October 22, 2014
Transaction Description: George Smith Partners successfully placed the financing to construct a seven-unit lot subdivision in Echo Park a Los Angeles suburb. The Sponsor purchased the land and began the entitlement process in March 2013. The project was designed as an alternative to older, more expensive detached single-family product common to this submarket. The non-recourse loan is funded to 85% of total project cost priced at Prime plus 2.5%, subject to a 6.5% floor. There is no profit participation at this leveraged level. Challenge: The Borrower was a first time builder who required non-recourse financing at a high advance rate. While the Echo Park stigma is rapidly diminishing, several capital providers do not yet consider this market as viable on a long-term basis. Solution: Mr. Lee recently financed several housing transactions in the immediate area. His recent tombstones and market information demonstrated real demand for additional affordable product so close to downtown Los Angeles. Although a non-recourse loan, GSP featured the financial strengths of the Borrower and his GC to offer assurances that the business plan would execute as prescribed. Rate: P+2.5% w/6.5% Floor Term: 18 Months Amort: Interest Only LTC: 85% Non-recourse Lender Fee: 1.5% Advisors: Jonathan Lee, Adam Candler
January 23, 2014
1 – 22 – 14 Transaction Description: GSP placed the cash-out refinance of a 521 acre land tract to be permitted for 921 single family residential lots, 434 multifamily units and an additional 270,000 square foot commercial project in Orlando, Florida. The two and a half year term is fixed at 5.85% with no personal repayment guarantee. Recourse is limited to a capitalized entity. Challenge: Still 18 months from final permitting and actual site development, the Sponsor was seeking to increase his equity yield by appropriately leveraging the land. Traditional bank-style pricing was required yet a personal repayment guarantee was not available. Solution: GSP identified a residential lender that understood the value in the land and became comfortable with the expertise and experience of the Sponsor. The Borrowers’ business plan was vetted through market research and the capital provider became comfortable that demand will only increase during the duration of the permitting process. Rate: 5.85% Term: 30 Months LTV: 50% Advisor: Malcolm Davies
January 23, 2014
1 – 22 – 14 Transaction Description: George Smith Partners successfully structured a 79% loan-to-cost construction loan for the ground-up development of a “For-Sale” townhome project in Denver, Colorado. At close, the project was fully entitled, permits were ready to be pulled, and the developer had pre-sold several units. The 18 month term is priced at Prime plus 1.0%, floored at the start rate. There is no prepayment penalty. Challenge: The developer required a highly leverage loan in order to complete the project and re-establish his development track record since the recession. Despite the housing recovery in most major markets, many lenders remain apprehensive about lending on new ground-up for-sale residential projects. Solution: GSP sourced a capital provider knowledgeable with this specific location and depth of the marketplace. The lender became comfortable with the developer’s expertise and business plan. GSP vetted the risk exposure in advance of completing the application with the lender to structure objective criteria that satisfied both the developer and the lender. Rate: Prime+1.0% Term: 18 Months Amort: Interest Only LTC: 79% Prepayment: None Recourse Advisor: Loren Bedolla
October 3, 2013
10 – 2 – 13 Transaction Description: George Smith Partners placed the $6,500,000 Acquisition & Senior Land Development Financing for the 30 acre First Phase of a 233-acre master development project in Indian Trail, North Carolina, an outer-ring suburb of Charlotte. The loan will fund development of 76 single family lots, including all municipal infrastructure services, and allow the Sponsor to deliver serviced single family lots for sale to homebuilding companies. The Sponsor plans a total of four phases in the 233-acre development, which will encompass a total of 582 single family lots, as well as horse stables and pastures, equestrian trails, and other recreational facilities. An existing development marketed alongside the project has been 85% developed and includes 527 single family homes, 89 townhomes, and 10 live/work units.
June 19, 2013
6 – 12 – 13 Transaction Description: George Smith Partners placed the $52,285,850 Senior Construction & Mezzanine Development Financing w/Performance Bonds for Phase I of a 310 acre master development project in Upper Marlboro, Prince George County, Maryland. Upon completion, the build out will encompass 533,000 sf of retail, 845 “for sale” SFRs & town homes, 2,240,000 sf.of office, 600 key hotels (multiple flags) and 884 multifamily rental units. The financing provided was for Phase I of the development, which consists of the entire infrastructure to deliver 500,000 sf of retail, 348 town homes, 504 rental units and a 150-key hotel. The raw land was initially purchased in February 2012 for $23,700,000. Challenge: The foreign based international development company has been extremely active in acquiring land in the United States during the past 5 years from their Canadian HQ. Collectively, they have acquired over 50,000+ acres in Arizona, Texas, Georgia, North Carolina, DC Region and Southern California. While they have been active in developing their land holdings in Canada since 1979, this was their first large financing request in the U.S. (The company owns all of their land un-levered). To add further complexity, the ownership structure in this asset included a Canadian Public Company and a German entity, which owned the asset as a TIC Structure. This precluded the sponsor from using a pledge of membership interest for the mezzanine financing. Sponsorship also had an important deadline to start the development. Negotiating the inter-creditor was paramount in a successful closing of the capital stack between the senior & mezzanine lenders. Prince George County has some of the most difficult performance bonding requirements in the country. Solution: GSP immediately embarked on a strategic and national in scope process of marketing that included face-to-face meetings in Boston, New York, Maryland, Virginia, DC, Texas, Arizona & California. The project included many moving parts involving articulating the strengths in multiple disciplines; valuation in retail, single family, hospitality, multifamily rentals, office & residual tract land. Combining this articulation and blanketing the country, GSP was able to secure senior debt from a Texas based bank that understood land development and was excited about the prospects for future development opportunities with this sponsor. GSP then structured the mezzanine loan from a New York based hedge fund making its first investment in commercial real estate. By focusing on market education in structuring and collateral, we were able to successfully complete a complicated inter-creditor agreement and funding by the mezzanine loan. Securing the mezzanine loan as a 2nd trust deed, we were able to provide the mezzanine lender it’s security, rather than by the standard pledge of membership interest. By adding a portion of the bonding capacity from the lender, the Sponsor was able to reduce the overall costs to secure the performance bonds for the project. The Grand Opening of the project is Thursday, June 13th.
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