July 3, 2014
7 – 2 – 2014
Transaction Description: Raffi Sarkissian successfully placed the acquisition debt for the purchase of a 20,000 square foot single-tenant industrial building in the San Fernando Valley of Los Angeles. The tenant/buyer is a foreign national who will occupy and operate from this location, but has yet to initiate any business here in the States. The capital provider became comfortable with the business plan of feeding existing overseas operations from this location. The vanilla industrial use in a strong market added comfort to the loan execution. Rate: 8.5% Term: 3 Years Amort: Interest Only Prepayment: None Recourse Advisors: Raffi Sarkissian, Tylene Turner, Manuk Boyajian
April 17, 2014
4 – 16 – 14 Transaction Description: George Smith Partners placed a land acquisition and infrastructure construction loan secured by 165 acres of a master planned community in Albuquerque, New Mexico. The collateral allows for over 1,100 apartment units, almost 600 single family residences, plus some commercial development. The Sponsor will develop residential lots and sell them to national and regional homebuilders. Financing included an initial funding to repay the existing lender and other expenses plus a secondary facility to fund future construction of residential lots and infrastructure. The two year term was limited to 65% of current value but was 87% of the actual acquisition price. Financing also allows for a full interest reserve and funding of 65% of new construction costs going forward. Fixed at 12.5%, the loan carries a 30 day interest prepayment penalty. Challenge: Financing this project offered several challenges. Since the last real estate cycle, unimproved residential land has fallen out of favor because it is a non-cash flowing asset and takes considerable time to monetize, posing considerable risk to a lender. Next, the Sponsor was involved with complex negotiations for a discounted payoff to the existing lender and restructuring payments to bondholders. Finally, Albuquerque is considered a tertiary market and, therefore, it is not a popular target location for many lenders and investors. Together, these challenges presented a formidable task to sourcing a financing partner. Solution: GSP immediately commenced on a targeted marketing effort to well-suited financial partners and sourced a capital provider who was not only knowledgeable about the location and marketplace, but also comfortable with 1) the investor’s expertise consisting of 35 years of land development and homebuilding experience including more than 20 years in Albuquerque; 2) a land basis that was the lowest in the marketplace; 3) level of guarantee (full recourse); and 4) a business plan that included already executed homebuilder contracts for residential lot purchases. GSP vetted the risk exposure upfront with the new capital provider and worked to structure objective criteria to satisfy the Sponsor and Lender. Rate: 12.5% Term: 24 Monthsw/extension Amort: Interest Only LTV: 65% Prepayment: 30 Days of Interest Recourse Lender Fee: 3 Points Advisor: Loren Bedolla
April 3, 2014
4 – 2 – 2014 Transaction Description: GSP successfully placed the $4,500,000 non-recourse acquisition loan for the purchase of a 41,000 square feet commercial office building located in Oakland, California. The property is currently being utilized and serves as the main campus for a local Charter School. Our Sponsor manages the school which has 650 students ranging from kindergarten to eighth grade. The school lease to the prior real estate owner was about to expire and the financing sourced by George Smith Partners allowed the tenant to take advantage and exercise their option to acquire the property. A second trust deed was recorded at closing bringing the total debt allocation to 73% of cost. The interest only, non-recourse loan closed in three weeks from application to funding. Challenge: The Borrower had been under contract to acquire the property for over 4 months and received several loan rejections as most lenders are not comfortable financing charter schools. Pending litigation threatened the future of the charter and thus the viability to service the debt. Timing became critical as the Seller received other higher bids. A portion of the buyers’ capital was in the form of a recorded second trust deed, typically a prohibition in the debt markets due to “cram-down” should the asset get moved into bankruptcy. Solution: GSP identified a reliable private equity capital provider who understood the pending lawsuit and is comfortable with the Sponsors’ business plan and the ultimate exit strategy. A higher than anticipated valuation (as confirmed by the sellers’ additional bids) added more comfort to the senior lender; ie allowing a recorded second trust deed, etc. The entire financing process took three weeks to fund and maintain the escrow.
