multifamily

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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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    5 Day Close on 84% Loan to Purchase Price for Multifamily Asset; West Hollywood, CA

    September 3, 2019

    Transaction Description:

    George Smith Partners arranged a quick close acquisition bridge loan for an 8-unit property in West Hollywood. The Sponsor approached GSP with a need for 80%+ leverage, which can be tricky with low cap rates and rent control. GSP utilized their experience to arrange a first and second capital provider on the loan. We ensured that the Sponsor would receive his required leverage and guaranteed that he could close on the Property quickly. With this structure the owner can increase rents and stabilize the cashflow. This will allow him in the future to place a much larger permanent loan on the Property at a lower interest rate. Sized to 84% of purchase with no hold back requirement for interest reserve or capital expenditures, the loan carries a 12-month term, interest only payments at 8.5% and no prepayment penalty.

    Rate: 8.5%
    Term: 12 Months
    Amortization: Interest only
    LTV: 84%
    Prepayment: None
    Guaranty: Non-Recourse
    Lender Fee: 1%

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    $42,700,000 Construction Financing for 286-Unit Garden-Style Multifamily Project; Portland, OR

    September 3, 2019

    Transaction Description:

    George Smith Partners secured $42,700,000 in non-recourse construction financing for the development of a ten-building residential community in the Clackamas County submarket of Portland, OR. The nearly 13-acre site, which is a 20-minute drive from the city, offers an affordable alternative to Portland’s ever-increasing rental rates, as well as an exemption for inclusionary zoning, requiring no affordable units.

    By leveraging the strength of the Sponsor’s local experience, coupled with the city’s need for housing alternatives to the urban infill product, GSP was able to find a non-recourse lender who was comfortable with the fact that the area had seen little development in recent years and offered no comparable product. The loan was priced at 30-Day LIBOR + 3.55% and was sized to 65% LTC, which is aggressive leverage considering the pricing and the non-recourse structure. As costs rose approaching the final budget, the Lender ratably increased the proceeds of their loan to minimize additional Sponsor dollars in, which ultimately showed a commitment to a long-term relationship; this was their second time working together, the first being another Portland development GSP sourced in 2017.

    Rate: Floating at 30 Day LIBOR + 3.55%
    Term: 3 Years with Two (12) Month Extensions
    Amortization: Interest Only
    LTC: 65%
    Guaranty: Non-Recourse

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    $6,500,000 7-Year Construction Loan 18-Unit Multifamily Project; 70% LTC; Prime + 0.75%; Culver City, CA

    August 28, 2019

    Transaction Description:

    George Smith Partners secured a $6,500,000 construction loan for the development of an 18-Unit Class A apartment building located in the greater Culver City submarket of Los Angeles. The interest only loan is priced at Prime + 0.75% for the full 18-month term and includes a 6-month extension option. The proceeds represent 70% of the total project cost. The transaction also includes a 5-year mini perm option priced at the 5 Yr. Treasury + 2.15% with a 30-year amortization schedule, which can be exercised upon stabilization of the Project.

    Challenges:

    Although the Sponsor had previous experience as a general contractor this was his first endeavor as a developer and guarantor. His experience with this Class A asset type was limited and a significant portion of his net worth was tied to a startup technology company with limited operating history. The Sponsor also had a strict deadline he needed to adhere to as his construction permits were reaching their expiration date. Additionally, the construction costs and Sponsor cash equity fluctuated throughout the application process, which complicated the reconciliation of the closing statement and final loan amount.

    Solutions:

    GSP demonstrated that the Sponsor had chosen a capable general contractor to oversee the Project and helped structure a contract that gave the Lender confidence that the development would be completed. With respect to net worth, GSP procured ample evidence supporting the financial growth and stability of the startup. GSP prepared all required closing documents in a timely manner and provided a material portion of the due diligence prior to entering application in order to execute the transaction before the expiration of the Sponsor’s permits. GSP kept a diligent record of costs and equity invested to date. The Lender gave credit for this prior equity and reduced the Sponsor’s required down payment at close.

    Rate: Prime + 0.75%
    Term: 18 Months + 1, 6 Month Extension
    Amortization: Interest Only
    LTC: 70%
    Guaranty: Recourse

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    $81,500,000 Non-Recourse Bridge Loan for a 19-Story Multifamily Tower; Phoenix, AZ

    August 28, 2019

    Transaction Description:

    George Smith Partners successfully arranged $81,500,000 in non-recourse bridge financing for a 312-unit, 19-story luxury high-rise apartment tower in Phoenix, AZ. The Property is in the heart of Phoenix’s historic Roosevelt Row Arts District and features restaurants and retail on the ground floor, 7 levels of parking, a state-of-the-art fitness center and a rooftop pool overlooking the Phoenix skyline.

    The financing was closed prior to the City issuing a final Certificate of Occupancy on the Property. Proceeds from the initial funding will be used to replace the senior construction debt and to finance the remaining construction. A future funding will retire the existing mezzanine construction debt as well as return cash equity to the Developer’s investor group.

