multifamily

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    $67,250,000 of Non-Recourse High-Leverage Senior Construction Financing for the Ground Up Development of a 254-unit Multifamily Tower in Phoenix, AZ

    July 17, 2019

    Transaction Description:

    George Smith Partners arranged $67,250,000 in non-recourse senior construction financing for the ground-up development of a market rate 254-unit, 17 story, multifamily tower in Phoenix, Arizona. The Property is in the Roosevelt arts district of downtown Phoenix near the Valley Metro Rail, Arizona State University graduate schools of journalism and law, as well as the University of Arizona Cancer Center. The Property will feature amenities such as a roof top pool overlooking the downtown skyline and beyond. Sized to 80% of total project cost, the interest only loan will strike a desired balance of debt to equity for the local developer. The Borrower was sensitive to standard bank underwriting decision making and asset management structures. GSP sourced non-recourse construction financing from a non-bank lender with a streamlined and flexible decision-making structure. The capital provider and their asset management team will act more like a partner than a lender from closing through development and payoff.

    Terms Confidential

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    $8,000,000 Cash Out Refinance of a Multifamily Renovation; Los Angeles, CA

    June 26, 2019

    George Smith Partners arranged $8,000,000 in cash out financing for a multifamily property in Los Angeles. The Sponsors’ goal was to quickly purchase, renovate and lease the Property. Due to the competitive market for multifamily in Los Angeles, six months ago, GSP arranged an expensive, quick-close financing to allow our Sponsors to complete the purchase of the subject property faster than their competitors. GSP financed the property at 80% of purchase price with a private debt fund. Now, GSP has refinanced the Property allowing the Sponsor to recover the capital invested in renovation and tenant buy-outs. This financing now reduces the cost of capital and allows the Sponsor to receive cash out to cover all capital expenditures. Most lenders would have required additional seasoning or limited the cash out. Through utilizing GSP’s relationships and the competition GSP created in the market, the Lender was willing to provide the requested capital.

    Rate: 5.25%
    Term: 3 Year
    Amortization: 30 Year
    LTV: 70% LTV
    Guaranty: Recourse
    Lender Fee: None

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    $18,600,000 Bridge Financing for Purchase of 112 Unit Multifamily Property; 80% LTC; LIBOR+2.55%; 4+1 Term; Seattle, WA

    June 26, 2019

    Transaction Description:

    George Smith Partners secured $18,600,000 in proceeds for the purchase of a 112-unit multifamily property located in the Seattle metro area. The fully funded loan represents 80% of the project capitalization. The loan provides $15,400,000 at close, with an additional $3,200,000 in future funding for capital expenditures. When discussing the transaction with bridge lenders, GSP found that most capital sources offered a 3+1+1 term with in/out fees of 1%/0.5%. The selected lender provided a unique program featuring a 4+1 term, 1% origination fee, and 0% exit fee. Instead of using boilerplate loan docs, the lender began with pre-negotiated docs from a previous transaction with a similar borrower. This helped to greatly reduce legal fees for the Sponsor. Although the going-in debt yield was about 3%, the Lender did not stipulate a minimum at closing. Rather, GSP structured an Interest Reserve since it was below a 1.0 DCR going in. While all lenders required a cash management account, the selected lender did not have a debt coverage ratio test until the 25th month after closing. The loan closed in just 40 days from the signed application.

    Rate: Floating at 1 Month LIBOR + 2.55%
    Term: 4+1
    Amortization: Interest Only
    Fees: 1% in/0% out
    Prepayment Penalty: 24 months minimum interest
    LTC: 80%
    Guaranty: Non-Recourse

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    Acquisition Bridge Loan, 73% Loan to Cost for a 13 Unit Multifamily Property in South Los Angeles, CA

    June 12, 2019

    Transaction Description:

    George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in the Westmont Neighborhood of South Los Angeles, California. The 13 unit, 1950’s vintage Property 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. Sized to 73% of total project cost, the financing includes 100% of future funding for a full gut renovation of unit interiors and an exterior upgrade.

    The two year bridge loan is interest only and floats at Prime plus 0.5% (6.00% today) with no prepayment penalty. Interest is not charged on the holdback until funds are drawn. The Lender only required a recourse obligation from the general partner who represented 10% of the equity, even though there were limited partners representing over 25% of the equity. The lender fee was negotiated down to 0.5%.

    Rate: Prime + 0.5%
    LTC: 70% / 65%, including 100% of future funding
    Term: 2 Years
    Amortization: Interest Only
    Prepayment Penalty: None
    Recourse: Full Recourse
    Lender Fee: 0.5%

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    Cash-Out Refinance at 4.35% Fixed for Seven Years, Non-Recourse; Downey, CA

    June 5, 2019

    Transaction Description:

    George Smith Partners secured the cash out refinance of a 15-unit stabilized multifamily property in Downey. Constructed in 1980 the Property is located in the heart of Downey, close to restaurants and retail centers. Fixed at 4.35% for seven years, the non-recourse loan floats at 6-month LIBOR + 2.25% for the remaining 23-year term. The non-recourse loan has 3 years of interest only payments and a 4,3,2,1 step down prepayment penalty.

