$13,944,000 ($1,180/SF) Non-Recourse Construction Financing for the Redevelopment of a Former Single-Tenant Office Property in Santa Monica, CA
June 12, 2019
George Smith Partners placed $13,944,000 in non-recourse construction debt for the conversion of a former single-tenant office property into an 11,800 square foot, luxury, multi-tenant retail property in a prime submarket of Santa Monica, California. GSP diligently worked to source a lender comfortable with funding a loan at a high basis of $1,180/SF for a “first-mover” redevelopment that was 64% pre-leased (on an economic basis) at record-setting rents to a mix of local and regional food and fitness users. Further complicating the loan request was the need to allocate separate components of the “bad boy” non-recourse carve-outs among two unrelated guarantor entities. Approximately 55% of the loan proceeds were future funded with no interest paid on unfunded loan proceeds until drawn.
Rate: One-Month LIBOR + 4.25% (6.75%) at closing burning down to One-Month LIBOR + 3.75% (6.25%) upon stabilization
Term: Three-year initial term plus two one-year extension options
Amortization: Interest only
Debt Yield: 8.5% stable debt yield
LTV: 70% as-complete value, 60% as-stable value
Prepayment: Open prepayment with 24-month spread maintenance
Lender Fee: 1%
$14,950,000 Non-Recourse Financing for the Acquisition of a 17-Property Single Tenant Dollar General Portfolio
June 5, 2019
GSP successfully placed $14,950,000 of non-recourse, 14-year (with an anticipated repayment date ten years from the initial closing) fixed-rate debt for the acquisition of 17 newly-constructed freestanding retail buildings 100% leased to Dollar General. The individual assets have 15-year lease terms and are located primarily in tertiary Upper Midwest states. GSP executed the financing concurrent with construction completion and sourced a lender able to provide 75% leverage financing at a 4.52% blended fixed coupon with five years of Interest Only payments, despite an absence of sales history and concurrent tenant lease terms expiring one year after loan maturity. The loan structure also provides the Sponsor flexibility to release properties from the loan collateral in the event of sale after year three of the loan term and allows the Sponsor to release up to 30% of the individual assets from the mortgage collateral and substitute like kind properties through year nine of the term.
May 22, 2019
GSP sourced a two year bridge loan on a small 50% occupied shopping center in Los Angeles for a family trust embattled in disputes for control of the asset. The loan was closed in 10 days, to prevent the sponsorship from filing for bankruptcy and provided capital needed to pay off creditors, buyout family members and allow one of the family members to hold the asset long term.
The estate heirs of the estate were involved in a two year lawsuit over control and over the same time period some of the major tenants moved out with occupancy dropping below 50%. The lawsuit created a need for cash and impacted the heirs’ credit. Between the credit and occupancy issues, it was impossible to find conventual financing. In addition, the lack of cashflow lowered the capitalized value of the property and the lawsuits were pushing the sponsorship into Bankruptcy.
The Shaffer team at GSP understood the diverse family dynamics, the overall value of asset and developed the strategy to quickly payoff the current debt and provide cash out to pay all the debts and buyout family members. Using GSPs expertise in equity recapitalizations, we were able to work out the disputes between the partners/family members and arraigned a quick five day bridge refinancing. We demonstrated to the capital provider that the long term value of the asset was only 65% of value even though the loan was 90% of the property’s capitalized value. In the end, the loan provided capital to buyout the family members, settle all legal claims and allow one of the heirs to hold the shopping center long term.
May 15, 2019
George Smith Partners secured a non-recourse cash out refinance loan for a 12,695 SF retail strip center located in Los Angeles. The loan is fixed at a rate of 4.85% for 10 years and is sized to 65% LTV. The majority of the lenders that were surveyed used a 25 year amortization, but the selected lender was able to use a 30 year amortization. This resulted in a lower monthly payment and greater loan proceeds. The property has one vacancy comprising 11% of the space, which resulted in several lenders limiting their proceeds to the in-place loan amount. GSP pointed out that the space has only been vacant for a few months, and provided historical data showing that the center has consistent high occupancy and long-term tenants. As a result, the selected lender was comfortable providing a non-recourse, cash out refinance loan.
Rate: Fixed for 10 years at 4.85%, followed by floating at 6 month LIBOR plus 2.5%
Term: 30 years
Amortization: 30 years
Prepayment Penalty: 3,3,2,2,1,1,1
LTV: 65% maximum
Origination Fees: Par
May 1, 2019
George Smith Partners arranged $8,740,000 of acquisition financing for an owner user retail property in Los Angeles. The Sponsor had been introduced to GSP after they received a loan cancellation from their direct bank. GSP jumped into the loan process right away and worked with the Sponsor, their CDC and the new Lender in order to ensure closing in a timely matter. The selected Lender that GSP brought in was able to give the Sponsor a much more aggressive interest rate than their direct lender had promised in their LOI. This ended up saving the Sponsor 67 bps on the interest rate and over $240,000 in interest during the first 10 years of the loan.
Rate: 4.57% fixed
Term: 10 years
Amortization: 25 years
Loan to Cost: 91.1%
Lender Origination Fee: None
- Advisors: Reuven Risch
April 24, 2019
In 2015 GSP financed a mixed-use retail/SRO-Hotel project in the “SoMa” (South of Market area) of San Francisco for $10,000,000. The Sponsor has continued to improve the Property and create additional value. Over the last several years the Property has doubled in value. The Sponsor was looking to recapitalize the original loan and take out $5,000,000 of cash equity.
The Sponsor did not want to pay prepayment penalties or incur a large refinance expense. The existing Lender did not have a program to allow for recapitalization or additional funding of their current loan.
