May 20, 2020
George Smith Partners successfully secured a high leverage $21,700,000 non-recourse, Construction-to-Perm loan to develop a six-building, 966-unit, climate controlled, Class-A self-storage facility near Stevenson Ranch in the Santa Clarita Valley, California.
The Sponsor, while very experienced in other asset classes, engaged GSP to source the full capital stack (debt, equity and carve-outs guarantor) for his first self-storage project. New Building & Safety codes that took effect in 2020 resulted in increased costs and delays. In order to obtain certified pads by the end of 2019, the entitlements in-place had to be vetted and the horizontal work needed to start prior to securing construction financing. The impacts of Covid-19 resulted in multiple delays from subcontractors, County inspectors, and in pulling permits due to County offices being closed.
GSP was able to source an investor from its pool of strong relationships who provided the equity. GSP focused on the market necessity for storage units in the desirable and growing community of Santa Clarita Valley, and successfully negotiated an agreement with Public Storage to operate the facility. GSP identified a capital provider to not only extend the financing commitment multiple times, but also to execute a structured, non-recourse, low-rate loan with the same terms agreed upon prior to Covid-19.
April 22, 2020
George Smith Partners secured $5,000,000 of senior financing for a gas station located at a premier Orange County intersection. The loan is fixed at 3.10% for the entirety of the 10-year term. This is one of the lowest fixed rate financings ever placed by GSP even though gas stations are typically priced with an interest rate premium.
The asset class presented a unique challenge when marketing the Project. GSP was able to arrange the loan with a money center bank by highlighting the strong cash flow, extensive experience in management and operations, and irreplaceable site location. The Lender did not require a depository relationship from the Sponsor, even though she was not an existing client.
The Sponsor showed concerns about having a large loan balance towards the end of the loan term, believing that the continuing growth of electric vehicles could diminish the value of gas stations in the future. GSP negotiated to allow the Sponsor to pay down up to 15% of the outstanding loan balance every year. The amortization was also reduced to 20 years to accelerate the principal paydown.
$4,500,000 Non-Recourse Self Storage Adaptive Reuse Construction Financing Fixed at 4.75%; Orlando, FL
March 25, 2020
George Smith Partners placed $4,500,000 in non-recourse construction financing for the adaptive reuse of a big box retail furniture store to convert to a 1,250-unit state of the art self-storage facility. The Property is located in Orlando, Florida, within a Qualified Opportunity Zone (QOZ) and was capitalized with a QOZ equity partner. Deal requirements included a non-recourse bank execution and best possible rate given the low leverage ask resulting from the QOZ equity partner’s significant investment in the Project.
GSP identified a bank lender that understood self-storage construction and found the institutional sponsorship attractive. The Capital Provider was willing to offer a simple, non-recourse execution and a swap product that resulted in a 4.75% fixed rate for the duration of the loan. A four-year initial term was offered to accommodate for the longer lease-up velocity common among self-storage properties.
Rate: 4.75% fixed (Swapped out 1 Month Libor + 315 at closing)
Term: 4 years with a 2-year extension
Amortization: Interest only for the initial term; 25-year amortization thereafter
Prepayment Penalty: None (apart from Swap breakage)
- Advisors: Zachary Streit
$23,500,000 Construction Loan Take-Out of the 30-Acre FBO and Airplane Hangars Adjacent to the Van Nuys Airport
February 12, 2020
George Smith Partners placed a $23,500,000 construction loan take-out for the 30-acre development of the piston driven airplane hangars and FBO (Fixed Base Operations) adjacent to the Van Nuys Airport. Although not yet completed and four or five months from the final certificate of occupancy, our perm lender agreed to fund without the requirement of a hold-back due to the ample cash flow in place at the time of the loan funding.
Van Nuys is the busiest general aviation airport (non-scheduled flights) with over 800 operations daily (take-off or landing). It services LAX as an over-flow for smaller turbine and all piston driven air traffic. This location is vital to the City Department of the Los Angeles World Airports (LAWA) that administers this airport and owns the land surrounding all sides of the two runways.
At funding, the loan floats at Prime less 1.25% but 75% of the outstanding balance will be SWAPed at a future date; currently at 3.58% for the full 16-year term. The remaining 25% balance will continue to float. Structured as a self-liquidating loan, it will amortize over 15 years after the first year of interest only. The loan is open for future advances during the IO period if requested.
May 29, 2019
George Smith Partners secured a 66% LTV acquisition loan for a vacant theatre space in Los Angeles. The loan provides 66% of the purchase price at a floating rate of Prime + 0.25%. The Sponsor plans to convert the theatre to a production studio/event space.
