Construction

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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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    $34,000,000 Non-Recourse, Permanent, Take-Out Financing without Certificate of Occupancy; Santa Monica, CA

    November 13, 2019

    Transaction Description:
    George Smith Partners successfully secured $34,000,000 in non-recourse, construction take-out, permanent financing at 3.65% fixed for 10 years for a newly built three-story, mixed-use, 30-unit, high-end building in Santa Monica, CA.

    Challenges:
    The Sponsor’s existing construction loan was set to mature, and the Property had not yet received a temporary certificate of occupancy. In addition, the borrowing entity was headquartered in a foreign country with extensive development experience abroad, but this was their first project in the U.S. Furthermore, only one of the three retail spaces had been leased and pre-leasing activity on the apartment units had not yet commenced.

    Solutions:
    GSP focused on the superior location, high-quality residential units and strength of the sole retail tenant, Trader Joe’s, to ensure maximum interest among financing sources. Ultimately, GSP leveraged its expertise and strong relationship with a Life Insurance Company to execute a structured, non-recourse, low-rate, permanent loan – prior to Certificate of Occupancy issuance. This early financing also saved the Sponsor from having to secure a bridge loan. Furthermore, GSP also negotiated a top-off to the loan based on the Property achieving certain milestones, thus enabling the Sponsor to access additional capital in the future.

    Rate: 3.65% Fixed
    Term: 10 Years
    Amortization: 30 Years
    LTV: 45% (As-Is Completed)
    Guaranty: Non-Recourse: 3.65% Fixed

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    $25,000,000 Condo Construction Financing; Los Angeles, CA

    October 30, 2019

    Transaction Description:

    George Smith Partners successfully arranged $25,000,000 in construction financing for a condominium project in an affluent area in Los Angeles County. The Project commenced construction in 2017, however due to construction delays and cost overruns, the Sponsor needed additional money to complete the Project. The existing Lender did not want to upsize their loan. GSP was able to identify two distinct lenders to structure a 1st and 2nd Trust Deed to complete and sell-out the building. The total loan was sized to 75% of the net sell-out value of the Property. The Sponsor has owned the Property for over 10 years so the majority of equity was imputed land equity allowing for loan proceeds of 100% of hard costs.

    TERMS CONFIDENTIAL

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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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