September 16, 2020
George Smith Partners placed the non-recourse refinance of a Southern California single-tenant office and instruction center owned and operated by a 501c3 approved charity. This office is configured for classroom training, instruction and traditional administrative office use. Deemed an essential business, operations were never delayed as a result of the COVID-19 pandemic. Due to the ownership structure, there is no recourse or carve-out guarantees beyond the charity entity. The cash neutral loan financed all closing costs and reduced the Borrowers’ mortgage constant by 190 basis points for significantly improved cash flow.
April 15, 2020
George Smith Partners placed bridge to permanent financing for the creative office conversion of a co-working space on Abbot Kinney in Venice, California. GSP sourced a lender comfortable with the trophy project’s high basis per square foot and co-working business model. The Project is slated to be the only co-working option on Abbot Kinney, one of the most coveted retail thorofares in Los Angeles. The 4.75% fixed interest rate was locked at application and featured 24 months of interest only followed by 25-year amortization for the remaining 5-year term. The loan was recourse to an entity, as no warm body was available and carries no prepayment penalty.
Rate: 4.75% fixed (locked at application)
Term: 7 Years
Amortization: Interest only for 24 Months; 25-year amortization thereafter
Yield Maintenance: None
Recourse: Entity-level only
- Advisors: Zachary Streit
$61,392,000 Refinance of a 207-Acre, Two Million Square Foot Pharmaceutical Campus in Tri-State Area
April 15, 2020
George Smith Partners arranged $61,392,000 in first mortgage debt for the refinance of a mixed-use office, industrial and lab campus in the Tri-State area (New York, New Jersey, Connecticut). The corporate user developed the campus in phases between 1906 and 2008, and the improvements consist of over two million square feet of laboratory, pharmaceutical manufacturing, office and support buildings including a central utility plant. The user still owns some buildings, and leases others on the campus. The Sponsor purchased the asset in 2015 with a long-term redevelopment goal to create a life sciences destination that will build on the existing laboratory, manufacturing, and office uses. The Property will ultimately feature shopping, dining, meeting and educational experiences as part of a cohesive “work/live/play” community.
GSP sourced a loan from a capital provider that was able to underwrite in-place income with flexibility for an ever-evolving business plan. The three-year, interest only initial loan term is structured as an initial advance of $42,940,000 with the remaining $18,452,000 future funded for approved capital expenditures and tenant improvements/leasing commissions for to-be-leased space. No interest is due on funds until drawn. The loan is open for prepayment at any time subject to a 24-month minimum interest payment.
Term: Three years plus two 12-month extensions
Amortization: Interest Only during Initial Term
Max Loan to Stable Value: 60%
Prepayment: 24 months minimum interest
Lender Fee: 1%
- Advisors: Gary E. Mozer
January 21, 2020
George Smith Partners arranged $16,000,000 in non-recourse financing to refinance and provide cash-out on a 119,000 SF Class-B office building located in Brea, CA, off one of the most densely trafficked business arteries in the area. The Property, built-in 1982, has been well maintained and has historically achieved above-market occupancy. The Sponsor’s goal was to refinance the existing loan with a facility that included a cash-out component to bolster the partnership’s returns. This facility allows the Sponsor to lease up the remaining vacant space and exit the investment through a sale to a third party in the next 6-8 months, all the while returning significant equity to the Sponsors today.
GSP focused on the extensive history of strong market demand in the Brea/Orange County market and was able to explain to capital sources the Property’s history of near full occupancy. GSP was able to identify a local lending source that not only understood the market and demand for office space in greater Orange County, but also understood the overall value of the Property and the subsequent loan that was procured.
December 18, 2019
George Smith Partners successfully arranged $3,000,000 in a cash-out permanent refinance secured by the sandwich leasehold interest in a single-tenant leased office building in Irvine, California. The Subject Property is in the heart of Orange County’s business district and next to the Irvine Business Complex and John Wayne Airport. The neighborhood is in a mature stage with limited amount of vacant land available for new development. The Property consists of three multi-story buildings having 69,474 SF net rentable space.
