multifamily

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    High Leverage Custom Program for Quick Close Bridge Financing of Multi-Family Buildings; Los Angeles, CA

    November 6, 2019

    Transaction Description:

    George Smith Partners arranged acquisition bridge financing for a value-add, multi-family property in Los Angeles, California. One of our more experienced multi-family owner/operators has become experienced in sourcing opportunities to quickly close on troubled multi-family properties. His ability to act quickly often allows him to become the chosen Buyer, purchasing these Properties at a large discount.

    GSP worked with a local REIT to develop a program that includes a first and second mortgage of up to 85% of acquisition price. The loan is designed to provide the same surety of close as an all-cash buyer, with no appraisal needed and the ability to close as fast as 5 business days. The loan is non-recourse and has no prepayment penalty.

    These loans are cheaper and easier than equity partners and allow the Sponsor to take advantage of smaller opportunities using very little cash. With less than $400,000 of equity, the Sponsor was able to purchase a $2,015,000 building. At close the Subject Property was worth close to $2,500,000, allowing the Sponsor to quickly flip the Property. This is the third time GSP has used this custom created loan program to procure financing for our client.

    Blended Rate: 8.00%
    Loan to Purchase Price: Up to 85% (83% on this transaction)
    Term: 12 Months
    Guaranty: Non-Recourse

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    Acquisition of an Apartment Building with One Master Lease in Place; San Diego, CA

    October 30, 2019

    Transaction Description:

    George Smith Partners arranged permanent financing for the acquisition of a master leased, multifamily property in San Diego, California. The complex is on a month-to-month master lease with a non-profit program that provides treatment and rehabilitation support to individuals and families facing substance abuse and behavioral health challenges. The Sponsor was in favor of this program and liked that it was promoting independent living and mental wellness. The Sponsor decided she wanted to keep the master lease in place instead of terminating it and turning the multifamily property into a traditional apartment building.

    Challenge:

    The Sponsor was in application with their relationship lender for over 6 weeks before finding out that they denied the loan. The Sponsor approached GSP immediately as their money had already gone hard and the Seller was growing impatient. In addition, the Seller had already identified the upleg of a 1031 Exchange and informed their agent to relist the Property and start fresh with a new buyer.

    Solution:

    GSP worked quickly to source a lender that allowed the Sponsor to keep the month-to-month master lease in place. GSP collaborated with the listing agent and buyer’s agent on getting an extension that everyone felt comfortable with. GSP closed the loan within the submitted time constraints.

    Rate: 4.20%
    Term: 5 Years Fixed, 15 Year Term
    Amortization: 30 Years
    Prepayment Penalty: 4,3,2,1
    Lender Points: None

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    $4,100,000 Non-Recourse Cash-Out Refinance, 14-Unit Multifamily Property; West Los Angeles, CA

    October 23, 2019

    Transaction Description:

    George Smith Partners successfully secured a $4,100,000 non-recourse permanent refinance of a 14-unit, multifamily property in West Los Angeles. Loan proceeds were used to pay off the existing variable, higher interest rate bridge loan into a lower interest, fixed rate loan. There was significant cash-out to the Sponsor, who had recently completed an extensive reposition and upgrade of the Property. Due to the Sponsor’s business plan, flexibility and interest only were paramount. As such, GSP worked with the Lender to structure a 5-year fixed rate term with 3 years interest only and a step-down prepayment structure of 3%, 2%, 1%. This structure allows the Sponsor to maximize current cash flow while providing the flexibility of a step-down structure that burns off when the loan begins to amortize.

    Rate: 4.20%
    Term: 30 years; 5 years fixed then converts to floating rate at Libor + 2.25%
    Amortization: 3 Years Interest Only then 30 year amortization
    LTV: 65%
    Minimum DSCR: 1.20x
    Guaranty: Non-Recourse
    Prepayment: Stepdown, 3%, 2%, 1%, open

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    Acquisition Bridge Loan for an 11-Unit Multifamily Property; 72.5% Loan to Cost; Arlington Heights Area of Los Angeles, CA

    October 16, 2019

    Transaction Description:

    George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in the Arlington Heights Neighborhood of Los Angeles, California. The 11-unit, 1960’s vintage property had significant deferred maintenance and below market rents. The Sponsor’s business plan was to reposition the Property, buyout tenants and release the units at market rents. Sized to 72.5% of total project cost, the loan includes 100% of future funding for tenant buyouts, a full gut renovation of unit interiors and an exterior upgrade.

