Industrial

George Smith Partners secured $4,950,000 of permanent financing for two industrial buildings (one single tenant, one two tenants) located in Castaic, California. The 30-foot clear height buildings are located side-by-side and collectively total 57,825 square feet. One of the properties was constructed in 2011, while the other was built in 2016. The buildings are both 100% occupied but all of the tenants have lease terms that expire within the next four years. GSP was able to identify a capital source that would provide a non-recourse, long-term fixed rate loan. The borrower wanted to maximize cash flow which was achieved by taking minimal ongoing reserves, securing a 30-year amortization, and negotiating four years of interest only. The 10-year loan was priced at 5.17% at 65% LTV and offers a stepdown prepayment structure.

George Smith Partners secured financing totaling $7,500,000 on two separate industrial properties in Los Angeles. The properties are occupied by a major domestic furniture manufacturer. The loans provided a return of equity to the borrower. The lender did not require an appraisal, but was able to use market comparables to substantiate the value of the properties. GSP provided extensive market data showing recent transactions of similar properties in order to further support the lender’s value. The lender was ready to close within two weeks of application.

Transaction Description:
George Smith Partners successfully secured $1,325,000 in financing for the purchase of a 9,500 square foot industrial/warehouse building in Los Angeles. The proceeds were structured as $1,125,000 for a first trust deed at a rate of 7.9% and $200,000 for a second trust deed at a rate of 12.99%. The combined proceeds represented 70% of the acquisition price. A number of challenges were encountered in securing financing for the property. First, our Sponsor had to secure financing within 1 week. Second, the subject property was leased to a tenant who was occupying the entire 9,500 square foot property, even though the lease agreement stipulated only 5,000 square foot of space was available to them. While GSP was marketing the deal, legal proceedings were underway to compel the tenant to comply with his lease. Finally, there was lease-up risk since it was unclear when the buyer would be able to lease the remaining space to a new tenant. The selected lenders had an intercreditor agreement and were able to offer a quick close with minimal documentation. The lenders required only a property walkthrough in contrast to a full appraisal. GSP provided rent comps that supported the Sponsor’s business plan for the property, as well as market data that showed vacancy of less than 1% for industrial product in the market. As a result, our lenders were able to underwrite to the in-place income of the property, and were comfortable with the value regardless of the outcome of the pending litigation with the tenant.

George Smith Partners placed a $5,000,000 senior trust deed on an existing net-leased container depot in the Inland Empire of Southern California. This location is ideal given the accessibility to the Ports of Long Beach, Northern and Eastern Interstates and within two miles of an industrial railhead. With only 2,000 square feet of improvement on an 11 acre parcel, many capital providers viewed this as a land loan despite the arms-length net lease to a global logistics operator. Our Lender also structured a $1,500,000 line of credit to cover expansion costs of an adjacent parcel to be leased to the same logistics operator. Both facilities carry five-year terms although the senior note is fixed at 4.23% and amortizes over 15 years whereas the Credit Line is priced at Prime + 0.75% and is interest only. The combined debt service underwrote to better than a 1.50 dcr on actual cash flow at close.

Transaction Description:
George Smith Partners placed the $8,400,000 cash-out refinance of a 105,752 square foot owner-user warehouse & distribution industrial building in Valencia, California. The single tenant is a non-credit owner-user who will utilize a portion of the loan proceeds for reinvestment into a building and operations expansion. Fixed for ten years at 4.69%, the non-recourse loan amortizes over 30 years.

Challenge:
Our Sponsor requested a non-recourse cash-out execution for a non-credit single tenant; not an ideal structure in today’s capital market lending environment. The physical improvements included a recently added 10,000 square foot building that lacked permits and a certificate of occupancy. Underwritten value was required from this unpermitted addition in order to maintain loan proceeds.

Solution:
George Smith Partners identified an institutional capital source that underwrote the transaction as an investor property and not as an on-going business concern. The pocket to pocket lease was supported by the strong industrial market location and supplemented with a list of multiple tenants interested in assuming occupancy should the Subject become available for lease. George Smith Partners worked with the lender to structure around the permitting issue by posting a small “permitting” reserve and allocating six months post-closing to obtain the Certificate of Occupancy for the addition. All additional square footage was used in underwriting, resulting in a higher underwritten value and allowing for a $2,000,000 cash-out through this refinance.

George Smith Partners placed the $3,000,000 permanent refinance of a 40,000 square foot single-tenant industrial building in Gardena, California. Sized to 55% of value, the loan floats at LIBOR+1.75% for the 10 year term and is amortized over 30 years netting a substantial cash flow after debt service. Single tenant event risk was mitigated with the low loan to value and the vanilla use of this asset in a strong industrial market. Our Sponsor requested floating rate debt to take advantage of the low LIBOR index as well as maintain flexibility for future equity calls; either through sale or refinance.