Several challenges were encountered while discussing the transaction with lenders. Many lenders were not willing to make a loan on a specialty use property. The Property had limited operating history as a theatre so detailed historical financial statements were not available. Furthermore, our Sponsor’s plan is to convert the Property to a new use.
These risks were mitigated when the Sponsor signed a master lease with a well-established, financially strong production company. Although the tenant will not move in for several months post-closing, the selected Lender was able to structure upfront reserves for capital expenditures and interest payments. The Lender waived the debt coverage ratio test for the first year after which the Property will cover at a 1.25x DCR.
August 23, 2017
George Smith Partners placed the non-recourse $16,400,000 rate and term refinance of a Southern California mixed use office and specialty retail center. Proceeds were used to retire the existing maturing loan and cover refinance costs. Actual in-place cash flow exceeded a 1.60 debt coverage ratio. Loan documents were drafted to allow for the transfer of ownership interests for estate planning purposes. Fixed for five years via a synthetic SWAP, the on-book loan allows for two – 1 year options; amortized over 30 years.
Anchored by a fitness center, store sales and membership information was not available. Approximately 30% of the net rentable office space was vacant and several tenants were also month-to-month.
Sized to 55% of value, our capital provider gained comfort of not having anchor store sales with physical inspections showing a strong client presence at this location. Our Sponsor demonstrated daily hands-on management addressing occupancy and maintaining good relations with existing office tenants. Three-quarters of the gross revenue is generated by the retail operations.
$4,500,000 Acquisition Bridge Financing for the Condominium Conversion of a Historically Designated Trophy West Hollywood Apartment Building
August 16, 2017
George Smith Partners arranged $4.5 million in bridge financing for the acquisition and condominium conversion of Patio del Moro, a seven-unit, historically designated trophy apartment property located in the heart of West Hollywood just one block south of the Sunset Strip. The sponsor’s business plan contemplates converting the apartment property built by famed developers Arthur and Nina Zwebell in their signature Spanish Courtyard style into a condominium complex and selling off units individually as condominiums to end users. This transaction was structured with a $3,500,000 initial advance and a $1,000,000 holdback with no negative arbitrage for condominium conversion fees, property rehab and interest reserve. Sized to 64% of total cost, the bridge loan is interest only and floats at Prime plus 0.5% for its 18-month term. The loan carries no prepayment penalty. Partial releases are subject to a 125% of par pay down and are not subject to a full cash flow sweep. The lender fee was a low 35 basis points.
West Hollywood is among the most challenging submarkets for re-entitlement in all of Southern California. Moreover, the property is historically designated, adding an additional layer of required approval, and is under-parked based on current condominium parking requirements. The project is also one of the first condominium conversions to occur since the Great Recession, so there is no recent precedent to fall back on. Finally, the project’s total cost is estimated at $7,000,000 equating to a high basis of $1,000,000 per door.
George Smith Partners compiled a sales survey demonstrating robust demand for high priced condominiums in West Hollywood and surrounding areas, including recent sales in other Zwebell projects that were condominium converted over a decade ago. Moreover, George Smith Partners also highlighted the sponsor’s significant condominium conversion and real estate investment experience outside of Southern California. By demonstrating these items and leveraging its extensive capital markets relationships, George Smith Partners was able to identify a low cost capital provider that was comfortable with the deal’s entitlement risk and high basis per door.
Rate: Prime +.50% (4.75% Today)
Amort: Interest Only
Term: 18 Months with one 6 Month Extension for a 0.15% Lender Fee
Partial Release Provision: 125% of Par
Prepayment Penalty: None
Lender Fee: 0.35%
- Advisors: Zachary Streit
August 9, 2017
George Smith Partners secured a $4,000,000 non-recourse acquisition loan to purchase a partially developed SFR project in Bel Air. The spec house development project had halted, and the previous developer was forced to sell the project. Our sponsor became involved in a competitive bid process and needed a quick close loan to purchase the property. George Smith Partners was able to identify a private money lender who not only closed in 5 days, but also gave the sponsor the necessary proceeds to take down the property. The interest only loan is priced at 7.99% and represents 50% of the property’s current value. The loan has a 1-year term with a 1-year extension option and no prepayment penalty.
Term: 1 year with a 1 year extension option
Amortization: Interest Only
Prepayment Penalty: None
- Advisors: Bryan Shaffer
July 31, 2017
George Smith Partners placed the ground-up development loan of 35 “For Sale” Los Angeles residential units over a 2,000 square foot retail unit. Offering convenient mass-transit and surface street access to employment centers in the Valley and minutes to downtown Los Angeles, this sub-market witnessed double-digit price growth year-over-year since 2011; yet housing is still significantly constrained by availability. Walking distance to a number of “hip” restaurants, entertainment, and boutique retail has made this area a weekend destination for many Los Angelinos. Sized to 80% of total cost, the two-year term allows for two-6 month options to extend and is priced at 10% for this non-recourse debt.
