February 19, 2020
George Smith Partners secured $4,650,000 in financing for the acquisition of a 28-unit multifamily property in the Highland Park area of Los Angeles. The transaction closed in just five days. The new debt on the Property is interest only and does not include prepayment penalties.
GSP was able to secure a high leverage, value-add multifamily acquisition program for our client. He now has the ability to purchase properties at a discount due to the quick close and small equity requirement. The Sponsor has the opportunity to quickly resell the Property or refinance with a rate of sub-3.75%.
The Sponsor has been able to achieve investment IRRs in excess of 200% by quickly renovating the Property and selling to long-term investors due to the high leverage and short closing.
February 12, 2020
George Smith Partners placed a $10,900,000 non-recourse loan for the refinance of an underperforming stabilized 50-unit multifamily community in Los Angeles. The Sponsor recently acquired the asset at approximately 50% below market from an affiliate party and GSP was able to facilitate approximately $3,000,000in cash out proceeds at closing. A portion of the loan proceeds will be used to renovate units as they become vacant in order to achieve current market rents. GSP identified a non-institutional lender who was comfortable with the cash out proceeds and who understood the history and dynamics of this non-arms-length acquisition. The non-recourse loan is fixed for 1.5 years with a 7.99% interest rate and 4.99% pay rate.
Rate: 7.99% with 4.99% pay rate
Term: 18 months
Recourse: Carve-Outs Only
Prepayment: None; no exit fee
- Advisors: Alina Mardesich
$5,700,000 Non-Recourse Acquisition Bridge Financing for a 2-Property Multifamily Portfolio; 80% LTC and 7.5% Debt Yield; Gardena, CA
February 5, 2020
George Smith Partners arranged $5,700,000 in non-recourse acquisition bridge financing for a two-property value-added multifamily portfolio in Gardena, CA. The two 1960’s vintage properties had significant deferred maintenance and below market rents. The Sponsor’s business plan was to reposition the Property and release the units at market rents. Maximum proceeds, despite a tight debt yield, and non-recourse were priorities.
George Smith Partners sourced a lender familiar with the market and willing to size the loan to a 7.5% debt yield, which resulted in 80%LTC. The loan, which offers an attractive parri-passu funding structure, includes future funding for a full gut renovation of unit interiors and an exterior upgrade. The three-year bridge loan is interest only and carries a fixed interest rate of 6.90%. Interest is not charged on the holdback until funds are drawn. The lender fee was limited to a 1.00% origination fee with no exit fee. The Lender did not charge a legal fee and closed the transaction in 30 days from term sheet execution.
Term: 3 Years
Amortization: Interest only
LTC: 80%, including future funding
Lender Fee: 1% in / no exit fee
Prepayment Penalty: 12-month interest guarantee
February 5, 2020
George Smith Partners successfully arranged $9,400,000 in non-recourse construction financing for the development of a 15-unit luxury apartment building in West Los Angeles. The Property will be comprised of a mix of 1-bedroom and 2-bedroom units and will include 28 parking spaces. The Class A asset sits in a prime location that adjoins some of Los Angeles most sought-after submarkets. Upon completion tenants will have world class views and easy access to major thoroughfares of the City.
The Sponsor has owned the site for over twenty years and after relocating existing tenants to make way for the construction of the new luxury building, he raised an existing 16-unit apartment building. Despite the low land basis, at a total cost at over $1 million per door, it was difficult to find comparables to justify the completed value in support of the requested loan amount.
GSP accessed its extensive lender network to identify a best-in-class construction lender to provide non-recourse construction financing for the Sponsor. GSP’s longstanding history with this lender allowed for a flexible and streamlined closing process that was favorable to the Sponsor’s project timeline. GSP was able to demonstrate to the Lender that as a family owned, multi-generational asset, the tight spread between development cost and value was a less important metric than for a merchant builder-built building, particularly with a significant equity investment.