Transaction Description: George Smith Partners successfully placed the cash-out refinance of a multi-tenant industrial business park in Portland, Oregon. This non-recourse financing provided for a return of equity with no hold back to our Sponsor while allowing for an opportunity to earn a return on equity once the Borrower finalizes their business plan. At funding the property was 90% occupied in a 3% vacant market. Sized to 65% of current value and floating at LIBOR+4.75% (floored at 5.25%) interest only two years, there is no prepayment penalty or exit fee.

George Smith Partners successfully structured and placed the non-recourse acquisition bridge loan for a 27 building multi-tenant industrial business park, totaling 475,000 square feet with over 231 tenants in the Pacific Northwest. At acquisition the property was 82% occupied with a going in debt yield of approximately 9.5%. $24,530,000 of the on-book financing was funded at closing with $7,220,000 to be future funded for immediate property improvements, future upgrades which includes funding for the Sponsors’ strategic spec-suite program, as well as future leasing costs. Upon achieving a predetermined net operating income, the lender will advance an additional $1,250,000 earn-out. Interest will not be paid on future funding until disbursement. Floating at L+2.75% for a three year term; the first two years are interest only. There is one (1) two-year extension.

Transaction Description: GSP successfully structured and placed the non-recourse acquisition bridge loan for a three property multi-tenant industrial portfolio, totaling 305,000 square feet in the Western United States. At acquisition the portfolio was 85% occupied with a going in debt yield of sub-9.5%. $13,800,000 of the on-book financing was funded at closing with the remaining $2,200,000 is to be future funded for immediate property improvements, future upgrades which includes immediate funding for the Sponsors strategic spec-suite program, as well as future leasing costs. Interest will not be paid on future funding until disbursement. The properties are able to be released as long as the remaining collateral maintains a 1.35x debt service coverage ratio on outstanding loan balance. The interest rate floats at L+2.75% for a three year term on an interest only basis for the initial two years of the term, with one (1) two-year extension.

Transaction Description: George Smith Partners successfully placed a high leveraged, non-recourse $22,800,000 refinance for a mixed-use 225,000 square foot warehouse building with a significant office component. The Orange County, California property sits on a 12 acre parcel and was constructed in 1966 and subsequently renovated in 1985 and again in 2001. The 2001 renovation was structured to accommodate a government agency whose footprint occupies 60% of the gross improved square footage. Their build-out consists of 31% office (2-story), 19% air conditioned warehouse, and 50% conventional warehouse. Loan proceeds were allocated to cover additional tenant improvements and lease commissions as this agency recently extended for an additional 15 year term. The remaining square footage is leased to an industrial bakery who has occupied the property since 1989. Their lease rolls during this 10 year loan term. GSP sourced a capital provider who underwrote the tight market constraints and agreed to push proceeds below an 8.0% debt yield without layering on mezzanine debt. Fixed at 4.92% for 10 years, the non-recourse loan is interest-only for 2 years before rolling into a 30 year amortization schedule.

Transaction Description: George Smith Partners successfully structured and placed the non-recourse acquisition bridge loan for an off-market and significantly undermanaged four property multi-tenant industrial portfolio, totaling 445,000 square feet in the Western United States. At acquisition the portfolio was 74% occupied with a going in debt yield of sub 7.5%. $22,050,000 of the on-book financing was funded at closing. The remaining $4,700,000 is to be future funded for immediate property improvements, future upgrades including funds for the Sponsor’s strategic spec-suite program, as well as future good news leasing expenses. There are release provisions to allow individual buildings to be sold or refinanced. The interest rate floats at L+4.25% for a three year term on an interest only basis, with two (2) one year extensions. Our Sponsor purchased a two year cap at closing with a required renewal in the third year.

Transaction Description: George Smith Partners successfully structured the cash-out non-recourse refinance of an 83% leased multi-tenant industrial business park. The Sponsor originally acquired the non-performing asset in 2014 and successfully executed their reposition plan; increasing physical occupancy and stabilizing cash flow. With the continued leasing velocity, the Borrower requested the opportunity to continue to capitalize on the remaining upside. This new financing structure provided an immediate return of equity while creating a floating rate debt stack with full flexibility and a limited reserve for tenant improvements and leasing commissions. Floating at LIBOR+3.50%, the three year term carries a 4.25% floor. There are two (2) one-year extensions, with no exit fee, and open to prepayment any time at par.