No construction had been completed in this sub-market since the residential down-turn; unit sales comparables do not exist. A significant amount of grading is necessary to create the pedestal. Our General Contractor lacked this level of grading experience. The Sponsor is not an American citizen and lacks real or liquid assets here in the U.S. Hard costs increased while under due diligence.
Recent downtown Los Angeles unit sales far outpriced our Sponsor’s proforma. The ease of downtown access and less urban density permitted our underwriter to accept out-of-market sale comps in their valuation. A sizable reserve is held by the lender until all grading is completed and the pedestal is poured. Once the subject is above-grade, funds will be released and allocated to the balance of the development. Our Sponsor’s vested interest, capital contribution, and retention of a local developer supported this request regardless of where his assets are held. GSP worked with the capital provider to increase loan proceeds in lock-step with an additional equity contribution to address increased hard costs.
$3,500,000 Acquisition Bridge Financing for a Waterfront Newport Beach Multifamily Property Closed in 5 Business Days at a 7.00% Fixed Rate
July 26, 2017
George Smith Partners arranged $3,500,000 in quick-close acquisition bridge financing for a waterfront Newport Beach multifamily property. The sponsor approached GSP with an extremely tight closing time frame and a property with one down unit. The sponsor valued certainty of execution above all else, so he could close on the property in short order. GSP identified a non-bank lender with a long history of providing quick close bridge execution, familiar with the location and comfortable with the property’s weak in place cash flow. Sized to 65% of purchase with no hold back requirement for interest reserve or capital expenditures, the loan carries a 9-month term, interest only payments at a 7.00% fixed rate and no prepayment penalty. The loan also includes two 3 month extensions and a 1.5% lender fee.
Rate: 7% fixed
Term: 9 months
Amortization: Interest Only
Loan to Cost: 65%
Lender Fee: 1.5%
- Advisors: Zachary Streit
$2,475,000 Non-Recourse Mini-Permanent Acquisition Financing for a 693-Unit Self Storage Facility in a Major Metro in the Southwest
July 19, 2017
George Smith Partners arranged a $2,475,000 non-recourse loan for the acquisition of a 693-unit Self Storage facility in a major metropolitan market in the Southwest. Although the facility is well located near a major university and a central business district, many lenders were uncomfortable with the facility having below market occupancy, limited frontage to the road, deferred maintenance, and being niche property type. The institutional sponsor also required fixed rate execution to hedge against rising interest rates, a non-recourse structure, and a flexible prepayment structure. GSP sourced a lender familiar with the strength of the location and sponsorship as well as believed in the property’s upside. Sized to 55% of purchase, the non-recourse loan carries a 4.71% fixed rate for a five-year term and amortizes over 25 years. There is a one-point prepayment penalty for the first three years of the term with no prepayment penalty thereafter.
Term: 5 Years
Amortization: 25 Years
Loan to Value: 55%
- Advisors: Zachary Streit
April 19, 2017
George Smith Partners placed a $7,500,000 refinance of two special use, unanchored multi-tenant retail properties located in the City of Industry. A sizable return on equity (142% of total capitalization) was permitted due to our Sponsors’ 20 year ownership and management history of the asset. This transaction was structured as senior debt funded at $4,300,000 and a $3,200,000 crossed-collateralized stand-by line of credit. Both vehicles were funded by the same capital source. Due to the special-use tenant mix, the senior debt was sized to 60% LTV and priced at Prime plus 1% fixed for five years and amortized over 25 years, while the credit line will float at Prime plus 1.5% for two years. Interest is only paid on funds drawn. There is no prepayment penalty for either tranche.
Special use tenancy at both properties is subject to a CC&R review by the local municipality at the end of 2017. One tenant who occupies 20% of the net rentable square feet went dark and vacated the property during the due diligence process.
GSP identified a regional lender that understood the market and was eager to build a relationship with our Sponsor, who has impressive real estate holdings, a long track record of execution and significant financial strength. By demonstrating that market rents and occupancy levels still allowed for significant debt service coverage, GSP was able to assist the lender in gaining comfort with the properties’ specialty-use and uncertain occupancy future.
Rate: Senior Loan – Prime + 1%; Line of Credit – Prime + 1.5%
Term: Senior Loan – 5 Years; Line of Credit – 2 Years + Extensions
Amortization: Senior Loan – 25 Years; Line of Credit – Interest Only
DCR: Senior Loan – 1.25x; Line of Credit – 1.5x
Lender Fee: 0.75%
- Advisors: Zachary Streit
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