March 20, 2014
3 – 19 – 14 Transaction Description: Bryan Shaffer successfully structured a recorded 2nd mortgage for an Owner/User Sponsor on a San Francisco industrial building. The cash-out proceeds were used for a much needed equity infusion into the business operations. The holder of the $6,000,000 Senior note agreed to allow the 2nd Trust Deed. The one-year term loan self-services through a lender funded interest reserve. Challenge: With less than two weeks to execute, the Sponsor required capital to rescue his business. It was cost prohibitive to retire the senior lender and very few capital providers will provide second mortgage debt. Solution: GSP quickly identified a private capital provider who understood the San Francisco Industrial Market and did not require further market support. The flat decision making process helped expedite the closing to meet the two week time-line from introduction to close. Rate: 14% Term: 1 Year + 1 Year Option Amort: IO-Funded through Interest Reserve LTV: 87% Advisor: Bryan Shaffer
March 13, 2014
3 – 12 – 14 Transaction Description: GSP successfully placed the 100% note acquisition financing for a single tenant owner/user distressed asset that was in bankruptcy. The prior senior note was retired and replaced with a new capital structure at close. The Borrower was placed in default by original lender and the deed of trust was sold through an auction company to a third party who forced the Borrower to file BK or lose his equity in the 1985 vintage West Covina office building. The two year term loan is priced at 9.99% and is Interest Only. Lender legal fees were capped at $6,500. Challenge: The originating institutional lender sold the note to a third party at the first indication of non-performance without consideration to the equity in their collateral. The third party had no intention of working out a repayment program and was pursuing judicial foreclosure to gain access to the asset. Without many options, the Sponsor proceeded to file bankruptcy to save his equity. The court did not look favorably at the distressed situation and chances of the bankruptcy standing were slim. Solution: Due to the type of asset, age and location, George Smith Partners secured financing to pay off both the first and second deed of trust and have the bankruptcy dismissed. Both the first and second lien holders were paid in full without any discount. Certainty of execution was vital since the court was ready to grant a release from stay if the lender could not fund on time.
February 20, 2014
2 – 19 – 2014 Transaction Description: GSP successfully arranged the cash-out refinance of an 80,000 square foot warehouse in Vernon, California. The Los Angeles based owner/user owns several separate buildings where they manufacture, assemble, and ship their product globally. The recent economic downturn netted losses posted to the company financials during the last several years and their bank was unwilling to extend additional credit. No warm-body was available to provide for a repayment guarantee. GSP identified a fund that was comfortable providing a return of equity based on the value of their real estate. Proceeds from the non-recourse loan will be used by the Company for expanding their operations lines as corporate sales have picked up throughout the United States.
August 29, 2013
8 – 28 – 13 Transaction Description: GSP placed the refinance debt for a negotiated discounted payoff of a CMBS loan collateralized by a 42,000 square foot Medical Office Building. Prior to the discount, the loan balance was approximately $6,200,000. The bridge loan is fixed at 12% for 18 months, allowing time for the Borrower to increase occupancy from the 30% at close. Challenge: The subject property went into default in the market down-turn when market rents declined and vacancy spiked. A major tenant vacated when given the option to buy their own property at a lower cost than renting. The Special Servicer agreed to a substantially discounted loan payoff in exchange for a very brief window to close. Solution: Certainty of close was most critical. GSP worked closely with the lender to push processing and worked with the 3rd party vendors to secure draft reports allowing for closing to execute as scheduled. Rate: 12% Term: 18 Months + 1 – Six Month Ext. Amort: IO LTC: 65% Prepayment: None Recourse Lender Fee: 3.5% Advisor: Nathan Auslander
August 7, 2013
8 – 7 – 13 Transaction Description: GSP successfully placed the bridge loan for the acquisition of a hotel, RV park, car wash, restaurant and vacant former casino commercial building located near Death Valley. The restaurant features slot machines and video gambling. The Sponsor purchased the mixed use property from the original developer who owned the asset for multiple decades. The subject is the best performing hotel property in this tertiary market, which serves as a gateway for campers traveling to Death Valley. Challenge: The tertiary market, an unincorporated town with a population of just over 35,000, proved to be a challenge for most prospective lenders. The large vacancy created by the former casino was a drag on overall occupancy, while driving down property value on a capitalized basis. Due to the multiple uses and lack of directly comparable properties, both Lender and Sponsorship had difficulty deriving an actual cap rate and value for the asset. Solution: GSP was able to source a West Coast Lender with the real estate knowledge to understand the strengths of the asset, regardless of the tertiary location. GSP and its Sponsor articulated the strengths of the asset with the large vacancy in place, and the potential upside presented by the space. GSP consulted multiple local appraisers to arrive at a capitalization rate which kept leverage (from a value perspective) at a satisfactory level for the Lender.