GSP underwrote and proposed a recapitalization program that would allow the Lender, with only a 25 bps increase, to provide a new $15,000,000 loan that provided the Borrower with $5,000,0000 cash-out. This allowed the Borrower to get the proceeds needed without refinancing expenses or prepayment penalties.
75% Leverage, 4.95% Coupon Non-Recourse Permanent Financing for a Neighborhood Retail Center in a Tertiary Southwest Market
April 10, 2019
George Smith Partners successfully placed $15,000,000 of non-recourse, ten-year fixed rate first mortgage debt for the acquisition of an approximately 90,000 square foot, 1980’s vintage, 99% leased multi-tenant retail property. The anchor, a privately-owned regional grocer, occupies almost 50% of the collateral’s total square footage and has a lease expiration approximately concurrent with loan maturity. GSP sourced a lender able to achieve 75% leverage non-recourse financing plus one year of Interest Only payments despite the tertiary location and lack of access to the grocer financials. The loan was sized to the greater of an 8.65% debt yield or 1.30x debt service coverage ratio on the 4.95% fixed rate coupon.
March 20, 2019
George Smith Partners secured $8,400,000 of bridge financing for the lease-up of a two-tenant retail center located in Greeley, CO. The Sponsor recently leased a 50,000 square foot space to a national fitness center. The new 10-year lease, which has a corporate guaranty, required a large tenant improvement package. Loan proceeds will be used to refinance the existing loan and fund leasing costs without requiring the Sponsor to bring in any additional equity. The other tenant at the center, a national specialty retailer, agreed to extend their lease term to 10 years concurrently, eliminating any rollover risk. GSP found a capital source that understood that the tenants are uniquely positioned to serve the market, allowing the Lender to get comfortable with the completed value of the center. The non-recourse financing was sized to 75% LTC and priced at One Month LIBOR + 4.25%.
$12,790,000 Non-Recourse Acquisition Bridge Financing to Reposition a 120,000 Square Foot Retail Center in Phoenix, Arizona
January 30, 2019
George Smith Partners secured $12,790,000 in non-recourse acquisition bridge financing for the heavy reposition of a 1980s vintage shopping center in the Paradise Valley submarket of Phoenix, Arizona. The value-added property had a vacating grocery anchor tenant, low occupancy rates and below market rents. The Sponsor’s business plan was to acquire the asset with a fitness tenant anchor in tow and then reposition and stabilize the remainder of the center.
Sized to 80% of total project cost, the loan includes a future funding facility to cover tenant improvements, leasing commissions and capital expenditures. The rate floats at 1 Month LIBOR plus 4.25% (approximately 6.75% today) and carries a two year term with two one year extension options. Interest is not charged on the holdback until funds are drawn. The Lender was able to accommodate several changes to the business plan throughout the application process. This included relocating several existing tenants within the center due to a conflict presented in existing tenant leases.
$11,650,000 (72% Loan-to-Value) Non-Recourse, Cash-Out Refinance of a Grocery Shadow-Anchored Salt Lake City Retail Center
January 15, 2019
GSP successfully sourced $11,650,000 of non-recourse, cash-out, permanent first mortgage debt sized to 72% loan-to-value to refinance out a maturing bridge loan on a 62,500 square foot, grocery shadow-anchored Salt Lake City multi-tenant retail property. The borrower recently completed its re-tenanting business plan that upgraded the tenant base and stabilized the 1960s vintage retail property at nearly 100% occupancy. Although many lenders are increasingly becoming more conservative regarding leverage and interest only terms on retail properties, GSP sourced a lender that relied on the borrower’s substantial real estate experience, strong submarket performance, and a diverse tenant mix to provide a full-leverage, non-recourse loan that repatriated substantial equity to the borrower and included three years of interest only payments followed by 30-year amortization.
$10,200,000 Acquisition Financing for Two Single-Tenant, NNN Retail Properties Albuquerque & Silver City, NM
December 19, 2018
George Smith Partners successfully placed $10,200,000 of acquisition financing ($5,100,000 each) for the purchase of two single-tenant, NNN-lease Albertsons in Albuquerque (52% LTV) and Silver City (65% LTV). The Albuquerque store measures 65,413 square feet, 7.48 acres, and the Silver City store measures 39,385 square feet, 4.81 acres. Albertsons currently has 12+ years remaining on each of the leases. The Sponsor is structured as a TIC and identified these properties in a 1031 exchange.
To mitigate rising interest rate risk, the Lender locked the rate at application, two months prior to closing. The 7-year loans are amortized over 25 years, include step-down prepayment penalties, and have a fixed interest rate of 5.19%.
December 5, 2018
George Smith Partners secured $8,700,000 of non-recourse, bridge acquisition financing for a 45,000 square foot retail center located in Richardson, TX. The Center, which was built in 1985, has a diverse mix of regional tenants and sits on the corner of two of the main thoroughfares in the area.
The Sponsor purchased the Property with the intent to add value through two approaches: (1) increasing rents for tenants that are rolling and paying below-market rates, and (2) constructing an additional 12,000 square feet on undeveloped land within the parcel. There were complications with parcelizing the existing building and the land, which meant that a single lender needed to fund the entire project. The large renovation and construction budget also resulted in only 41% of the total loan being funded at closing.
George Smith Partners identified a lender that could structure the financing to have two holdback reserves, one for the CapEx and TI/LC’s for the existing space and the other dedicated to funding the construction of the new building. The separate reserves allow the Sponsor to pursue both value-add opportunities simultaneously, which drastically reduces the project timeline and maximizes the Sponsor’s IRR. Our capital source was able to get comfortable with the construction component by requiring 75% of the space to be pre-leased prior to funding.
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