Single Tenant

George Smith Partners arranged a $7,000,000 ($901/sf) cash-out, non-recourse, first mortgage from a REIT to refinance a single-tenant, owner-user office property in Venice Beach, California. The Lender was comfortable with providing the cash-out financing, although the single tenant was in bankruptcy protection due to the property’s irreplaceable location which is blocks from the ocean in Venice Beach. The financing provides 12 months of bridge term while the Tenant works through bankruptcy proceedings. Although the loan is non-recourse, the Lender did not require an appraisal or other third-party reports. Sized to 60% of the Lender’s underwritten value, the loan priced at 6.90% fixed for the 12-month loan duration.

Transaction Description:

George Smith Partners secured $3,744,000 of permanent financing for the acquisition of 3 single-tenant Starbucks. The drive-thru locations all have new leases with at least 8 years of term left and tenant options to extend. Each property is located in a different state across the middle of the country (Texas, Louisiana, Illinois). The Sponsor wanted to have a single capital source finance all three properties for ease of closing and ongoing servicing. GSP was able to find a lender that could accommodate the variety of locations and provide the same terms for each acquisition. All of the loans are fixed at 4.75% for 5 years and have a 30-year amortization schedule. Loan amounts were sized to a 1.25x DSCR, which resulted in an average LTV of 62%. The recourse financings do not have any prepayment penalties and can be refinanced at any time.

Transaction Description:

George Smith advised on $27,000,000 of debt and equity financing for 163 purpose built, single family homes for rent in Humble, Texas. Bank debt of $16,700,000 was secured on a non-recourse basis. The homes will range from 1,200 sf to 1,500 sf and will each have a two car garage. Amenities are expected to include greenspaces, a neighborhood lodge, a fitness room, a children’s playroom, and a playground for both children and adults. Infrastructure development will commence immediately, and home construction is expected to commence in the second quarter of 2020. Initial occupancy is expected for late in the second quarter of 2020. The Property will include on-site leasing and management. The location of the Property is in close proximity to growing employment hubs including George Bush Intercontinental Airport, Generation Park, and the Port of Houston. The Community is situated in the award-winning Humble Independent School District and residents are zoned to the recently built Groves Elementary School and Westlake Middle School in The Groves master-planned community, as well as Summer Creek High School.

Transaction Description:

George Smith Partners arranged $2,830,000 of acquisition financing for the purchase of a 17,000-SF industrial-flex property in El Segundo, CA. The Sponsor was awarded the deal in an off-market transaction with a hard-close date to facilitate a series of 1031 exchanges for the Seller. GSP utilized its extensive lender relationships to identify a long-term, fixed-rate, non-recourse lender that would work diligently to close in accord with the required timing.

The Property is 100% NNN leased to a credit-tenant on a recently signed 10-year lease. Situated in a business-friendly district of El Segundo, the Property has excellent adaptive reuse potential. The interest-only acquisition financing is fixed at 4.98% for 10 years.

Transaction Description:
George Smith Partners successfully completed a $10,000,000 refinance of a single-tenant medical office with an NNN lease with 14 years remaining. GSP arranged this 15 year, fixed rate loan with a rate of 4.82%. The first 5 years are interest only and then the loan converts to a 30 year amortization. The loan also features a step-down prepayment instead of typical yield maintenance.

Challenges:
The first challenge dealt with the remaining lease term. It is customary for loan terms especially on non-recourse loans to be at least 2 years shorter than the lease term on single tenant buildings. In this case, 14 years remain on the single tenant lease and the Sponsor wanted a 15-year term.

The second challenge was that the lease was to an entity that was a partnership between a local doctors group and an investment grade hospital without a guarantee from either group.

Solutions:
Because the building was well located in a high demand market, GSP did extensive market research and looked at the value from two different perspectives. First we looked at it from the perspective of the Tenant staying in the building and secondly we looked at it from the perspective of the Tenant moving at the end of the lease term. We proved it would be very hard and unlikely for the Tenant to relocate in Santa Monica. Using GSP’s relationships, market experience and medical office expertise, we were able to identify a lender who understood our view of the market and accepted it. The Lender was willing to do a 15 year fixed rate financing beyond the term of the lease. It was non-recourse to the Sponsor and had no guarantee from the Tenant.