    The two-year bridge loan is interest only and floats at a rate of Prime plus 0.50% (5.75% today) with no floor rate, which is important in a declining interest rate environment. The loan carries no prepayment penalty, and interest is not charged on the holdback until funds are drawn. The lender fee was negotiated down to 0.5%.

    Rate: Prime + 0.5%
    Term: 2 Years
    Amortization: Interest Only
    LTC: 72.5%, including 100% of future funding
    Prepayment Penalty: None
    Recourse: Full Recourse
    Lender Fee: 0.5%

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    $3,350,000 Bridge Loan for Purchase of 13-Unit Multifamily Property; 70% LTC; LIBOR+3.65%; Los Angeles, CA

    October 16, 2019

    Transaction Description:

    George Smith Partners secured $3,350,000 in proceeds for the purchase of a 13-unit multifamily property located in an infill area of Los Angeles. The loan is structured as $1,963,000 at closing and $1,387,000 in holdbacks for capital expenditures and interest reserves. Six of the thirteen units were vacant at close. The fully funded loan represents 70% of the project capitalization.

    The Sponsor requested a loan with both low pricing and non-recourse execution. Several challenges were encountered in meeting both goals. The small size of the loan ruled out almost all debt fund lenders, who typically seek financings larger than $10,000,000. While banks offered rates in the 5% range, they required the Sponsor to sign full recourse. Private money lenders quoted the deal with prohibitive interest rates above 8.0%.

    The selected Capital Provider was the only one to provide non-recourse execution with a rate in the 5’s. The loan did not stipulate a required debt yield based on the stabilized cash flow. Additionally, the Lender released additional money at closing for expenses the Buyer incurred while in escrow. This amount totaled $260,000 in reimbursements for soft costs. The loan closed about 45 days from the signed application.

    Rate: Floating at 1 Month LIBOR + 3.65%
    Term: 2+1+1
    Amortization: Interest Only
    Fees: 1.0% in/0.5% out
    Prepayment Penalty: None
    LTC: 70%
    LTV: 75%
    DY: None
    Guaranty: Non-Recourse

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    $7,800,000 in Permanent Financing for a 247-Unit Apartment Multifamily Project; Indianapolis, IN

    October 16, 2019

    Transaction Description:

    George Smith Partners secured $7,800,000 for the cash-out, refinance of a newly renovated, class B, 246-unit multifamily building located in Indianapolis. The structure allowed the Sponsor to pull out over $2,000,000 in cash and leave in place an affordable grant loan that was awarded to the Property for maintaining a certain number of affordable units.

    The Sponsor is a regional multifamily owner who has a strong relationship with an international bank. The in-place loan was originated by the Sponsor’s relationship bank. There were only three months of results after renovations. Due to the lack of results, the current Lender’s proposed offer to refinance the Property did not give the Sponsor credit for the upgrades and increased rents. It also would have required the payoff of an attractive loan from the City.

    GSP identified a national balance sheet lender that understood the strength of the asset, improvements and experience of the Sponsor. Using our vast experience in understanding this type of asset and proving out the large future increases in cash flow, GSP was able to secure financing that was far superior and allowed for cash-out to the Sponsor. The financing also allowed for the affordable grant loan to remain in place. GSP was able to negotiate no lender fees or prepayment. The loan GSP secured allowed for higher proceeds, cash out, longer term, and an overall lower cost.

    Rate: 4.40%
    Term: 7 Years Fixed / 30 year Term
    Amortization: 30 Years
    LTV: 75.0%
    Guaranty: Recourse
    Prepayment: None
    Lender Origination: None

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    $7,400,000 Interest Only Refinance for a Multifamily Property; 74% LTV at Breakeven DSCR; Venice Beach, CA

    October 8, 2019

    Transaction Description:

    George Smith Partners arranged a $7,400,000 refinance for a multifamily property in Venice Beach. The proceeds provided 74% leverage and was fixed at a rate of 5.00% with interest only payments. Over the past 15 months, the Sponsor renovated four of the units and upgraded the electrical and plumbing. GSP sourced a capital provider that understood the value of the location and the Subject Property along with the strength of the Sponsor in order to mitigate a breakeven debt service coverage ratio and a high loan to value.

