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Land Development/Housing

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    $5,340,000 Land Acquisition Loan for 226 Affordable Housing Units; Southern California

    October 20, 2021

    Transaction Description:

    George Smith Partners arranged $5,340,000 in a pre-entitlement land development loan for a proposed 226-unit affordable housing project in California. The 60% loan to acquisition is priced at 4.50% over LIBOR (with a 5.50% floor) interest only. The Sponsor is addressing a major need for affordable housing in the state. GSP secured a unique capital source to arrange favorable and flexible capital that met with the Sponsor’s timeline. The interest-only land loan was priced at 5.50%, with an 18-month term and one 6-month extension option. There is additional flexibility with the loan structure having no prepayment penalty. Despite dealing with a strict closing deadline on the purchase, GSP was able to identify a lender who could execute on terms and close within the purchase agreement.

    Rate: 5.50%
    Term: 18 Months, One 6 Month Extension
    Amortization: Interest Only
    LTV: 60%
    Prepayment: None

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    High Leverage Acquisition Land Financing of $5,880,000 for Build By-Right Land, to-be 82 Multifamily Units, 75% LTV; Koreatown area of Los Angeles, CA

    May 12, 2021

    Transaction Description:

    George Smith Partners arranged $5,880,000 in acquisition land financing for a 18,000 SF vacant lot to be developed into 82 workforce housing units located in the Koreatown area of Los Angeles, CA. The Sponsor is addressing the need for workforce housing in this area of Los Angeles. There is a gap between high housing prices/rent and employee household incomes. This is creating a shortage of affordable housing. The loan represents 75% of the purchase price and is structured with a holdback feature to cover the predevelopment soft costs to bring the Project to permit-ready status. The interest-only land loan was priced at 5.50%, with an 18-month term and one 6-month extension option. The extension option gives flexibility to the Sponsor should they be unable to pull permits within 18 months. There’s additional flexibility with the loan structure because there is no prepayment penalty. Amid market uncertainty, GSP was able to leverage their network to identify land lenders who could provide certainty of execution. Despite being on a strict closing deadline, GSP was able to identify a lender who could close within the required deadline.

    Rate: 5.50%
    Term: 18 Months, One 6 Month Extension
    LTV: 75%
    Prepayment: None

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    $16,500,000 Non-Recourse, Pre-Development Bridge Financing for Five-Property Co-Living Land Portfolio; Los Angeles, CA

    February 10, 2021

    Transaction Description:

    George Smith Partners secured $16,500,000 in bridge financing for a five-parcel land portfolio located in Los Angeles, CA. The five individual parcels are entitled (one in process of entitlements) for co-living developments totaling 211 units and 879 beds. The non-recourse loan refinanced existing debt, while providing for permitting and carry costs prior to development, with four assets slated to break ground in early 2021, and the fifth in late 2022. The loan is sized at approximately 50% LTC on a 6.90% fixed rate, non-recourse, with a 12-month term. The loan did not require an interest reserve.

    Given COVID related permitting delays and perceived impacts to the co-living product type brought by the pandemic, GSP was able to identify a lender that understood the stability of the submarkets for future development and the resilience and growth of co-living over the next several years. The infill development sites, and high-density entitlements provide strong value to the collateral base for this financing. The loan closed within five weeks of term sheet execution (including the holiday and New Year’s break).

    Rate: 6.90%
    Term: 12 months with one 12-month extension
    Amortization: Interest Only
    LTC: 50%
    Guaranty: Non-Recourse
    Lender Fees: 1.00%
    Prepayment: Open

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    Bozeman, MT Land Development Loan for 400 Unit Project

    January 6, 2021

    Transaction Description: George Smith Partners secured an $8,150,000 pre-entitlement land development loan for a proposed 400-unit project in Montana. The 65% loan to cost financing is priced at 5.00% over LIBOR (with a 50-bps floor) interest only. The loan will allow the Sponsorship to build out the necessary infrastructure to obtain the plat map and secure full entitlements in 2021. The Project will be one of the largest in the state of Montana and this crucial financing is essential to meet the growing housing shortage in these markets which have accelerated during the COVID-19 pandemic.

    Challenge: The large, pre-entitlement project is situated on the outskirts of a tertiary market that was officially classified as a Micropolitan Statistical Area (according to the 2010 Census). Moreover, despite the Institutional Sponsorship, the small market is not a target focus for many regional or national lending institutions traditionally capable of handling loans of this nature. The size of the loan also precluded many local/state banks from obtaining the necessary leverage for the Project.

    Solution: GSP secured a regional bank with headquarters near the Project which could understand the growth metrics of the projected Metropolitan Statistical Area (based on the 2020 Census) and how the Project will be vital to the long-term development of the City. The bank relied on the financial strength of the Sponsorship to advance 65% LTC and become comfortable with the pre-entitlement status of the Project. The loan which closed in 45 days from application also included a necessary bank provided, letter of credit to the City which guarantees the necessary capital to be invested into the Project to obtain entitlements.

