-
Arms-Length Non-Performing Note Purchase on a Southern California Mixed-Use Property to 85% Loan-to-Purchase
August 23, 2012
8 – 22 – 12 Transaction Description: GSP successfully placed the 85% loan to purchase debt on the distressed note for a first time note purchaser. The original loan funded a large mixed use property that was part of a complex New Market Tax Credit (NMTC) Project. The note seller mandated a quick sale with a five day due diligence period and a five day close. GSP secured a two-year loan for 10.25% interest only. Challenge: Unlike traditional real estate assets, note purchasers only acquire the legal right to collect previously contracted mortgage payments; and in event of default, foreclose on the property. A note lender has very limited options to secure their interest in this type of transaction. The quick timing and knowledge that the original borrower is non-cooperative, using every legal tool to delay or block lender actions, added a significant complexity to this transaction. In addition to being contested by the primary borrower, the NMTC structure of the borrower increased the difficulty of this transaction. Solution: GSP used its’ expertise and strong relationships to identify a private equity lender who had financed 3rd party contested notes and worked with the client to understand the collateral loan and the NMTC structure. With the LOI signed on day two of the five day due diligence period, GSP worked with the client to complete legal and due diligence before the end of the five day period. GSP successfully closed the transaction for the client within the five day period after the due diligence period as required by the note seller. Rate: 10.25% Interest Only Term: Two Years LTC: 85% DCR: 1.20 Recourse Broker: Bryan Shaffer -
$2,145,000 10 Day Quick-Close Acquisition Financing for an Atlanta REO Apartment Building
June 28, 2012
6 – 28 – 12 Transaction Description: GSP successfully placed the acquisition financing for 172-unit apartment building that was foreclosed on by the prior lender. The property is currently 90% occupied at below market rents. While not a true distressed asset, the former lender was not interested in owning the property, and liquidated it for $3,300,000 ($19,200 per unit). The property requires $300,000 of cosmetic improvements for maintaining or upgrading gates, fences, swimming pool & roof repairs, and stairwell reinforcement. Challenge: The borrower is an absentee owner, and required quick close financing to accommodate their escrow commitment. Traditional “Hard Money” was not an option as the Borrower was rate sensitive and required higher leverage debt. Certainty of execution was also mandated to avoid forfeiture of the Borrowers’ non-refundable escrow deposit. Solution: GSP identified a reliable private equity capital provider who is comfortable with the Borrower’s business plan despite its out-of-state location. The lender provided an aggressive loan structure and proceeds at favorable pricing and ultimately closing in 10 days from signing of loan application. Rate: 9.5% Term: 2 Years Amort: Interest Only LTC: 65% Prepayment: 6 Month Locked then Open Recourse Lender Fee: 2.5% Broker: Gilda Rivera -
$4,200,000 Distressed Note Acquisition
May 31, 2012
5 – 30 – 12 Transaction Description: GSP arranged hypothecated debt financing for the acquisition of a distressed senior note. The 1st Trust Deed for the 60-unit multifamily property was being serviced, but had matured. As a part of a broader balance sheet clean-up effort, the bank intended to sell off the 1st Trust Deed. Due to deferred maintenance and temporary management problems, the note was acquired at an approximate 25% discount to face value. The underlying collateral promises significant upside with tighter controls and a light renovation. Challenge: The Purchase and Sale required an 18-day close with deposits hard day one. Certainty of execution and expedience was paramount. High leverage, non-recourse debt was required. The property owner filed a personal bankruptcy that entwined the underlying collateral of the note. Solution: GSP called on a close relationship with a dependable and sophisticated private lender with expertise in bankruptcy and note acquisitions in order to assure a smooth closing. GSP worked with four separate legal teams to perform due-diligence, negotiate documents, monitor the bankruptcy process, and close the purchase. The note buyer anticipates collapsing their position to assume control of the fee, stabilize the asset, and refinance with institutional debt within one year. Rate: 11.5% Term: 18 Months+12 Month ext. Amort: Interest Only LTC: 85% Non-recourse Brokers: Steven Orchard, Shahin Yazdi -
$7,300,000 Discounted Payoff of a Mixed-Use Office and Retail Building in Claremont, California
February 21, 2012
