaranty: Non-Recourse

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    $6,500,000 7-Year Construction Loan 18-Unit Multifamily Project; 70% LTC; Prime + 0.75%; Culver City, CA

    August 28, 2019

    Transaction Description:

    George Smith Partners secured a $6,500,000 construction loan for the development of an 18-Unit Class A apartment building located in the greater Culver City submarket of Los Angeles. The interest only loan is priced at Prime + 0.75% for the full 18-month term and includes a 6-month extension option. The proceeds represent 70% of the total project cost. The transaction also includes a 5-year mini perm option priced at the 5 Yr. Treasury + 2.15% with a 30-year amortization schedule, which can be exercised upon stabilization of the Project.

    Challenges:

    Although the Sponsor had previous experience as a general contractor this was his first endeavor as a developer and guarantor. His experience with this Class A asset type was limited and a significant portion of his net worth was tied to a startup technology company with limited operating history. The Sponsor also had a strict deadline he needed to adhere to as his construction permits were reaching their expiration date. Additionally, the construction costs and Sponsor cash equity fluctuated throughout the application process, which complicated the reconciliation of the closing statement and final loan amount.

    Solutions:

    GSP demonstrated that the Sponsor had chosen a capable general contractor to oversee the Project and helped structure a contract that gave the Lender confidence that the development would be completed. With respect to net worth, GSP procured ample evidence supporting the financial growth and stability of the startup. GSP prepared all required closing documents in a timely manner and provided a material portion of the due diligence prior to entering application in order to execute the transaction before the expiration of the Sponsor’s permits. GSP kept a diligent record of costs and equity invested to date. The Lender gave credit for this prior equity and reduced the Sponsor’s required down payment at close.

    Rate: Prime + 0.75%
    Term: 18 Months + 1, 6 Month Extension
    Amortization: Interest Only
    LTC: 70%
    Guaranty: Recourse

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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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    GSP Increases Financing to $11,200,000 to Cover Renovation Cost Overruns in Five Days; Orange County, CA

    July 24, 2019

    Transaction Description:

    After securing an initial loan of $9,700,000 for a well-located Orange County, California retail center, George Smith Partners arranged an additional $1,500,000 in construction/renovation mezzanine capital. This brought the total debt capitalization to $11,200,000. The Sponsor has been renovating the center over the last year but went over-budget due to increasing construction costs.

    Challenges:

    The Sponsor had used a debt-fund loan to renovate the aging shopping center and make it more vibrant. However, due to rising construction costs, the Sponsor went over budget with the property renovations. Most lenders are not comfortable financing a project that already has expensive debt and is also experiencing cost overruns.

    Solutions:

    GSP ultimately demonstrated the lender’s last dollar basis was very conservative compared to the as-stabilized value of the property following renovations. GSP utilized one of our relationship lenders to provide the emergency capital and was able to close the transaction within just five days. This allowed the Sponsor to complete construction and focus on leasing the center.

    Rate: 8.4%
    Term: 1 Year and 1 Year extension
    Amortization: Interest only
    LTV: 80% Cost
    Prepayment: None
    Guaranty: Non-Recourse
    Lender Fee: 1%

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    $460,000,000 Non-Recourse Senior Construction Financing for the Ground Up Development of Block 216, a 35-Story Mixed-Use High-Rise Anchored by a 251-Key Ritz Carlton Hotel; Portland, OR

    July 24, 2019

    Transaction Description:

    George Smith Partners structured and placed a $460,000,000 non-recourse senior construction loan for the ground up development of Block 216, a landmark 1.1 million square-foot ground-up high-rise development in the heart of Portland, Oregon’s central business district. The 35-story luxury high-rise will be anchored by a 251-key five-star Ritz-Carlton hotel, the first five-star hotel in Portland. The development also features Ritz-Carlton branded residences, 140,000 square feet of Class A office space, and 7,800 square feet of ground floor retail, which will open up to a pedestrian “festival street.” Located at the intersection of the Central Business and Pearl Districts, Block 216 spans a full city block. This is extremely rare in Portland. Upon completion in 2023 Block 216, will be the fourth tallest high rise in Portland and the largest tower in Portland based on square footage.

    Challenges:

    Block 216 represents the first luxury, five star hotel and branded residential project in Oregon. It is also the first project with amenities common to luxury properties but absent in Portland thus far. This ground up development is also a true mixed used project with four different uses (hotel, residential, office and retail) in a single building.

    Solutions:

    GSP focused on Portland’s incredibly strong underlying fundamentals, including: its population of 2.5 million; its unemployment rate 50 basis points lower than the national average; its 1,200 tech companies (hence the name “Silicon Forest”); the impressive number of blue chip companies with presences in the market; and, the considerable number of institutional investors active in the market. GSP also stressed the Project’s unparalleled location and walkability to every major amenity in Downtown Portland as well as the 30 new conferences booked at the Portland Convention Center as a significant demand driver for five star accommodations.

    GSP executed significant and high profile marketing to ensure the Project was appropriately received in the capital markets. These efforts resulted in a highly structured, non-recourse execution in less than six months from engagement.

     

    All terms confidential

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    $67,250,000 of Non-Recourse High-Leverage Senior Construction Financing for the Ground Up Development of a 254-unit Multifamily Tower in Phoenix, AZ

    July 17, 2019

    Transaction Description:

    George Smith Partners arranged $67,250,000 in non-recourse senior construction financing for the ground-up development of a market rate 254-unit, 17 story, multifamily tower in Phoenix, Arizona. The Property is in the Roosevelt arts district of downtown Phoenix near the Valley Metro Rail, Arizona State University graduate schools of journalism and law, as well as the University of Arizona Cancer Center. The Property will feature amenities such as a roof top pool overlooking the downtown skyline and beyond. Sized to 80% of total project cost, the interest only loan will strike a desired balance of debt to equity for the local developer. The Borrower was sensitive to standard bank underwriting decision making and asset management structures. GSP sourced non-recourse construction financing from a non-bank lender with a streamlined and flexible decision-making structure. The capital provider and their asset management team will act more like a partner than a lender from closing through development and payoff.

    Terms Confidential

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    $4,900,000 Co-Living Construction Loan in Los Angeles, CA

    July 2, 2019

    Transaction Description:

    George Smith Partners placed a $4,900,000 construction loan for a shuttered assisted living facility to be converted to a 42 bed co-living facility targeted toward young working professionals. As rental housing prices continue their rise many developers are addressing affordability with smaller units that offer common living amenities to maintain lower costs. The co-living concept of a singular bed/unit is popular in New York, Seattle, San Francisco and has a strong foot-hold in the Hollywood market of Los Angeles. Located adjacent to Downtown Los Angeles, the Subject Property proved challenging to comp as it is not located in Hollywood and co-living is a new concept in this market. Partially or fully furnished bedroom units are supported by a central communal kitchen. Some units will share a bath. Utilities are provided, including heat, cable and WiFi allowing residents to move-in with simplicity and ease. Social connections are encouraged through property gatherings and a movie room. A business center will also be offered to residents. This is the first co-living development for this sponsorship team. Priced at L+400, the two-year term was constrained by 70% of capitalization and 60% of “As-Stabilized” value. There is a six month option to extend for an additional 50 basis points.

    Rate: LIBOR + 400
    Term: Two Years + 1 Six Month Option
    LTC: 70%
    LTV: 60%
    Guaranty: Recourse

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