The Subject Property is encumbered by a ground lease. The leasehold interest, ground lease, and tenant improvement lease all expire in five years, with no extension options. The non-investment grade tenant has a six year lease remaining and they are not required to provide business financials.
GSP identified a capital provider able to structure a five year fully amortizing loan. The Sponsor’s considerable real estate track record and financial strength further encouraged the Lender to provide a low interest rate. The recourse loan is fixed at 3.00% with a 5-year term and will be fully amortized in five years.
December 18, 2019
George Smith Partners placed an $11,895,000 cash-out refinance of a 100% owner/user corporate office and assemblage facility in Orange County, California. Excess proceeds were used to address a loan maturity for other unrelated real estate. The other assets are not stabilized but located in primary in-fill Los Angeles markets. Although proceeds were allocated to other real assets our Capital Provider only collateralized the Subject Property. Our Capital Provider sized this request to 65% of appraised value and fixed the rate at 3.88% for 5 years. It was extremely important for our Sponsor to have permanent financing that carries a step-down pre-payment penalty from 5%.
December 18, 2019
George Smith Partners arranged $25,500,000 in non-recourse bridge financing for the acquisition of a 230,000 square foot Class A office building located in the heart of Phoenix, Arizona’s Midtown District. Positioned on a heavily trafficked thoroughfare of a major professional corridor, the site benefits from its central location, proximity to Downtown Phoenix and abundance of local economic drivers. The Project, built in 1982, had been well-maintained but was running a below-market occupancy rate of 82% due to the recent expiration of a large tenant lease. This bridge facility allowed the Canadian-based Sponsor to purchase the asset and undergo a proposed renovation, bringing the design up to competitive market standards in order to successfully lease-up and stabilize the asset.
By focusing attention on sophisticated bridge lenders active in the local area, GSP identified a capital provider who understood the growth of the market. The selected Capital Provider structured around the Project’s current vacancy, recognizing the strength of the Sponsor and their ability to successfully execute on the intended business plan of value creation. The loan was structured with minimal cash management language and featured pari passu funding throughout the term. The interest only non-recourse bridge loan was priced at a spread of 350 basis points over the 30-Day LIBOR, with a three-year term and two 12-month extension options.
October 30, 2019
George Smith Partners successfully arranged $1,500,000 of rate and term refinancing for a multi-tenant office building in Santa Monica, CA. The Property was constructed in 1975, and it has been recently renovated with 6,256 sf net rentable area. The Property is conveniently located near Santa Monica College, Downtown Santa Monica, and it is less than two miles away from Santa Monica State Beach. Santa Monica has been and still is one of the most highly sought-after office locations in the Los Angeles area by tenants and investors. The submarket has very significant supply constraints, though rental rates are lagging the metro average. The purpose of the refinance is to pay off the existing debt and take advantage of the low interest rate environment.
The Sponsor is self-managing the Property. They renovated the units recently and brought the rents up to market rate. The Building was 100% occupied by local and non-credit tenants at closing. All of the leases will roll within the first three years of the loan term.
GSP sourced a lender who is willing to offer a 7-year permanent loan term, without holding back Tenant Improvement and Leasing Commissions reserves. The loan is sized to 31%LTV, it has a fixed coupon of 3.46% with a 25-year amortization schedule.
October 8, 2019
George Smith Partners secured a $6,870,000 cash-out refinance loan for a 43,435 square foot medical/office property in Los Angeles. The loan represented 70% of value and a 1.25x debt coverage ratio. Our team helped the Sponsor secure the previous loan about a year ago at a time when the Property had 20% vacancy. Due to the considerable upside potential, the Sponsor had deliberately chosen a loan with no prepay. Since then, they successfully signed several new leases and achieved 100% occupancy.
