July 31, 2019
George Smith Partners placed the cash-out non-recourse refinance of an improved San Fernando Valley lot that had been vacated while the Developer moves forward on an up-zone re-entitlement. Our Sponsor will double the available units on this over-sized lot bringing needed housing to this dense in-fill tract. Proceeds beyond the existing payoff will be used to cover soft costs and will be invested back into the site development. The exit will be via a ground-up construction loan to be funded late 2019. Closing occurred within two weeks from executed application to funding. No appraisal was required for funding. Fixed at 7.50%, the non-recourse loan does not carry a prepayment penalty.
January 9, 2019
George Smith Partners secured $7,650,000 in proceeds for the acquisition of a 12.66 acre parcel of undeveloped and unentitled land in a major city in the Western United States. The proceeds represent 65% of the appraised value of the land. The loan carries a 12 month term with two, 6 month extensions available. The loan is fixed at a rate of 10% annually and is prepayable at any time.
GSP surveyed the market and found that many lenders would only finance the acquisition at 50% LTV. Other lenders could meet the Sponsor’s desired leverage but quoted an interest rate in the low teens. Some capital providers were concerned about the Sponsor’s ability to secure a takeout construction loan next year, and would only finance the purchase if pre-leasing was in place. The Sponsor intended to sell a small portion of the land shortly after closing. The parcel is located in a market that is growing rapidly, but experienced a large downturn during the last recession. There is still a lot of undeveloped land in the immediate area.
GSP provided extensive comparable data that demonstrated the Sponsor’s acquisition price per acre was well supported by the market. Since national lenders were hesitant to provide sufficient leverage, GSP focused on local lenders that know the market well. Emphasis was placed on the enormous amount of new development currently underway in the same market as the subject, including a new big box retail store slated to open later this year. The Sponsor had already successfully developed a mixed-use project in the same submarket, demonstrating their ability to execute a complete business plan. The Lender provided a release provision that allows part of the parcel to be sold to a third party without the requirement of any additional pay down from the Sponsor. The third party appraisal supported a value higher than the purchase price, validating the Lender’s cost basis and resulting in them increasing the loan amount while we were under application.
$8,700,000 Non-Recourse Predevelopment Land Loan in Los Angeles’s Hollywood Neighborhood; 14-Day Close
November 14, 2018
GSP arranged the $8,700,000 non-recourse first mortgage from a REIT to refinance a maturing bridge loan on a recently entitled retail site located along a major thoroughfare in Los Angeles. The loan provides an additional 12 months of term while the Borrower evaluates whether to re-entitle the site for a mixed-use project, or move forward with in-place entitlements. Although the loan is non-recourse, the Lender did not require an appraisal or other third-party reports, nor did it require an interest or carry reserve despite insufficient cash flow to cover debt service. Sized to 60% of value, the loan priced at 6.90% fixed for the 12-month loan duration.
$9,200,000 Non-Recourse Predevelopment Land Loan in Los Angeles’s Beverly Grove Neighborhood; 14-Day Close
October 31, 2018
GSP arranged the $9,200,000 non-recourse first mortgage from a REIT to refinance two separate maturing bridge loans on two non-contiguous, recently entitled land parcels totaling 24,725 square feet located along a major thoroughfare in Los Angeles. The loan repaid existing debt, covered 100% of closing costs, and repatriated equity to the borrower. The loan provides an additional 12 months of term while the borrower pre-leases the project and finalizes construction drawings. Although the loan is non-recourse, the lender did not require an appraisal or other third-party reports, nor did it require an interest or carry reserve although there is no in-place cash flow on either parcel. Sized to 60% of value, the loan priced at 6.90% fixed for the 12-month loan duration.
September 26, 2018
GSP arranged the $8,750,000 ($935/Building SF) non-recourse first mortgage from a REIT to refinance a maturing bridge loan on a 29,500 square foot land parcel located along a major thoroughfare in Coastal Los Angeles. The Borrower recently entitled the land for a retail redevelopment and is now pre-leasing the Project. The loan repaid the existing debt, covered 100% of closing costs, and repatriated equity to the Borrower. The loan provides an additional 12 months of term while the Borrower pre-leases the Project. Although the loan is non-recourse, the Lender did not require an appraisal or other third-party reports, nor did it require an interest or carry reserve although there is no in-place cash flow. Sized to 60% of value, the loan priced at 6.90% fixed for the 12-month loan duration.
August 22, 2018
GSP arranged the $7,250,000 ($328/Land SF, $1,375/Building SF) non-recourse first mortgage from a debt fund to refinance a maturing bridge loan on a 22,150 square foot land parcel located along a major thoroughfare in coastal Los Angeles. The Borrower recently entitled the land for a retail redevelopment and is now pre-leasing the to-be-constructed improvements. The loan repaid the existing debt, covered 100% of closing costs, and provides the borrower with an additional 12 months of loan term while it pre-leases the project and gains final site plan approval from the City. Even though the loan is non-recourse, the Lender did not require an appraisal or other third-party reports, nor did it require an interest or carry reserve although there is no in-place cash flow. Sized to 60% of value, the loan priced at 6.90% fixed for the 12-month loan duration.