Rate: 1-Month LIBOR + 7.50%
Term: 28 Months
Amortization: Interest Only
Lender Fee: 1% in / 1% out
- Advisors: Gary M. Tenzer
$4,200,000 Cash-Out Refinance for Predevelopment Land Financing on a To-Be-Built 90-Unit Multifamily Project; West Oakland, CA
January 29, 2020
George Smith Partners arranged a $4,200,000 cash-out refinance for predevelopment land financing on a to-be-built 90-unit multifamily property in West Oakland, CA. The Property consists of a 1.5-acre parcel and 35,000 square feet of raw industrial space built in the 1950s that will be demolished at the start of construction. The Property recently obtained entitlements for a 90-unit multifamily development, but the Sponsor required significant capital and about 12 months to complete construction drawings. The Sponsor was seeking a refinance and approached GSP with 30 days of term remaining on their existing land loan. The existing land Lender would not release the good news money earmarked for a successful entitlement that would have been used to fund construction drawings. They were also seeking to charge an extension fee that was significantly above market.
In a very short timeframe, GSP sourced a land lender comfortable with refinancing the existing land loan and providing cash-out to help fund construction drawings. Sized to 65% LTV, including a considerable land step-up for entitlement, the financing is interest only and carries a 12-month term with two 3-month extensions. There is no prepayment penalty, and the Lender origination fee was only 0.5%. The new loan closed in less than 30 days from term sheet execution avoiding a maturity default on the existing loan and enabling the Sponsor to fund construction drawings.
Term: 12 months with two 3-month extensions
Amortization: Interest only
Prepayment Penalty: None
Lender Fee: 0.5% in / 1% out
- Advisors: Zachary Streit
$4,480,000 Non-Recourse, 80% LTV, Quick-Close Refinance of a 148-Unit Multifamily Asset; Cincinnati, OH
January 21, 2020
George Smith Partners secured a $4,480,000 non-recourse, 80% LTV, quick-close refinance of a 148-unit workforce multifamily property in suburban Cincinnati, Ohio for out of state borrowers. The loan was structured, approved, and funded within a three-week period. The financing resolved an impending loan maturity for the Sponsor while providing flexibility to roll into a permanent take-out loan after seasoning the Property’s cash flow with minimal friction cost. The balance sheet facility was underwritten to 80% of value at a floating rate of the 1-Month LIBOR plus a spread of 4.25% for an all-in coupon of 6.00%.
$10,500,000 Acquisition Bridge Loan For 71-Unit, Multifamily Property; Floating at LIBOR + 2.75%; Seattle, WA
January 21, 2020
George Smith Partners secured a $10,500,000 acquisition bridge loan for a 71-unit multifamily property in the greater Seattle area. The loan provides 75% LTC and floats at a rate of LIBOR + 2.75% for a 3-year term. Proceeds are structured as $8,462,000 in initial funding plus holdbacks for interest reserve and capital expenditures.
When speaking with capital providers, GSP encountered several challenges. The Property is in a submarket about 10 miles south of Downtown Seattle that has yet to experience significant redevelopment. The Seller made limited investments in the Property upkeep in recent years resulting in a significant amount of deferred maintenance. Because of this, the Property showed poorly on-site tours with prospective lenders.
The selected lender was comfortable with the strength of the Sponsorship and was able to provide 75% LTC at a competitive interest rate. Although LIBOR was about 1.75% on the day of close, GSP negotiated a LIBOR floor of 1.25%. This could be very advantageous for the borrower since the forward LIBOR curve is downward sloping. In order to prove out the proforma market rents, GSP provided examples of several other properties the Sponsor had successfully completed in the area. The Sponsor also provided a very detailed exterior renovation budget that will enhance the appearance and amenities of the Property. The Lender also had true springing cash management. This means that the Borrower did not have to open an account at close and retains full control over the cash flow. The Lender allowed pre-negotiated loan docs that the Borrower had used for a similar transaction. The loan closed in about 45 days even with the end of year holidays.