    GSP sourced and negotiated with a capital provider who became comfortable with the market, lack of project completion, and lease up risk at a high leverage point. Furthermore, the new Lender was very agreeable to the existing mezzanine lender’s requested intercreditor terms. By retiring the higher priced construction debt, the new bridge loan provides the Developer with additional term, substantial savings on interest, and exit flexibility during project lease-up.

    All terms confidential

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    $6,000,000 Non-Recourse Refinance with Significant Cash-Out for 97-Unit Multifamily Property; Bellflower, CA

    August 21, 2019

    Transaction Description:

    George Smith Partners successfully secured a $6,000,000 non-recourse permanent refinance of a 97-unit, 51,732 square foot multifamily property in Bellflower, CA. Loan proceeds were used to pay off the existing variable, higher interest rate loan into a lower interest, fixed rate loan. There was nearly $4,600,000 cash-out to the Sponsor, who had recently spent over $800,000 to complete full and partial remodeling of 62 units (64% of the total units). Thanks to GSP’s strong lender relationships, the Sponsor’s credentials and longevity of ownership, and extremely low leverage, GSP was able to source a lender that provided an additional $500,000 above the Sponsor’s initial funding ask, assumption rights in the event of a sale and no post-closing financial covenants for future successors.

    Rate: 3.96% Fixed
    Term: 15 Years
    LTV: 35%
    Guaranty: Non-Recourse

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    $10,200,000 Cash-Out Refinance of a Historic All-Brick Building; Los Angeles, CA

    August 21, 2019

    Transaction Description:

    George Smith Partners secured a $10,200,000 cash-out refinance of a 1920s-mixed-use brick building located in Los Angeles. In a growing movement to gentrify the area, this Property features both ground floor retail, and multifamily living. The cash-out refinance allowed our Sponsor to recapture the investment they made in upgrading and repositioning the Property. It is challenging for lenders to finance historic brick buildings and they have trouble getting their arms around mixed-use properties because of the potential risk they pose. GSP offered comfort to the Capital Provider by showing the significant improvements the Sponsor made to the Property, quantifying how retail will enhance the Property value as well as the benefits of being fully leased.

    Rate: 4.05% fixed for five years
    Term: 30 years
    Amortization: Interest only
    LTV: 75%
    Prepayment: 1.75% 1-3 years, 1.00% 3-5 years
    Guaranty: Non-Recourse
    Lender Fee: 1%

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    $13,600,0000 Bridge to Stabilization Financing for a Newly-Built 75 Unit Multifamily Property; Ontario, CA

    July 31, 2019

    Transaction Description:

    George Smith Partners placed $13,600,000 in bridge financing on a newly constructed 75 unit multifamily property in Ontario, CA, shortly after the Property obtained it’s certificate of occupancy. Due to construction cost escalation, which has been a pervasive industry challenge, the Sponsor incurred significant cost overruns during the course of construction. This resulted in a large number of mechanics liens filed on the Property as well as open trade payables and a lender that was threatening to file a notice of default. To further complicate matters the construction lender was an esoteric form of bond financing with a very narrow payoff window. Failure to repay within the window would result in significant penalties. Property occupancy was less than 10% at the time of engagement.

    By emphasizing the Property’s excellent location in West Ontario in close proximity to the airport and convention center as well as the submarkets strong fundamentals and low vacancy rate, GSP was able to source a lender who provided a fully funded loan representing 75% of total cost. The loan carries an interest rate of 1Month Libor + 2.50%, which is near institutional level pricing for a middle market sponsor and has no going in debt yield or DCSR requirements. The loan has a holdback for interest reserve so no additional out of pocket costs will be incurred for debt service. The loan term is 24 months and there is no prepayment penalty or exit fee, allowing the Sponsor to sell or refinance at stabilization at no additional cost. The loan closed in just 60 days from the signed application.

    Rate: Floating at 1 Month LIBOR + 2.50%
    Term: 2+1
    Amortization: Interest Only
    Fees: 0.5% in/0% out
    Prepayment Penalty: None
    LTC: 75%
    Guaranty: Recourse

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    $9,300,000 Non-Recourse Cash Out Refinance For Los Angeles Multifamily Property

    July 17, 2019

    Transaction Description:

    George Smith Partners secured a $9,300,000 Non-Recourse refinance loan for a 35 unit multifamily property in Los Angeles. The loan provides 65% leverage and is fixed at a rate of 4.04% for seven years. Over the past 3 years, the Sponsors renovated 27 of the 35 units with a heavy lift that neared $50K per unit. GSP sourced a 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. In order to maximize underwritten cash flow, GSP provided data that demonstrated the very low vacancy percentage in the submarket. This allowed the Lender to use a slightly lower vacancy factor than that of a typical apartment transaction. Additionally, the Lender used market rate expenses despite some variation in the historical P&Ls. The Lender was able to rate lock at application and close in about 55 days.

    Rate: Fixed at 4.04% for 7 years then floats at 6 Month LIBOR + 2.25%
    Term: 30 years
    Amortization: 30 years
    Prepay: 4,3,2,1,0
    LTV: 65%
    DCR: 1.15
    Guaranty: Non-Recourse

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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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