Construction

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    Construction Loans California | $3,820,000 Single-Tenant Construction Financing at LIBOR plus 5.00%; 95% LTC

    November 21, 2018

    Transaction Description:
    George Smith Partners arranged a $3,820,000, 95% LTC construction of an 11,500 square foot NNN DaVita Dialysis center in a tertiary market of California. The Borrower entity was a joint venture between a developer and the land owner.

    Challenges:
    The Property is located in a tertiary market and also in a predominately residential neighborhood. The Sponsor was unable to contribute cash equity to the Project. Many lenders require 15% of the as-complete value to be in the form of cash equity. Lastly, while the tenant is somewhat well known in the capital markets, the Property is rated as sub-investment grade.

    Solution:
    George Smith Partners identified a lender who recognized the strength of the tenant and the lease terms relative to the market. The Lender accepted the as-is value of the land which, after the entitlements were achieved, was significantly more than the limited partner’s cost. The Lender proceeded with the loan without any Sponsor cash equity in the deal, reimbursed the Developer for out of pocket costs to date and gave them additional proceeds as a result of excess value in the land. Because the Lender allowed the land to be contributed at as-is value, the loan amount resulted in a loan to cost ratio of 88%. Given the original cost of the land by the Limited Partner, the actual loan-to-cost ratio was closer to 95%.

    Rate: 1 month LIBOR + 500
    Term: 15 Months + three 3 month extensions
    Amortization: Interest Only
    Loan to Cost: 88% LTC
    Lender Fee: 1.25%
    Prepayment Penalty: None
    Guarantee: Recourse

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    $26,118,000 Mixed-Use Construction Loan Take-Out; Boise, ID

    November 21, 2018

    Transaction Description:

    George Smith Partners placed a ten-year permanent loan for “The Fowler”; a recently constructed 159 unit mixed use multifamily development in Boise, ID. GSP placed the construction loan in Spring 2016 and the Borrower received its final Certificate of Occupancy in March 2018. The Property has become one of the most architecturally significant buildings constructed in downtown Boise. It includes live work units as well as 4,000 square foot of retail.

    Our Sponsor obtained +95% physical occupancy in September and was looking to secure a perm loan before year end. Given the rapid lease-up and forecasted rate increases, GSP was commissioned to source the construction loan take-out that would allow for a partial return of equity upon stabilized occupancy but with limited stabilized operating history.

    Boise was recently named the fastest growing city in the United States, and the capital markets embraced the Boise MSA’s market dynamics by offering multiple aggressive sizing and pricing structures. Our Sponsor selected an option that allows for a “second bite” for an additional recapitalization once cash flows are further documented and supported by stronger historical operating history. Priced at 153 basis points over the Ten-Year Treasury, the full-term interest only loan allows for future secondary financing.

    Rate: 4.63%
    Term: Ten Year Fixed
    Amortization: Full Term Interest Only
    Prepayment: Yield Maintenance
    Recourse: Carve-Outs Only

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    $58,820,000 Non-Recourse Ground-Up Construction of 304-Unit Luxury Multifamily Property; Preferred Equity to 87% LTC

    November 14, 2018

    Transaction Description:

    George Smith Partners placed a total of $58,820,000 in structured financing for the ground up development of a luxury 304-unit multifamily development. Proceeds were structured as a $41,070,000 senior construction loan and $17,750,000 of preferred equity. Together these two sources represent 87% of the cost of the project.

    The non-recourse senior loan floats at a rate of LIBOR + 4.0%, while the preferred equity accrues at a market rate return. Payments on the preferred equity financing are completely deferred until a capital event occurs at project stabilization. The Preferred Equity Provider is receiving a fixed return on their investment and will not participate in any future upside. There are no repayment guarantees to either Capital Provider.

    Since the market has few new multifamily properties with the projected rents, both Capital Providers required extensive market comparable data and a deep dive into the Sponsor’s experience. The business plan was proven out by the Sponsor’s recent successful development, stabilization, and sale of a 220-unit property in the same MSA but a separate sub-market. The Sponsor’s Development Team from the previous project remained intact for the subject property. Financing closed with enough time for the Sponsor to avoid incurring additional fees extending their land loan.

    Senior Loan
    Proceeds: $41,070,000
    Rate: LIBOR + 4.0%
    Term: 3+1+1
    LTC: 60%
    LTV: 55%
    Origination Fee: 1%
    Recourse: Completion Guarantee Only

    Preferred Equity
    Proceeds: $17,750,000
    Rate: Market
    Term: 3+1+1
    Origination Fee: 1%
    Recourse: Entity Only

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    $23,000,000 Construction to Perm Financing at 74% LTC Fixed Rate, Lone Tree, CO

    October 31, 2018

    Transaction Description:

    George Smith Partners secured $23,000,000 in proceeds for the ground up construction of an 80,000 square foot medical office property in Lone Tree, Colorado. The Property consists of a 4.8-acre site located directly across from a hospital campus (Sky Ridge Medical Center). The total project cost is a little over $31M and the loan represents 74% LTC. The Property is only 10% preleased, but it has drawn in a great deal of interest, from potential tenants. The Project is now under construction. This loan was high leverage on a spec deal; 5.25% fixed rate locked at application with 7-year term and non-recourse at stabilization.