Acquisition Permanent Financing for a Multifamily Property, Sized to 75% LTV and a 1.15x DCR; West Adams, Los Angeles, CA
December 11, 2019
George Smith Partners arranged permanent acquisition financing for a multifamily property in the West Adams submarket of Los Angeles, California. The 1960’s vintage property had significant deferred maintenance and below market rents, but the Sponsor required permanent financing from a portfolio lender in order to take advantage of today’s low interest rates. GSP sourced a regional bank that was willing to fund 75% of the purchase price with no holdback based on underwriting the in-place cash flow to a 1.15x DCR. The loan carried a five-year fixed rate of 4.00%, a ten-year term and an attractive 3-2-1 prepayment penalty. No deposits were required.
Term: 10-Year Term; 5-Year Fixed
Prepayment Penalty: 3-2-1
Lender Fee: 0.25%
- Advisors: Zachary Streit
December 4, 2019
George Smith Partners secured a $5,230,000 non-recourse refinance for a 40-unit multifamily property in Los Angeles. The loan is fixed at a rate of 3.85% for five years and provides two years of interest only payments. Over the past three years, the Sponsors renovated 28 of the 40 units at a very high investment of $28,000 per unit. GSP sourced a bank lender that gave the Borrowers maximum credit for the higher income that resulted from leasing the newly renovated units. The Lender did not require seasoning on the new leases. The Lender did not have a floor on the rate at a time when many banks are applying floors to keep their rates above a certain threshold. The rate was competitive with Agency financing during a period when Freddie Mac was temporarily slowing down new loan originations. The Sponsors were operating the Property very efficiently with below-market expenses, and the third-party appraiser marked those expenses up to market. This resulted in a capitalized property value that did not meet the lender’s 65% LTV constraint. The Lender accommodated the Borrower by raising the LTV threshold so that loan proceeds and the rate would not be affected. The Lender was able to rate lock at application and was ready to close in about 50 days.
Rate: Fixed at 3.85% for 5 years then floats at 6 Month LIBOR + 2.35%
Term: 30 years
Amortization: 30 years
Prepayment Penalty: 3,2,1,0
Interest Only: 2 Years
November 27, 2019
George Smith Partners secured $7,167,000 in non-recourse financing for a mixed use property with 46 residential units and 5,350 sf of ground floor retail space. The financing provides 65% leverage and is fixed at a rate of 3.50% for five years with three years of interest-only payments. Several challenges were encountered when discussing the transaction with capital providers. Since the Property is mixed use, extensive market comparable data was required to prove out the value of both the residential and retail portions. A different cap rate was applied to each component of the Property before summing the individual values. This process demonstrated that the Lender’s underwritten value was well supported. One of the retail spaces is occupied by a nightclub and several lenders declined the deal because of the high turnover rate with this type of tenant. GSP showed that the nightclub was in place for over 10 years and remains very popular to this day. Despite rates rising during the diligence process, the Lender held the rate even without a formal rate lock.
Rate: Fixed at 3.5% for 5 years then floats at 6 Month LIBOR + 3.25%
Term: 20 years
Amortization: 30 years
Interest Only: 3 Years
November 20, 2019
George Smith Partners successfully arranged a cash-out permanent refinance of a 7-unit multifamily property in North Hollywood, California. Loan proceeds were used to pay off the existing variable, higher interest rate loan and allow the Sponsor to obtain a lower interest, fixed rate loan. The equity also allowed the Sponsor to complete upgrades to the Property including roofing, flooring and various other deferred maintenance. GSP targeted a capital provider who is active in the multifamily segment and could maximize loan proceeds for the Sponsor in order to finish the Property upgrades.
Term: 7 Years Fixed, 30 Year Term
Amortization: 30 Years
Prepayment Penalty: 3, 2, 2, 1, 1 with nothing after the 5th year
Lender Fee: None
- Advisors: Reuven Risch
High Leverage Custom Program for Quick Close Bridge Financing of Multi-Family Buildings; Los Angeles, CA
November 6, 2019
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.
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