$12,375,000 Construction Loan for the Development of a 34-Unit Multifamily Property; 75% LTC; LIBOR+2.45%; Los Angeles, CA
March 25, 2020
George Smith Partners secured $12,375,000 in proceeds for the development of a 34-unit multifamily property located in the Greater Wilshire/Hancock Park area of Los Angeles. The proposed development will consist of 31 market rate units and 3 affordable units for very low-income households that are to remain affordable for a period of 55 years. Building plans were approved prior to loan funding; construction is scheduled to commence in March 2020 with an estimated completion date of approximately August 2021, resulting in an 18-month construction period.
The loan has a term of 24 months from closing with two 6-month extension options. The recourse loan will be secured by the land and the to-be constructed building. The fully funded loan represents 75% of the total project capitalization. The loan will be interest only for the 24-month term floating at 30-Day LIBOR + 2.45%. Upon completion the development will represent excellent quality multifamily units in an in-fill Los Angeles neighborhood. There are several projects currently under-construction in immediate proximity that will be competitive with the Subject Property. GSP selected a capital provider that was knowledgeable about the project’s location and the Sponsor’s experience to mitigate the new supply concerns.
March 18, 2020
George Smith Partners placed a $3,200,000 cash-out refinance on a multifamily property in the trendy Larchmont submarket of Los Angeles, CA. The Property was a recent acquisition and still undergoing renovations as part of a value-added strategy. Despite this, GSP was able to source a bank lender offering a mini-permanent loan structure that met the Sponsor’s request for cash-out proceeds to re-invest in new development deals. Although the loan included a 12-month interest reserve a holdback for the remaining construction budget was not required. The financing was sized to 70% LTV and carries a rate of Prime + 0.5% (5.25% today). The loan carries a 5-year term and is interest only the first 18 months followed by a 30-year amortization.
Rate: Prime + 0.5% (5.25% today)
Term: 5 Years
Amortization: 18 months interest only followed by 30-year amortization
Prepayment Penalty: None
- Advisors: Zachary Streit
$27,270,000 Refinance of 11-Property Portfolio; Fixed For 10 Years at 3.61%; Full Term Interest Only; Los Angeles, CA
March 18, 2020
George Smith Partners placed the $27,270,000 refinance of eleven stabilized Los Angeles multifamily properties totaling 302 units. The interest rate is fixed at 3.61% for ten years with full term Interest Only payments.
Since acquisition several years ago, the Borrower has invested a considerable amount in capital expenditures across the whole portfolio. Invoices were used to separate capital expenditures from recurring R&M expenses. This information helped to provide support for the Lender’s underwritten cash flow and property values. The Lender had previously provided the acquisition loan for the portfolio and is refinancing its own loans. For the refinance, they initially requested a higher level of due diligence than that of the previous loans. GSP worked with the Lender to waive these requirements and provide the same diligence as the loans from acquisition.
$60,100,000 Cash-Out Permanent Financing on a Newly Constructed 235-Unit Mixed-Use Apartment Community; St. Louis City, Missouri
March 11, 2020
George Smith Partners successfully placed $60,100,000 in permanent debt to take out a construction loan and fund the buyout of a major equity partner on a newly built, mixed-use property located in the trendy St. Louis City neighborhood of The Grove. The 82% leverage loan is a combination of a $50,000,000 non-recourse senior loan to 70% loan-to-value and a $10,100,000 non-recourse mezzanine loan to 82% loan-to-value with a blended fixed-rate coupon of 4.89% for the duration of the ten-year term. The financing provided significant cash out to the Borrower that allowed both the buyout of a major equity partner as well as substantial cash-out above what was needed for the partnership buyout. Additionally, the financing structure replaced a recourse construction loan with a non-recourse, fixed-rate permanent loan with full-term interest only to maximize cash flow. GSP leveraged its expertise of the St. Louis market, long-standing lender relationships, and capital markets creativity to achieve the Borrower’s goals.
$15,250,000 Non-Recourse, Cash-Out Bridge Financing for a 200-Unit Multifamily Property in a Tertiary Market; 80% LTC at 375 over 1-Month Libor; Rexburg, ID
February 26, 2020
George Smith Partners arranged $15,250,000 in non-recourse, cash-out bridge financing for a 200-unit multifamily property in Rexburg, Idaho. While home to BYU-Idaho (with a student population of 25,000), Rexburg is a small town with a non-student, resident population of only 20,000. The Sponsor approached GSP looking to refinance out a recourse construction loan from a local bank and also return capital to investors, while providing the Property time to season prior to selling or refinancing.
By emphasizing the demand driven by BYU-Idaho’s presence, the strong sponsorship with a long history of development and investment in the local market, and the Property’s robust in-place cash flow, GSP ultimately sourced a prominent debt fund capital provider that was comfortable assuming tertiary market risk. The 80% loan to cost, non-recourse execution included a sizeable cash-out, given that the in-place construction loan was sized to 65% loan to cost. The loan floats at a spread of 375 over the 1 Month Libor (5.4% all-in today) and is interest only.
February 26, 2020
George Smith Partners placed the $43,281,000 non-recourse cash-out permanent loan for 360 stabilized units in a secondary California market. This represented a substantial return on equity. Loan proceeds were increased post application as the supportable underwritten net cash flow improved during the due diligence process. Occupancy constantly operated at 98% with future increases forecasted at unit turn. Fixed for ten years at 3.66%, the non-recourse loan is interest-only for five years prior to amortizing over 30 years for the balance of the term.
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%.
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