George Smith Partners secured $2,849,250 in acquisition financing for a single-tenant Tractor Supply Company in Las Vegas, New Mexico. The Sponsor purchased the 19,000 square foot building for $3,800,000 at a very attractive cap rate for the product type. The tenant has 10 years remaining on their original lease with 10% rental increases every 5 years. GSP was able to mitigate the risk that the market presented by highlighting the Sponsor’s track record with similar assets. Sized to 75% of purchase price, the permanent loan is fixed for 7 years then floats for the last 3 years of the 10-year term.

George Smith Partners secured a cash-out loan for the refinance of a single-tenant, special purpose property in Los Angeles leased to a preschool. The loan is fixed at 4.35% for 7 years and then floats at the 3 year CMT rate + 1.75%. Most lenders required a 25-year amortization for this specialty use property, but the selected lender was able to provide a 30-year amortization. The loan has no prepayment penalty and closed 45 days from application.

GSP successfully placed the cash-out, partial-recourse, refinance loan for a 100% leased single-tenant truck terminal industrial facility in Fontana, California. The financing allows the sponsor to retire its construction loan on the asset, lock in a low 4.43% fixed coupon for 10 years, and provide an immediate return of equity. GSP was able to identify a lender that was comfortable with structuring a 10-year loan term despite the tenant’s five-year lease term by underwriting the income associated with the tenant exercising its two five-year extension options. The interest rate is fixed at 4.43% for a ten-year term on an interest only basis for the initial two years then amortizes thereafter.

George Smith Partners secured a $3,800,000 permanent loan for the acquisition of a single tenant Tractor Supply Company located in Colorado. The 22,300 square foot building was constructed earlier this year and the tenant has a new 15-year lease. GSP was able to identify a capital source that does not require a reserve structure, which helped to increase the cash flow and bolster loan proceeds. Sized to 73.5% of purchase, the recourse loan carries a 4.84% fixed rate for a 10-year term and amortizes over 30 years. The transaction funded 45 days from application.

George Smith Partners arranged $5,100,000 of non-recourse, bridge financing to complete the conversion of a 26,000 square foot, 100% vacant, 1920’s vintage, industrial building into creative office space in a major Southwestern city. The property is well-located near a central business district and is 100% preleased to a single, non-credit-rated tenant. Although not investment-grade, GSP was able to source a Capital Provider comfortable with the tenant’s financial history and business operations. The sponsor acquired the property with cash and proceeds will be used to complete the conversion, taking advantage of the growing creative office market.

George Smith Partners arranged the acquisition financing for a single tenant office located in the downtown area of a top Southern California market. The tenant is a private technology company that has 2 years remaining on their lease term. Due to the short lease term, GSP structured in reserves for tenant improvements, leasing commissions, and interest payments in the event that the tenant decides to vacate. If the tenant signs a new lease, the reserves that were held back will be released to the Sponsor. The lender was able to get comfortable with funding the reserves since the tenant is currently paying below-market rents and the property should see an increase in value with higher implemented rents at lease expiration. The financing has a 3-year term and carries a 5-year extension option that can be executed once the tenancy has been finalized and certain financial metrics have been realized. The recourse loan has an initial funding of $8,990,000 and is sized to 70% of total cost, floating at a rate of 2.75% over the one month LIBOR.  The additional future funding for re-tenanting the building is not charged interest until drawn.

Transaction Description:

George Smith Partners arranged $5,000,000 for the acquisition of a newly constructed, 17,200 square foot single tenant build-to-suit Rite Aid. Our Sponsor was focused on minimizing monthly debt service costs plus maintaining prepayment flexibility. The proposed Rite Aid acquisition by Walgreens and the tertiary market location added levels of complexity to the transaction. After evaluating the firm’s extensive lending relationships, GSP sourced a regional lender experienced with this location and comfortable with Sponsor’s financial strength, track record, and personal guarantee. The loan is fixed at 4.75% for five years with a 30-year amortization schedule, sized to a 1.20x DSCR, and is open to prepayment at any time. The lender charged a nominal fixed $2,500 cost for loan processing and documentation.