    Rate: 5.5%
    LTV: 60%
    LTC: 65%
    Term: 12 months
    Recourse: Full Recourse

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    $12,500,000 Non-Recourse Acquisition Financing for Unentitled Land; Van Nuys, CA

    December 16, 2020

    Transaction Description:

    George Smith Partners arranged $12,500,000 in non-recourse financing for the acquisition of land which the Sponsor will entitle for 333 apartment units. GSP was able to locate a lender able to provide 85% of the purchase price. Not only was the loan high-leverage, it had no holdbacks for pre-development costs, making servicing very simple for the Borrower. The Sponsor intends to complete the entitlements and refinance into a construction loan in 6-12 months.

    Rate: 9.75%
    Term: 12 Months
    Amortization: Full Term Interest Only
    LTV: 85%
    LTC: 65% of predevelopment expenses
    Prepayment: 6-months
    Guaranty: Non-Recourse

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    $4,200,000 Loan for Unentitled Land, 5.9% Interest Rate; Pasadena, CA

    October 21, 2020

    Transaction Description:
    GSP secured a $4,200,000 bridge loan for unentitled land in Pasadena, CA. The site is proposed to be developed into 59 luxury townhomes. The loan is fixed at 5.9% for a 12-month term with two 6-month extensions. The proceeds represent 45% of the total cost to purchase the land and entitle it.

    The Sponsor acquired the Property in 2015 and has been working with the City to receive entitlements to develop the townhome plot since property acquisition. The land remains unentitled; however, the Sponsor expects to receive Ready-to-Issue (RTI) in 6 months which would provide significant value appreciation. The Sponsor had a loan coming due on the Property and needed to refinance. Given the economic situation due to the COVID-19 pandemic, many lenders were hesitant on providing financing.

    GSP demonstrated that the location of the Property and market are very strong, and the specific neighborhood is undergoing a revamp. The Sponsor is an experienced Los Angeles developer who is familiar with the entitlement process and the Property is less than six months away from receiving RTI.

    Rate: Fixed at 5.90%
    Term: 12 months, 2,6 month extension options
    Amortization: Full Term Interest Only
    LTC: 45%
    Guaranty: Non-Recourse

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    $5,400,000 Land Acquisition and Predevelopment Financing Facility for a To-Be-Built, 150 Bed Co-Living Community; Highland Park, CA

    March 11, 2020

    Transaction Description:

    George Smith Partners arranged a $5,400,000 financing facility for the acquisition of a 29,930 square foot vacant parking lot in the trendy Highland Park submarket of Los Angeles, CA. In addition to purchase financing, the facility offers good news money for predevelopment costs related to the Sponsors planned 150-unit co-living community on the site, which will be a by-right development and will take advantage of TOC Tier 1 incentives.

    Co-living has emerged as a remedy to address the acute shortage of affordable housing across the country by offering tenants fully furnished, highly amenitized units with the cost of utilities, common area maintenance, and other traditional living spaces bundled into the rent. The Property is within a 5-minute walk from both York Boulevard and Figueroa Street, Highland Park’s two main amenity-rich thoroughfares lined with shopping and dining destinations.

    By focusing attention on land lenders who are active in the local area, GSP identified a capital provider who is familiar with the local market and also understands the importance that the co-living space will serve in the greater rental market going forward. The loan was uniquely structured to disburse the balance of the down payment in addition to sponsor equity at closing. The remaining proceeds will be reserved in a holdback feature to cover the predevelopment soft costs in order to bring the project to permit-ready status. The interest-only predevelopment land loan was priced at 8.50%, with a 15-month term and one 6-month extension option. The loan closed in less than 30 days from application.

    LTC: 70% (including predevelopment costs to take the project to RTI)
    Rate: 8.50%
    Term: 15 Months with One 6-Month Extension
    Amortization: Interest Only
    Guaranty: Recourse

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    $2,750,000 Non-Recourse Subdivision Construction Loan in Echo Park, Los Angeles, California

    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%
    Lender Fee: 1.5%
    Advisors: Jonathan Lee, Adam Candler



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    $7,100,000 Pre-Development Land Loan on 521 Acre Tract

    January 23, 2014

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    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
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    $2,100,000 Construction Loan for a “For-Sale” Residential Development

    January 23, 2014

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    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
    Advisor:  Loren Bedolla
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    $6,500,000 Senior Land Development Financing

    October 3, 2013

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    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.
    Rate: LIBOR+475 w/5.85% Floor
    Term: Two Years + 1 One Year Option
    Amort: Interest Only
    LTC: 51%
    Advisors: Malcolm Davies, Peter Kleinberg, Drew Sandler
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    $52,285,850 Senior Construction & Mezzanine Development Financing w/Performance Bonds

    June 19, 2013

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    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.
    Rate: 7.58% Blended
    Term: 3 Years w/two – 1 Year Exts
    LTC: 66.7%
    Recourse:  50% recourse limited to a corporate entity.

    Advisors:  Malcolm Davies, Peter Kleinberg, Drew Sandler.

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