    Challenges:
    The Sponsor was traveling for work in another country when loan documents were ready to be signed. Due to the Sponsor’s busy schedule, they were unable to go to a U.S. Embassy to sign loan documents and would not return from their trip for over 3 months.

    Solutions:
    GSP was able to get the Lender comfortable in allowing the Sponsor’s Power of Attorney (POA) to sign loan documents. The Lender has never allowed a POA to act as signer on behalf of a Sponsor and was hesitant to allow for a POA to sign for a new Sponsor. After many conversations GSP was able to convince the Lender to allow the POA to act as signer and even agreed to waive their internal legal fees during this process.

    Rate: 5.00%
    Term: 30 years
    Amortization: Interest Only
    LTV: 74%
    DCR: Breakeven, 1.0:1.0
    Lender Fee: $2,730

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    $36,950,000 Bridge Loan for Purchase of 192 Unit Multifamily Property; 72.5% LTC; LIBOR+2.55%; Los Angeles, CA

    October 2, 2019

    Transaction Description:

    George Smith Partners secured $36,950,000 in proceeds for the purchase of a 192-unit multifamily property located in an infill area of Los Angeles. The loan is structured as $32,989,000 at closing, $825,000 in interest reserve, and $3,136,000 in holdbacks for capital expenditures. The fully funded loan represents 72.5% of the project capitalization. GSP ran a competitive process among providers of bridge capital and received quotes ranging from L+255 to L+375. The selected lender had both the lowest pricing and the most amenable structure for the Borrower to complete their business plan.

    Several challenges were encountered while discussing the transaction with capital providers. The Property is located in a transitional submarket, which caused some lenders to quote the deal conservatively. GSP pointed out that the market is a very close distance to multiple highly desirable neighborhoods. When the Sponsor signed the PSA, the Property had over 20% vacancy, resulting in a low going-in debt yield. This ruled out many of the usual bridge lenders because they required a 5.0% or higher debt yield at close. The selected lender viewed the vacancy as an advantage because the Sponsor could quickly renovate and turn the vacant units. The Lender stipulated only a 3.7% debt yield at close and provided an interest reserve to make up for the shortfall in the first few months. The fully funded proceeds were underwritten to a 7.0% debt yield. While all lenders required a cash management account, the selected lender did not have a debt coverage ratio test until the 12th month after closing. The DCR test also required three consecutive months of underperformance before springing cash management is triggered. The Lender also worked to provide an easy draw process that allows the Borrower to get reimbursed as units are turned.

    Rate: Floating at 1 Month LIBOR + 2.55%
    Term: 3+1+1
    Amortization: Interest Only
    Fees: 0.5% in/0.25% out
    Prepayment Penalty: 18 months spread maintenance
    LTC: 72.5%
    LTV: 65%
    DY: 3.7% in/7.0% out
    Guaranty: Non-Recourse

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    $6,086,000 Non-Recourse Refinance Loan for Multifamily Property; Seattle Area, WA

    September 25, 2019

    Transaction Description:

    George Smith Partners secured a $6,086,000 non-recourse refinance loan for a 43-unit multifamily property in the greater Seattle area. The loan provided 70% leverage and is fixed at 4.04% for ten years. The collateral for the new loan excluded a free-standing building that was part of the original purchase, which gives the Owners an option to redevelop that parcel. Over the past several years, the Borrower has completely renovated the exterior of the Property and turned about one quarter of the units. The Lender gave the Borrower maximum credit for the higher rents on the newly refurbished units without requiring any seasoning. Additionally, the Lender did not apply a loan-to-cost constraint, which allowed the Borrower to receive a significant amount of cash-out from the refinance. The Lender also provided 5 years of Interest Only payments. Net operating income was underwritten at the actual note rate, resulting in higher proceeds than what other lenders were offering. The loan closed on the same day that the prepay on the existing loan dropped to 0%.