August 1, 2013
8 – 1 – 13 Transaction Description: GSP’s Ameet Chagan placed a permanent loan with a private lender secured by 6.25 acres of unentitled and unimproved land in Northern California. The fixed rate loan self-amortizes over 20 years with no prepayment penalty after the fourth year. Challenge: The subject property is located in a tertiary market and the borrower’s original bank land loan was sold to a private investor. The note had ballooned and despite the borrower’s strong banking relationships, no bank would facilitate a land loan without an exit strategy involving development within one year. Hard money financing would be expensive and carry an annual balloon risk, an event the Sponsor was anxious to avoid. Solution: GSP identified a private lender willing to underwrite the property’s highway visibility and proximity to big box retail centers. GSP demonstrated to the borrowers’ strong credit and financial strength, allowing the lender to qualify the low risk of default. The loan was structured as a fully self-amortizing loan to avoid all balloon risk and allow sufficient time to carry out the development plan as the market recovered. Rate: 8.25% Fixed Term: 20 Years Amort: 20 Years Prepayment: 4,4,4,4, open Recourse Lender Fee: 0.5% Advisor: Ameet Chagan
July 3, 2013
7 – 2 – 13 Transaction Description: Bryan Shaffer successfully placed the acquisition/reposition debt for a distressed 382 unit Multifamily property that was 40% occupied at funding. The loan closed within 7 days from when the lender received this loan request. The non-recourse loan to an international Borrower was sized to 70% of purchase plus 100% of “good-news” dollars to $3,000,000. Challenge: Funding a severely distressed building with break-even cash flow in a 7 day window presented a significant challenge. The “off-shore” structure of the Borrower added an additional level of complexity. Solution: Leveraging our long-term relationships and experience with an international Borrower, GSP was able to quickly identify the correct lender and close the transaction within the 7 day-deadline. Mr. Shaffer customized an ownership structure to allow for the release of the construction funds within the timeframes of the buyer. Rate: 11% Term: 18 Months LTC: 70% + $3M rehab Non-recourse Advisor: Bryan Shaffer
Structured Finance Las Vegas: $9,100,000 Bridge Acquisition of an 85% Occupied Las Vegas Retail Center
March 7, 2013
3 – 6 – 13 GSP placed the $9,100,000 acquisition bridge loan for the purchase of The Shoppes at Harmon Square, a 35,265 square foot un-anchored shopping center located on the corner of Harmon Avenue and Paradise Road in Las Vegas, Nevada. The capital provider is a private fund that GSP corresponds with. The property is located adjacent to the Hard Rock Casino & Resort. As the main route to McCarran International Airport, Paradise Road provides Harmon Square with a 100,000 daily car count. At acquisition, the center was 85% occupied with no national tenants. The business plan calls for the Borrower to leverage the strong location to attract regional and national tenants, providing a synergy that will support higher rents. The bridge loan is 73% of total capitalization including acquisition and lease-up, and offers a facility to borrow further proceeds based upon new leases to 100% of future occupancy costs. The two-year term is interest only, paid current out of cash flow with partial recourse. The loan requires a 12 month “make whole” provision and opens with no prepayment thereafter. It is anticipated that the bridge facility will be taken out with a long-term, fixed rate loan within 16 months. All other terms are confidential.
December 13, 2012
12 – 12 – 12 Transaction Description: GSP arranged the bridge financing of a stalled residential condominium project along the a Pacific Northwest waterfront. The project consisted of a 204- Slip Marina and entitlements for 208 to-be-built condominium units. The original construction lender was seized by the FDIC late 2007 and the project stalled mid-stream. At the time of the bank take-over, $44,000,000 of developer equity and bank debt had been invested in to development. The FDIC later forgave $24,000,000 of the then outstanding debt as a result of the bank failure. Our Sponsor has since engaged GSP to provide construction financing for what is now a re-entitled 373-Unit Apartment site. Challenge: Although the FDIC settlement forgave a bulk of the bank debt, many creditors were not paid when the project stalled. The sponsor entered into bankruptcy, ultimately exiting in 2011 with a court approved re-organization plan that included the repayment of all mechanic’s liens. The Developer was ordered to pay off the creditors by a specified date or the property would revert back to the creditors. Timing was critical with no opportunity for an extension. Solution: GSP identified a private bridge lender who became comfortable with the special purpose use, Sponsor credit issues and partial development of the site. The marina was completed and 95% occupied, offering a nominal cash flow to cover taxes and operating expenses. All grading and horizontal improvements were finalized with finished pads. A parking garage for the residential units had been completed to further support the “As-Is” value. GSP also identified a qualified ‘exit’ for the bridge lender having secured a qualified term sheet for the final phase of construction. While the construction due diligence was underway, funding could not occur timely to meet the court ordered schedule. The GSP lender funded literally in the 11th hour.
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