2 – 21 – 12 Transaction Description: George Smith Partners successfully placed the refinance of a discounted payoff (DPO) on a mixed-use, office & retail asset in Claremont, California. The subject property is listed on the Historical Landmark Registry. The new loan financed 97.3% of the total DPO amount on a non-recourse basis for a 3 year term. Challenge: The Sponsor did not have formal approval of the DPO terms from the existing lender until after appraisal receipt, and needed to close within weeks thereafter. While going through the DPO process, one tenant vacated the building. Solution: George Smith Partners worked with the new Lender to secure full approval and commitment prior to the formal DPO agreement. GSP was able to demonstrate that there was significant value in the property beyond what the existing Lender allowed. After the unexpected tenant vacancy, the new capital provider held terms by decreasing reserves and allowing for a lower debt service coverage ratio. Rate: 6.75% Term: 3 Years Amort: 30 Years LTV: 73% of as-is Value LTC: 97.3% DCR: 1.25 Non-recourse Brokers: Steven Orchard, Michelle Lee, Gary E. Mozer -
$7,000,000 Non-Recourse Acquisition & Reposition for a Tertiary Regional Mall
February 16, 2012
2 – 15 – 12 Transaction Description: Financing closed from start to finish in 10 days. This underperforming retail asset was operating at breakeven cash flow, but carries an incredible potential for redevelopment. Although the Borrower held expressions of interest from numerous potential tenants, no leases were negotiated or executed by funding. The financing allowed the sponsorship to acquire the property from a bank within a compressed timeframe, and included an additional capital funding + interest reserve to support the loan during lease-up through the redevelopment and entitlement process. Challenge: The Borrower committed significant non-refundable deposits to the seller, mandating the certainty of close. This acquisition required a quick close as the new owners’ business plan included multiple reposition/redevelopment scenarios with both demand and entitlement risk. No “warm-body” repayment guarantee was available for the new financing. Solution: GSP relied heavily on its relationship with the Lender and access to the primary decision makers. This produced a loan with a mechanism that incentivized the Sponsor to successfully execute the business plan and compensate the Lender for the perceived market risks. The Lender understood the “story”, and quickly evaluated the in-depth market information provided by the Borrower. The Lender and Sponsor worked in good faith without formalized business terms in order to expedite and close the acquisition by the Seller’s drop-dead date. Sponsorship expertise in this market was crucial in securing the non-recourse debt. Non-recourse Brokers: Gary E. Mozer, J. Jay Brooks -
Foreclosure Avoided! $7,900,000 Bridge Loan Funded in 7 Days – Closed December 30th
January 18, 2012
1 – 18 – 12 Transaction Description: GSP arranged financing for a vintage historic Bay Area warehouse. The 28,000 s.f. property was fully renovated in the early 2000’s and is leased to a single tenant for creative office use. The building is fully entitled for 74 units of residential (For Sale or Rentals). The Sponsor contacted us with less than 2 weeks remaining in the year and needed to close by year-end or lose the property to foreclosure. The loan funded at below break-even DCR and the Lender did not require an interest reserve to maximize proceeds at closing. Challenge: The Sponsor had a hard payoff date by year-end with an executed deed in lieu. The Borrower was under a forbearance agreement with the deed in escrow, meaning the Sponsor would lose the property on January 2nd. Solution: GSP sourced a Los Angeles private placement lender who closed in 7 days under the terms agreed to in the application. The Lender increased loan proceeds by $400,000 during the loan process. The Lender flew up and met with the Borrower the day the application was executed. The Lender agreed to accept some documentation (ie lease guarantee) post-close. GSP funded 3 loans with this capital provider in 2011. Rate: 12.0% Amort: Interest Only LTV: 70% Lender Fee: 3% Exit Fee: 2% Brokers: Steve Bram, David R. Pascale, Jr. -
$1,740,000 Cash-Out Refinance for Unentitled Land
September 21, 2011
9 – 21 – 11
Description: GSP’s Sponsor required a bridge loan for the cash-out refinance of a 12.5-acre unentitled parcel in Oceanside, California. Proceeds from the 18-month, Interest Only loan will be used for pre-development costs on a proposed 165-room Hilton flagged hotel near the Pacific Ocean. Challenge: Lenders’ appetite for land financing is relatively low, and pinpointing a reliable Hard Money lender is difficult in today’s market. The property was free & clear at funding and despite significant cash invested, is still considered a cash-out scenario by capital providers. The appraised valuation of the land was lower than expected. Solution: GSP identified a reliable private equity capital provider who is comfortable with the borrowers’ business plan and exit strategy. The lender ultimately funded a greater loan-to-value ratio than originally forecasted, and was able to close in a timely manner. Rate: 13.5% Term: 18 Months LTV: 45% Recourse Broker: Gilda Rivera -