In a survey of the market, GSP found that other lenders were limited by a higher stress rate, an above-market vacancy factor, or a lower LTV constraint. The selected Capital Provider had none of these constraints and was able to provide proceeds $300,000 higher than the rest of the market. The new Capital Provider was also able to provide the Sponsor full credit for the new leases without a seasoning requirement. The Capital Provider also included cash flow from month-to-month tenants and short-term tenants in their underwritten cash flow. As a result, the loan provided a considerable return of equity to the Sponsor. The loan was quoted at a rate of 5 year CMT + 2.55% with no floor. During application, the index rate declined by about 30 basis points. At loan approval, the rate was fixed at 3.98% for 5 years.
$13,850,000 Non-Recourse Permanent Loan for a 20-Story Office Building; 4.00% Fixed 4 Years Interest Only, 73% LTV; St. Louis, MO
September 18, 2019
George Smith Partners successfully placed a $13,850,000 permanent loan for the refinance of a 213,000 square foot Class A, multi-tenant office building located in the heart of Downtown St. Louis, Missouri. The multi-tenant building has a unique combination of national and local businesses. The Sponsorship has added tremendous value by improving the Property and creating state of the art shared amenities.
The Downtown St. Louis office market has been weak mainly because several buildings fully occupied by Fortune 500 Companies have gone vacant with tenants moving to the suburbs or out of town. Several lenders were concerned about the market and high level of vacancy. In addition, lenders usually only offer interest only payments options with leverage of 60-65%. For this property, the sponsor desired long term low fixed rate non-recourse financing with some interest only, but also required the higher leverage to make the loan work.
With experience in the market, GSP utilized an international relationship lender whom we had completed other complicated office transactions to complete this financing. We overcame the lenders objections by providing detailed market research and access to local experts, which demonstrated to the Capital Provider the strength of multi-tenant office market as compared to the high vacancy in the single tenant downtown office market. Thanks to our understanding of the market and relationship with the Lender, GSP was able to secure 10 Year Non-Recourse fixed rate of 4.00% with 4 years I/O at 73% Loan to value and close the loan in under 30 days.
$15,400,000 Non-Recourse Acquisition Financing for Office Tower; 3.68%; 70% LTV; 10 Year Interest Only; San Fernando Valley, CA
August 14, 2019
George Smith Partners secured $15,400,000 in non-recourse acquisition financing for an office tower located in the San Fernando Valley. The loan is fixed at 3.68% for 10 years with full term interest only payments. The proceeds represent 70% of the acquisition price.
The Property has over 40 tenants and many leases will roll within the next 2-3 years. Shortly before the PSA was signed, a major tenant moved out resulting in vacancy of 10%. The Property receives income both from cell tower leases and excess parking capacity, but many lenders do not give credit for these types of revenue. The seller included both regular operating expenses and capital expenditures in the historical P&Ls.
GSP demonstrated that the Property had historically high occupancy above 95% and provided data that demonstrated the strength of the local office market. This made the Lender comfortable with the short term leases and the temporary increase in vacancy. Additionally, while the loan was in application, the Sponsors signed a new lease to bring occupancy back up. The Lender did not require seasoning on this new lease. The Lender was able to include cell tower and parking income based on the historical P&Ls. Finally, GSP obtained the Seller’s general ledgers and was able to separate out major capital expenditures from the P&Ls. The Lender was ready to move quickly and close in about 30 days, but the Seller requested an extension and the loan closed about 50 days from application.
July 10, 2019
George Smith Partners successfully arranged a $10,200,000 refinance of a 69,552 square foot, multi-tenant office building in San Diego. The permanent recourse financing is fixed at 3.68% for the first five years with a rate reset for the remaining five years. The loan amortizes for 25 years with a declining step down prepay penalty.
There is rollover risk of approximately 53% of the square footage from the largest tenant, with their lease expiring in three years. Because of this, other lenders proposed limited loan terms of five years or less or simply declined the financing request. Lender’s willing to finance required reserves to mitigate the rollover risk which was unappealing to our Sponsor.
George Smith Partners worked with a new banking relationship who was able to get comfortable with the rollover risk given the conservative 56% loan to value request. The strength of the Sponsor and longevity of ownership helped the Lender meet the Sponsor’s financing requests.
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