    Challenges and Solutions:

    The first challenge was proving Sponsor’s rent proforma which was much higher than the comps which ranged between $21-24 NNN. With the help of the Appraiser and the Sponsor, GSP was able to get the Lender comfortable with the higher proforma. This was achieved due to the Property’s proximity to the Hospital. This location offers the tenants the ability to be close to the hospital without being subject to hospital use restrictions, approval and oversight. The second challenge was starting the Project prior to the rain and snow season. The Lender was able to fund 2 weeks earlier than originally planned enabling the start of construction.

    Rate: 5.25%
    Term: 24-month construction period rolling into a 5-year permanent loan
    Amortization: 36-month Interest Only then 25 years
    LTC: 74%
    Lender Fee: 1.0%

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    Construction Loans Los Angeles | $6,000,000 Non-Recourse Predevelopment Financing for Construction of 170-Unit Multifamily Project in Tarzana, CA

    October 24, 2018

    Transaction Description:

    George Smith Partners secured $6,000,000 in non-recourse predevelopment financing for a 170-unit ground-up multifamily project in the Tarzana community of Los Angeles, CA. The site is a collection of five contiguous lots, parceled together by the Sponsor to create an opportunity for larger scale development in the area. This financing facility allowed the Sponsor to recuperate some of the invested equity to be used towards continued advancement of the predevelopment for the Project, including but not limited to design and construction drawings, entitlement costs and permits. The Sponsor is currently building another ground-up multifamily project nearby and is an active local investor and developer, owning several retail and mixed-use assets in the area.

    GSP sourced a lender who offered a fixed-rate financing facility to lessen the burden of development costs on the Project, recapturing nearly 65% of invested dollars for a bridge through the pre-development phase; it will ultimately be taken out by the construction loan when the Project breaks ground. The identified capital group was already familiar with the site, and was able to offer a flexible and low-cost structure without a prepayment penalty. The application was an expeditious process; GSP was able to facilitate a closing less than three weeks from the date the term sheet was signed. The twelve month fixed rate note was priced at 6.90%, and was sized to 64.5% of cost basis.

    Rate: 6.90% Fixed
    Term: 12 Months + 2 (6)-Month Extensions
    Amortization: Interest Only
    LTC: 64.5%
    Guarantee: Non-Recourse

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    $17,725,000 Non-Recourse Construction Financing for a 127-Key Cambria-Branded Lifestyle Hotel in the Roosevelt Row Arts District of Phoenix, AZ

    October 10, 2018

    Transaction Description:

    George Smith Partners secured $17,725,000 in non-recourse construction financing for the development of a 127-key Cambria-flagged lifestyle hotel in the Roosevelt Row Arts District of Phoenix, Arizona. This financing facility allowed the Sponsor to begin construction on the first of several projects slated for delivery within Roosevelt Row (Ro2). The Sponsor won a city-led RFP bid earlier this year that provided them with control and ownership of four contiguous city blocks within the core Ro2 area. This was the Sponsor’s first lifestyle branded hotel development and their first hotel development within the state of Arizona. These facts presented a challenge for many groups, despite their extensive experience developing other asset classes, including Monroe 44, the tallest residential building in Arizona.

    GSP sourced a hospitality lender who shared the Sponsor’s vision and excitement about the revitalization of the historic community, recognizing their ability to execute this project under the Cambria Brand. Despite several collateral restrictions presented throughout the application process, GSP was able to facilitate creative alternative scenarios for security of both Lender and Sponsor, ultimately achieving a mutually agreeable solution and additional proceeds to cover the new shortfall. The three year floating rate note was priced at 1 Month LIBOR + 7.50%, and was sized to 68.0% of project costs.

    Rate: 1 Mo. LIBOR + 7.50%
    Term: 3+1+1
    Amortization: Interest Only
    LTC: 68.0%
    Guarantee: Non-Recourse (with standard bad boy carve-outs)

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    $25,000,000 Construction Mezzanine Financing for Speculative Office in Tempe, Arizona

    October 3, 2018

    Transaction Description:
    George Smith Partners arranged $25,000,000 of Mezzanine construction financing and supported the sponsor in negotiating the $80,500,000 senior financing for a speculative, mixed-use, office and retail project located on North Scottsdale Boulevard and Tempe Town Lake in Tempe, Arizona. This phase of the development includes 250,000 square feet of a 15 story, Class A, high rise office space and 44,000 square feet of lifestyle retail space.

    Challenges:
    Given the perceived historical volatility of the Phoenix and Tempe office markets, and the speculative nature of the business plan, many potential investors were unwilling to take on the risk. Preleasing was critical to the advancement of the Project and to the capital markets. The Senior Lender mitigated the uncertainty by requiring a minimum leasing threshold to be achieved prior to advancing any loan proceeds. However, the local leasing market would not commit to new leases without a committed delivery date.