    Rate: 4.35% Fixed for 7 years; 6 Month LIBOR + 2.25% thereafter
    Term: 30 years
    Amortization: 3 years interest only, followed by 27 years amortization
    Prepayment Penalty: 4,3,2,1
    LTV: 55%
    DCR: 1.15x
    Guarantee: Non-Recourse
    Origination Fees: Par

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    $4,050,000 (85% LTC) Financing for the Acquisition of 3 Contiguous Parcels in Los Angeles, CA

    June 5, 2019

    Transaction Description:

    George Smith Partners secured a $4,050,000 acquisition loan for 3 contiguous multifamily buildings located in Toluca Lake (Los Angeles), CA. While there are currently 11 units on the 3 parcels, the Sponsor is in the process of designing a 57 unit multifamily project. This development is allowed “by right” but must go thru planning commission for final approvals and will utilize the density bonus regulations. The proposed building will feature a mix of 1 and 2-bedroom units and will provide more rental housing for the local community. The final project will have an affordable component, boosting the supply of units for designated for low income tenants. The Project is walking distance to the Universal City metro rail stop. Nearby employers include Universal Studios, CBS, and Warner Brothers.

    The non-recourse financing was sized to 85% of purchase price at an interest rate of 9.50% for 18 months for a 1.5% lender fee. The high leverage loan allowed the Sponsor to minimize their initial equity investment into the deal. The Sponsor plans to replace this loan with construction financing once the Project is ready to break ground. This Lender has the ability to convert some or all of their acquisition loan to a mezzanine position up to 85% of total construction cost behind the future construction loan.

    Rate: 9.50% Fixed
    LTC: 85% of Acquisition Price
    Term: 18 Months
    Amortization: Interest Only
    Prepayment Penalty: 9 Months of Minimum Interest
    Recourse: Non-Recourse
    Lender Fee: 1.5%

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    Acquisition Bridge Financing for a 12 Unit Multifamily Property in South Los Angeles, CA; 70% LTC

    May 29, 2019

    Transaction Description:

    George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in the Hyde Park Neighborhood of South Los Angeles. The 12 unit, 1940’s vintage property 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. Sized to 70% of total project cost, the loan includes 100% of future funding for a full gut renovation of unit interiors and an exterior upgrade.

    The two year bridge loan is interest only and floats at Prime + 0.5% (6.00% today) with no prepayment penalty. Interest is not charged on the holdback until funds are drawn. The Lender also only required a recourse obligation from the General Partner, who represented only 10% of the equity, even though there were limited partners representing over 25% of the equity. The lender fee was negotiated down to 0.5%.

    Rate: Prime + 0.5%
    LTC: 70% / 65%, including 100% of future funding
    Term: 2 Years
    Amortization: Interest Only
    Prepayment Penalty: None
    Recourse: Full Recourse
    Lender Fee: 0.5%

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    $20,000,000 3-Year Revolving Credit Facility for 88 Co-Op Units in Midtown Manhattan, New York

    May 29, 2019

    Transaction Description:

    George Smith Partners secured a $20,000,000 revolving credit facility on 88 co-op units in Manhattan. The 88 co-op units are part of a 495-unit “family legacy” property that includes 72 rent stabilized units that have been owned and operated by the Sponsor since the 1990s. The Sponsor has never forced a tenant “buy out” during their ownership history. The 3-year credit facility is based on an ‘as-is’ LTV of 50%, full recourse, interest-only at L+525 with a LIBOR floor of 2.25%, no minimum interest and no prepayment penalty. The value of the underlying collateral ‘as-vacant’ is in excess of $100,000,000 due to the strong demand in this section of Midtown Manhattan. The historical negative combined average NOI from the Project, due to the 72 rent stabilized units, resulted in an ‘as-is’ value of ~$40,000,000. The average NOI for the rent stabilized units at closing was negative $484 per unit/per month while the NOI for Market Rate Units was positive $2,600 per unit/per month.

    Challenges/Solution:

    The non-traditional security for the loan (shares in a corporation and interest in proprietary leases) combined with the historical negative cash flow were non-starters for most lenders. The operating metrics i.e., debt yield and debt service coverage ratio did not meet typical lender requirements. GSP identified a lender that understood the value of the underlying collateral, was comfortable with the historic rate of turnover and was comfortable with the natural rate of attrition. The Lender was able to underwrite the upward-trending in-place income at a starting debt yield of < 2% while making the entirety of the credit facility available to the Sponsor.

    Rate: L+525 with a LIBOR floor of 2.25%
    Term: 24+6+6 with 50bp extension fee on outstanding principal balance
    DY Requirements/Prepay Penalty: None
    Minimum Interest/Yield Maintenance: None
    LTV: None specified but between 45% – 50% is starting LTV
    Unused Line Fee: between 0.10% and 0.5% depending on line usage amortized over 24 months
    Reserve: 6-months of Interest and Maintenance Fees

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    $128,130,000 Forward Index Locked, Fixed Rate – 10 Year, I/O, First Mortgage in Downtown Los Angeles

    May 22, 2019

    Transaction Description:

    George Smith Partners successfully arranged the early index and rate lock for Orsini II, a 566-unit, institutional quality multifamily property located in Downtown Los Angeles. Orsini II is a mid-rise, over podium apartment complex comprised of five stories built over a three-level parking garage, walking distance to central downtown Los Angeles.