April 4, 2018
George Smith Partners arranged pre-development financing for a parcel of land strategically located one block from Hollywood Boulevard, in Hollywood, California. The land is fully entitled for the ground-up development of 28 multifamily units, with the potential for a density bonus as the parcel is located within a Transit Oriented Development district. The pre-development loan allowed the Sponsor to “cash out” appreciated equity to pursue other development projects and to use excess loan proceeds to finance the costs of density bonus application. The lender was able to get comfortable with the re-capitalization of the land with limited cash flow, due to the strong location, market fundamentals and experienced sponsorship.
Term: 12 Months
Extension: 12 Month for 1% at 8.3%
- Advisors: Gary M. Tenzer
Construction Loans: $21,025,000 75% LTV, Non-Recourse Predevelopment Financing for a Land Parcel Adjacent to a Southern California University
March 14, 2018
GSP arranged the $21,025,000 ($175/Land SF), non-recourse first mortgage from a debt fund for the acquisition of an infill 2.76-acre land parcel located adjacent to a major Southern California university. The acquisition loan will be taken out with a construction loan upon receipt of entitlements for a large-scale student housing redevelopment. GSP worked with borrower and lender to tailor a unique loan structure that provides financing during the entitlement period via an interest and carry reserve. The lender was able to provide a high-leverage loan on an unentitled parcel that provides no cash flow due to the project’s streamlined “by right” entitlement process, experienced sponsorship, and strong market fundamentals. Sized to 75% of as-is value, the acquisition loan priced at 7.25% over One-Month LIBOR for the 24-month loan duration.
December 20, 2017
George Smith Partners arranged $12,500,000 in non-recourse acquisition debt secured by both a 58,237 sf lot containing a K-12 Prep School and a 29,400 sf lot containing a largely vacant retail center. The properties are situated in the Koreatown and Chinatown district of Los Angeles respectively. GSP targeted a capital provider comfortable with foreign sponsorship, proposed entitlements, religious relationship of the property, quick closing timeline, and the ability to focus on the future value of the land parcel. Sized to 45% of the $28MM total purchase price and fixed at 8.50% on an interest only basis, the non-resource facility has an initial term of 18 months followed by an optional 6-month extension. The capital provider closed the loan in 14 business days, allowing the Sponsor to close on the property quickly given the sellers strict timeline. All prepayment penalties were waved, allowing the Sponsor the flexibility to refinance at a lower rate once entitlements or construction financing are obtained.
$13,740,000 Non-Recourse Acquisition Bridge Loan of Land Parcels For a Future $200,000,000 Mixed-Use Hotel Development Project; 5-Day Close
September 27, 2017
George Smith Partners successfully placed a $13,740,000 acquisition bridge loan to acquire two land parcels and refinance three adjacent land parcels for a large mixed use hotel and condo development site in the heart of the Koreatown district of Los Angeles. With the final components of the land assemblage completed, the $200,000,000 mixed used development project is scheduled to break ground in March of 2018. Our Sponsor’s initial business plan was to build the mixed use project on three parcels of land previously held in his portfolio. The opportunity to acquire two adjacent parcels will allow him to double the total buildable square footage of the project. Fixed for 12 months, the non-recourse loan does not carry any prepayment penalty and closed in 5 days.
It was crucial to identify a lender who could close quickly, provide leverage, and waive any prepayment penalty. Due to the upcoming March 2018 groundbreaking, existing tenants on the current 3 parcel assemblage were all on short term leases with discounted rents. As a result, in place cash flow had been compressed and limited the ability for institutional lenders to get comfortable with the property and provide meaningful proceeds. Additionally, a fast close was necessary to take advantage of a seller discount.
GSP identified an unconventional lender who focused on the future value of the five parcel assemblage and shovel ready development site rather than the current value based on in-place NOI. This capital provider closed the loan in 5 days, allowing the Sponsor to achieve a significant discount on the purchase price. The capital provider also waived all prepayment penalties, assuring the Sponsor would preserve significant capital once the subsequent construction loan is placed within the next few months.
80% LTV Land Acquisition Financing at a 9.00% Fixed Rate for a Future Multifamily Development Site in Mid-City Los Angeles
July 19, 2017
George Smith Partners arranged 80% LTV land acquisition financing for a future multifamily development site in the Mid-City neighborhood of Los Angeles, California. The sponsor, a non-resident non-citizen, sought maximum proceeds for the land acquisition and had a 30-day closing time frame from initial contact, which was impractical for many lenders. Certainty of execution was critical as an extension to the purchase contract was not obtainable. GSP identified a non-bank lender with a long history of providing quick close bridge execution and who was familiar with the location and comfortable with the land basis. The loan was sized to 80% of value with no hold back requirement for interest reserve or capital expenditures.
Rate: 9.00% Fixed
Term: 12 Months with four 3 month extensions
Amortization: Interest Only
Prepayment Penalty: None
Origination Fee: 2%
- Advisors: Zachary Streit
November 16, 2016
George Smith Partners placed the refinance a three-parcel assemblage entitled for future development of 13 small-lot subdivision. A return of equity was sought to fund additional pre-development costs. GSP secured a capital provider comfortable with funding in-fill entitled land at higher leverage points: 80% of total capitalization in this situation. Our Sponsor’s strong development pipeline and proven track record added to the strength of this location/housing market. Sized to 80% of cost, the loan is fixed at 8.50% for a 12 month term with a 1.5% lender origination fee.
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