    Solution:
    The Sponsor, with George Smith Partners’ assistance, was able to develop an alternate structure to the Senior Loan. This allowed the Sponsor to fully engage the equity solution and provide a certain completion date to the Lenders and the tenant market.

    TERMS ARE CONFIDENTIAL

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    $10,750,000 Preferred Equity for Condo Construction; 83% Loan to Cost

    September 19, 2018

    Transaction Description:

    George Smith Partners successfully arranged $10,750,000 in preferred equity financing for the ground-up development of 61 condo units in an infill Los Angeles location.  The Sponsor acquired multiple adjacent single-family homes and successfully took them through the entitlement process. The Sponsor arranged the senior construction financing up to 65% Loan to Cost with a local bank and was seeking additional debt to complete the capital stack.  George Smith Partners located a preferred equity provider that give full credit for the imputed land value which put the preferred equity at 83% of total project cost and did not require any additional cash from the Sponsor.

     

    Rate: 13%
    Term: 36 Months
    Amortization: Interest Only
    LTC / LTV: 83% / 70%
    Recourse: Full Recourse
    Lender Fee: 1.0%
    Exit Fee: 1.0%

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    Hotel Construction Loan | 53,000,000: Non-Recourse Construction Financing for the Development & Conversion of a 32 Key Boutique Hotel into a 177 Key Marriott Autograph Collection Hotel in Scottsdale, AZ

    September 12, 2018

    Transaction Description:

    George Smith Partners secured a $53,000,000 non-recourse construction loan for the expansion of a 32-key boutique lifestyle resort into a 177-Key Marriott Autograph Collection in Scottsdale, Arizona. The construction financing provided the Borrower with sufficient funds to not only expand the Property by adding 145-keys but also to repay the existing lender in full and cover all closing and financing costs.

    GSP sourced a lender who understood the intrinsic value of the Property’s strategic location along with the development plans of the expansion. The three year floating rate note, priced at 8.95% + 1 Month LIBOR was sized to 64.5% of project costs. (This included an allowance of imputed equity, which represented a 25% increase in the Sponsor’s basis).

    Rate: 1 Mo. LIBOR + 8.95%
    Term: 3+1+1
    Amortization: Interest Only
    LTC: 64.5% (This included an allowance of imputed equity, which represented a 25% increase in the Sponsor’s basis.
    Guarantee: Non-recourse with standard bad-boy carve-outs

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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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    Construction Loans: $5,800,000 Financing Facility for Assemblage of a Full City Block for Construction of Resort Destination Mixed-Use Project

    July 25, 2018

    George Smith Partners successfully arranged the $5,800,000 financing facility for the purpose of finalizing the assemblage of a full city block in a mountain resort destination. The funds were utilized by the 3rd generation owner of the land to close on a city parcel in order to finalize their submittal for permits for the future development of destination mixed use development. A challenge that GSP faced was to secure a new capital source after the original lender backed out prior to closing. GSP successfully identified a new capital source who understood the complexities of the market as well as the opportunity and was able to close within three weeks.

    ALL TERMS CONFIDENTIAL

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    $24,400,000 Construction Loan and $7,900,000 PACE Equity Financing for a Resort Hotel Development in Coachella, CA (As Seen in Today’s LA Times)

    June 28, 2018

    George Smith Partners successfully arranged $32.4 million in financing for the ground-up development of a 250-room, 35-acre, casitas-style resort IHG Hotel Indigo in Coachella. The financing included both a $24.4 million senior construction loan and an $8.0 million PACE funding for the hotel. This hotel will be the closest hotel to the Empire Polo Club – the site of many famous music festivals held annually. The property includes a 13,000-sf convention center, 10,000 square-foot salt water pool with a summer cooling system and a DJ booth/cat walk, an 11-acre ‘playground’ to host music related events, wellness retreats and corporate/private events. The 250 guestrooms, which has private entrances and in-suite bathrooms, are located in spacious 2, 4 and 6 bedroom casitas with living rooms and social areas for entertaining options. The hotel also provides a restaurant, spa, gym and yoga/pilates studio.

    In today’s lending environment, hotel construction is a challenge to finance, but with GSP’s deep relationships, they were able to find a lender who was excited about the concept. Also, this is the first-ever PACE-financed new construction hotel project in California. The PACE equity, essentially an energy loan, finances the energy-efficient HVAC, which gives the Sponsor the ability to finance the high-end, environmentally friendly resort hotel they envision. The City of Coachella has also enthusiastically supported the project by providing a $25 million tax abatement and approving Mello Roos bond financing for the infrastructure.

    By communicating the Sponsor’s proven track record of developing and operating hotels, as well as their strong connections to A-list performers and music labels available for future concert performances, GSP was successful in proving the Sponsor’s unique ability to make this resort a ‘go to’ destination during the area’s many music festivals.

    ALL TERMS CONFIDENTIAL

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