    In 2016, GSP secured a $115,200,000 floating rate loan on the Property. Even though there were over 8 years of remaining term, due to last summer’s rapidly rising long term mortgage rates, the Sponsor decided to refinance with 10-year fixed rate debt to hedge further interest rate risk.

    Challenge:

    Locking in low interest rates in a rising interest rate environment and harvesting appreciated equity for future development opportunities meant that the Sponsor would have to incur pre-payment penalties on this early refinance. Additionally, the existing loan was locked-out from repayment until April 2019 which required securing a forward index lock and a deferred closing.

    Solution:

    While there was a 17 bps premium for the forward rate lock, GSP determined that the interest rate savings for a new 10-year loan would easily offset the early prepayment costs of the existing loan, as well as provide for the major cash out the Sponsor was seeking.

    The $128,130,000, 55% LTV, fixed rate refinance funded in April 2019. The non-recourse, 10-year, interest only loan is fixed at 4.24%.

    Rate: 4.24%
    Term: 10 Years, Fixed Rate
    Amortization: Full Term I/O
    LTV: 55%
    Guaranty: Non-Recourse

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    $8,745,000 Refinance for 61-Unit Apartment Complex in East Bay, CA

    May 15, 2019

    GSP arranged a refinance that allowed the Sponsor to take cash out and strategically position the Property for future upside. The Sponsor purchased the Property in 2011 with an existing regulatory agreement mandating 80% median rents. The agreement expires in 5 years and the 7 year loan term will allow time for stabilization. The subject Property consists of 12 one-story and two-story stucco over wood frame buildings. It features large 2, 3 and 4 bedroom 2-level townhome style units. The units attract families in a market with barriers to home affordability. Amenities include an outdoor playground and covered parking.

    Rate: 4.05%
    Term: 7 years
    Amortization: Full term interest only
    LTV: 55%
    Lender Fee: 0.50%
    Guaranty: Non-Recourse

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    $6,500,000 Bridge Refinance of Vacant Apartment Building with No Cash-Flow in Los Angeles, CA

    May 1, 2019

    Transaction Description:

    GSP recently arranged a $6,500,000 bridge loan on a vacant 30-unit apartment community near the Los Angeles CBD. The Property had structural issues and was red tagged by the City. The owner took the 1913 building down to the studs and completely rebuilt the Property. In order to reduce cost and finalize construction, the ownership requested bridge financing.

    With no cash flow and no signed leases several lenders were concerned about repayment. Using GSP’s relationships and market expertise we were able to place a Libor floating rate bridge loan. This financing provided the Sponsor the ability to payoff of the current loan. In addition, there was enough capital left over for completion construction and an interest reserve for lease-up.

    This take-out financing replaced more expensive financing and provided the Sponsor with the capital needed to finalize the renovation and move to permanent financing. With no prepayment premium and no interest rate cap, it was a very affordable way to bridge between the loans.

    Rate: 5.05 % – 30 Day Libor+ 255bps – No Rate CAP Required
    Term:
    2 Years
    Prepayment Penalty:
    None
    Lender Origination Fee:
    1%

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    $25,250,000 Cash-Out Refinance, Non-Recourse, Full Term Interest Only in Los Angeles, CA

    May 1, 2019

    Transaction Description:
    George Smith Partners secured $25,250,000 for the non-recourse cash-out refinance of a newly constructed, ultra-luxury 49-unit multifamily building located in Los Angeles (Brentwood). The Building is situated in one of the most sought after areas and is in close proximity to popular restaurants, bars and entertainment. The construction take-out permanent loan is fixed at 3.96% for ten years with full term interest only and has a yield maintenance prepayment penalty structure.

    Challenges:
    The Building was in the final lease up stage when the financing process started and final Certificate of Occupancy had not yet been delivered. The Building also contains four affordable units, which were the last units to be leased up, due to the City’s application certification process. Thus the owner did not have any seasoning on the newly leased units nor any historical operating expenses.

    Solution:
    GSP identified a capital source that understood the strength of the asset, location and the experience of the Sponsor (Developer). Based on these strengths, the Lender was able to underwrite to in-place income without seasoning and proforma operating expenses, which maximized loan proceeds. The Lender was able to fund once the Property was 95% leased and final Certificate of Occupancy issued. The Sponsor locked a full term interest only structure, which is advantageous to the Property’s cash flow as the new leases begin to season.

    Rate: 3.96% Fixed for 10 years
    Term: 10 years
    Amortization: Interest Only
    Prepayment Penalty: Yield Maintenance
    DCR: 1.55x
    Guaranty: Non-Recourse
    Origination Fees: Par

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