Land

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.

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.

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.

Transaction Description:
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.

Challenges:
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.

Solution:
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.

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.

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.

Transaction Description: GSP arranged the $10,700,000 non-recourse first mortgage for the acquisition of a 33,600 square foot land parcel located in Hollywood, California. The parcel is currently improved with 21,425 square feet of retail and office space; 18% of the space held vacant by the seller with the remaining tenants on short-term leases. An interest reserve was funded as in-place cash flow is inadequate to cover debt service. Cash flow will further decrease post-closing as the Sponsor vacates existing tenants in order to demolish existing improvements and build a 38,000 square foot grocery store. GSP was able to source a lender comfortable with the high loan per square foot due to tight market vacancy and in-place tenants paying significantly below market rate rents. Sized to 79% of purchase price, the two-week quick close acquisition loan priced at 9.25% over 30-Day LIBOR for the 12-month loan duration.

Transaction Description: George Smith Partners arranged the $7,000,000 non-recourse acquisition loan for the acquisition of a 22,150 square foot parcel located along a major thoroughfare in West Los Angeles, California. Currently improved with a 5,275 square foot retail building occupied by a single tenant, the lender structured an interest reserve as in-place cash flow is inadequate to cover debt service. This loan provides our Sponsor with financing during the entitlement period and will be taken out with a construction loan upon receipt of entitlements for the 15,000 square foot retail redevelopment. Funded to $316 per square foot for the land; $1,327 per square foot improved, GSP sourced a capital provider comfortable with the high loan per square foot on the existing collateral due to the project’s streamlined “by-right” entitlement process and tight market occupancy. Sized to 67% of purchase price, the two-week non-recourse quick close acquisition loan priced at 10% fixed for the 18-month loan duration.

Transaction Description: George Smith Partners arranged the $2,680,000 non-recourse acquisition loan on a fully entitled 16 acre parcel of land in North San Diego County. Our Sponsor acquired the land to re-entitle for a higher density housing development for re-sale to a homebuilder. The loan was sized to 65% of purchase, priced at 7.75% over Prime.

Challenge: Several capital sources viewed the Sponsor’s business plan to re-entitle the land within 12 months more as an unentitled land transaction than a re-entitlement opportunity. Due to the higher risk nature of re-entitlement and secondary market location, many lenders rejected the transaction or offered very low leverage with full recourse.

Solution: GSP identified a lender who was comfortable with the business plan, land basis, and short duration that the loan would be outstanding given the Sponsor’s financial strength and previous land entitlement experience. There is no recourse beyond the standard carve-outs.

Transaction Description: George Smith Partners successfully placed acquisition & recapitalization financing for a four-parcel land assemblage in the Koreatown area of Los Angeles. Our Sponsor will construct a 90-unit multifamily project on the fully entitled site. All four parcels are currently improved with duplexes or four-plexes. Two of the four subject parcels are owned free and clear, and the additional two were under contract for purchase. Market research identified a strong and improving employment and demographic trajectory of the area. Underwriting modeled the land basis in terms of loan per buildable unit. Recent land sale comparables with similar entitlements produced sufficient value for the lender to qualify the value to justify this level of leverage. Sized to 80% of total capitalization, no additional cash equity was required to complete the purchase. Priced at LIBOR plus 300, there is no interest rate floor netting an all-in coupon under 4.0%.

Transaction Description: George Smith Partners successfully the construction financing for the development of three residences in Toluca Lake, California. Currently the subject is a vacant single family home that will be raised and the lot sub-divided for the future homeowners. Sized to 70% of total cost, the 12 month institutional loan is priced at 5.0%.

Transaction Description: George Smith Partners successfully arranged $1,680,000 for the acquisition of a two parcel assemblage in the Koreatown area of Los Angeles. The Sponsor is purchasing the land with the intention to entitle and build a 53-unit multi-family residential community. Given most capital providers’ standings on unentitled land, our Borrower required certainty of execution with this quick-close purchase. GSP identified a Los Angeles non-institutional fund familiar with this in-fill location and mapped out market trades for unentitled land while providing comps per unit for a traditional construction debt execution exit. Fixed at 8.9% for one year, this recourse loan has two options to extend should the Sponsor be unable to secure his permits with the first year.