$5,200,000 Acquisition Loan for Auto Dealership Conversion
August 18, 2011
8 – 17 – 11 Transaction Description: GSP successfully placed the $5,200,000 acquisition/reposition loan for the conversion of a former auto dealership into a retail center. The future multi-tenant retail property loan provided 67% of the purchase price with an additional commitment of $500,000 for “Good News” dollars upon the execution of leases. Challenge: The site had environmental issues from the repair shop at the former dealership. The Sponsor required non-recourse for a quick-close loan as the purchase option contract had expired. Solution: GSP identified a lender that understood the location’s potential, becoming comfortable providing capital with no leases in hand from retailers, only letters of intent. The lenders’ environmental engineer quickly analyzed the Phase I & Phase II reports and concluded the remediation plan and costs were well founded. The loan was funded without a valid purchase and sale agreement and was able to close in less than two weeks. Tenant improvements will be lender funded up to $500,000 with signed leases. Rate: 11.5% Term: 2 years Amort: Interest Only LTV: 67% Non-recourse Brokers: Steve Bram, Jonathan Lee -
Spec Home Construction Loan
April 20, 2011
4 – 20 – 11 Transaction Description: GSP successfully placed a non-recourse acquisition and construction loan for an investor to acquire a tear-down single family residence and build a new ground-up spec home to be sold upon certificate of occupancy. Challenge: The borrower was in escrow to purchase a small 1950’s bungalow on a large lot in a desirable Los Angeles residential market. The borrower needed funds to close quickly in addition to funding construction costs going forward. Solution: GSP demonstrated the excellent location, construction concept, borrower’s track record, and strength in the local market to a private lender who funded 100% of the purchase price and provided additional development dollars for construction. GSP established the lender’s low risk position using current for-sale information and the exit sale probability of the borrowers’ completed project. Because of the ample market information presented by GSP, the lender did not require an appraisal and was comfortable funding the 75% loan-to-cost transaction. Rate: 13.0% Term: 1 year + extensions Amort: Interest Only LTC: 75% Prepayment: None Non-recourse Lender Fee: 2.0% -
$2,000,000 Cash-Out Industrial/Manufacturing Refinance
April 6, 2011
4 – 6 – 11 Transaction Description: GSP successfully arranged the non-recourse financing of an 80,000 sf owner-occupied warehouse in Vernon (Los Angeles), California. The company – an 80 year old furniture manufacturer – owns three separate buildings where they manufacture, assemble and ship finished goods. The company posted operating losses the last three consecutive years and was unable to qualify for bank debt. Corporate ownership was unwilling to guarantee on a personal level. GSP identified a fund willing to provide a return of equity based exclusively on the real estate value on a non-recourse basis. Proceeds will be used to “prime the pump” as corporate sales in Texas and the Southeast have increased and continues to gain momentum. The company posted a profitable first quarter in 2011 and is well positioned for a return to profitability. Rate: 9.0% Term: 2 years Amort: Interest Only LTV: 35% Prepayment: None Non-recourse Broker: Jonathan Lee -
$2,600,000 Acquisition Loan for 90% vacant 26,000 sf Strip Retail in Henderson, Nevada. Lender funded 7 business days after receiving request from GSP!
March 23, 2011
3 – 23 – 11 Transaction Description: GSP arranged quick close financing for this 2010 constructed retail property. The acquisition price was well below replacement costs. The center consists of 1) 2,600 sf pad leased to a leading fast food tenant for 20 years, 2) A vacant 15,000 sf retail building with leases in negotiation for 11,500 sf, and 3) Two pads totaling 9,900 sf. Both pads are vacant but have LOIs being circulated from other fast food tenants. Las Vegas retail vacancy exceeds 20% although the lender understood this assets’ prime location and leasing potential. The lender also funded an interest reserve to cover the below break-even debt coverage. Rate: 12.5% Amort: Interest Only paid through a lender funded reserve account LTC: 67% Lender Fee: 4.5% Broker: Steve Bram
Don't Miss a Fact,
Sign Up for FINfacts!
FINfacts is a weekly newsletter highlighting recent financings and economic insights.
Subscribe Here