    Rate: Fixed at 4.04% for 10 years then floats at LIBOR + 3.25%
    Term: 20 years
    Amortization: 5 yrs Interest Only, then 30 years
    Prepay: Stepdown
    LTV: 70%
    DCR: 1.2
    Guaranty: Non-Recourse

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    $14,000,000 in JV Opportunity Zone Equity Financing and $23,000,000 in Non-Recourse Construction Financing for the Development of a 127 Unit Multifamily Property; Vancouver, WA

    September 25, 2019

    Transaction Description:

    George Smith Partners advised on $14,000,000 in Joint Venture QOZ (Qualified Opportunity Zone) Equity Financing and $23,000,000 in non-recourse senior construction financing for the ground-up development of a 127 unit multifamily property in Vancouver, Washington, a suburb of Portland, Oregon. The Property sits across the street from the Vancouver Waterfront, which is undergoing a $1.5B dollar public/private master plan redevelopment. The 6-story, 173,000 square foot property will feature a landscaped third floor courtyard, a community room, balconies, two levels of parking, bike storage and excellent views of the Columbia River and Mount Hood.

    Challenges:

    Due to of the Project’s location in a QOZ, the Sponsor sought a QOZ financing partner who had the ability to place capital for the required 10-year horizon as per the QOZ guidelines. Moreover, many capital sources also expressed reservations related to supply concerns in the greater Portland market.

    Solutions:

    GSP focused on the Vancouver submarket’s strengths, including very limited new supply in contrast to downtown Portland, no state income tax, the more relaxed lifestyle, the proximity to PDX airport, and the Project’s location in very close proximity to the waterfront. Additionally, GSP highlighted the Sponsor’s ability to execute by showcasing its recent Class A multifamily delivery in Vancouver that fielded a large number of offers and traded at a record low cap rate. Ultimately, an opportunity zone JV Equity financing partner was selected who recognized the strength of the location and Sponsor’s best-in-class development history. These attributes also resulted in GSP securing non-recourse construction financing at 60% loan to cost with an interest rate of 1 Month Libor + 3.65%.

    Rate: Floating at 1 Month LIBOR + 3.65%
    Term: 3 Years with Two (1) Year Extensions
    Construction Loan LTC: 60%
    Amortization: Interest Only
    Guaranty: Non Recourse

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    $3,155,000 Acquisition and Reposition Financing on 32-Unit Multifamily Property; Salt Lake City, UT

    September 11, 2019

    Transaction Description:

    George Smith Partners arranged the $3,155,000 first mortgage on a 1970’s vintage, 32-unit multifamily light value add property. The national bank lender provided financing at 88% loan to purchase price and 70% loan to stabilized value. The seven year facility was structured as a fixed rate facility with a going in 1.00x DSCR. The loan was structured with two-year’s interest only for the stabilization period then converting to a five year permanent loan. The structure of the loan provided the sponsorship the ability to execute the stabilization of the property while maximizing proceeds and utilizing a fixed rate loan in order to mitigate their interest rate exposure.

    Rate: 4.50%
    Term: Seven years fixed (Two years interest only stabilization period converting to five year perm. loan)
    Amortization: 24 months interest only, converting to 25 year amortization schedule Max Loan to Purchase Price: 88%
    Guaranty: Recourse with burn down at stabilization metrics Lender Fee: 1.00%

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    $25,500,000 Bridge Loan for VACANT Newly Constructed 65 Unit Multifamily Property; 100% LTC; Fixed at 4.95%; Los Angeles, CA

    September 11, 2019

    Transaction Description:

    George Smith Partners secured $25,500,000 in proceeds for the refinance of a construction loan on a newly constructed 65-unit multifamily property located in Los Angeles. The loan represents 100% of project capitalization and is fixed at 4.95%. The Property had recently received Certificate of Occupancy, but was still completely vacant at close. The bridge loan is intended to give the Sponsor time to lease up the property to stabilization. The fixed rate is unusual for a bridge loan; most capital providers offered floating rate financing and required the purchase of a cap.

    Because the Property was still vacant, the Sponsor’s proforma rents were not yet proven out by signed leases. This was a challenge because the rents are several hundred dollars higher than those of typical multifamily properties in the submarket. GSP was able to overcome this challenge by pointing out that the brand new units at the Subject Property were considerably larger than those in the comp set. This provided support for the premium rents. Another hurdle was the 90% loan-to-cost constraint imposed by most capital providers. The selected lender allowed for 100% of cost, subject to a 7.0% debt yield on the stabilized cash flow.

    Rate: Fixed at 4.95%
    Term: 12 months with one 6 month extension option
    Amortization: Interest Only
    Prepayment Penalty: None (no required minimum interest)
    LTC: 100%
    LTV: 73%
    Stabilized DY: 7.0%
    Fees: 1% in/0% out
    Guaranty: Non-Recourse: None (no required minimum interest)

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