Financings

Recent Financings

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    $4,000,000 Non-Recourse and Cash Out of an Office Building in Beverly Hills, CA

    April 17, 2019

    Transaction Description:

    George Smith Partners arranged $4,000,000 of non-recourse and cash-out on a refinance of an office building in Beverly Hills. The non-recourse loan is fixed for the first 5 years at 4.48%. There is no requirement for a reserve account which is typically required for tenant improvements and leasing commissions when there are rollover leases in place. The Capital Provider was able to give the Sponsor credit for actual expenses, instead of historical P&Ls. The most recent P&Ls included many capital expenditures and non-recurring expenses, as the Sponsor has spent a great deal of funds in renovating and re-leasing a large portion of units

    Rate: 4.48%
    Term: Fixed for 5 years
    Prepayment Penalty: 5,4,3,2,1
    Guaranty: Non-Recourse

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    77% of Purchase Price Financing for the Acquisition of a Vacant 75,000 Square Foot Data Center in Northern California

    April 17, 2019

    Transaction Description:

    GSP arranged $5,475,000 in financing, composed of $4,275,000 non-recourse first mortgage from a REIT and $1,200,000 recourse second mortgage from a private-money lender, to acquire a 1980’s-vintage, 100% vacant data center. The 77% of purchase price financing provides 12 months of term to allow the Sponsor to 1) implement capital improvements, and 2) generate positive cash flow, prior to putting permanent financing on the Property. The Lenders did not require an appraisal or other third-party reports, and required only a four-month interest/carry reserve despite no in-place cash flow. The financing is prepayable without penalty throughout the loan term.

    Rate: 8.80% Fixed (Blended)
    Term: 12 Months
    Amortization: Interest Only
    Lender Fee: 1.33% (Blended)
    Prepayment: Open Full Term
    Guarantee: Non-Recourse (First), Recourse (Second)

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    $6,350,000 Cash Out Refinance of 28 Units in Los Angeles; Maximum Credit for Unit Renovations

    April 17, 2019

    Transaction Description:

    GSP secured $6,350,000 in proceeds for the refinance of two properties comprising 28 units in Los Angeles. Since acquisition, the Borrowers made significant upgrades to the Property, including renovating 12 units at a cost of nearly $30,000 per unit. These units were re-leased at market rate, resulting in a considerable increase in income. The selected Lender was able to give the Borrower maximum credit for the higher income without using a loan-to-cost constraint. Additionally, two of the renovated units were leased just a week before close. The Lender was able to use the additional income based on the signed leases, without requiring any seasoning. Fixed at 4.4% for 7 years, the loan provides three years of interest only payments before rolling into a 30 year amortization schedule. Proceeds were maximized by using a 1.15x Debt Coverage Ratio on the actual mortgage constant.

    Rate: 4.4% fixed for 7 years, then floating at 6M LIBOR + 2.25%
    Term: 30 years
    Amortization: 3 years Interest Only followed by 30 year amortization
    Prepayment Penalty: 3,2,1,0
    LTV: 65%
    DCR: 1.15x
    Guaranty: Non-Recourse

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    $3,120,000 for Purchase of 30,000 SF Office Property in the San Fernando Valley; Non-Recourse Financing at 60% LTV

    April 10, 2019

    Transaction Description:

    George Smith Partners secured $3,120,000 in proceeds for the purchase of a 30,000 SF office building located in the San Fernando Valley. The Lender provided a Non-Recourse loan that was 60% of the purchase price at a rate of 4.85% fixed for five years.

    A number of challenges were encountered while discussing the transaction with lenders. The tenants at the Property consisted of small businesses renting 1,000-2,000 SF suites, many of whom are under month to month (MTM) leases. This caused some concern about the stability of cash flow. The Seller’s historical P&Ls included many corporate and non-recurring expenses. Based on these P&Ls, several lenders quoted proceeds of just 50% of the purchase price. An environmental screen mandated a Phase II subsurface investigation.

    GSP demonstrated that although some tenants were under MTM leases, they were long term occupants that had only converted to MTM when their lease expired. Overall, historical occupancy was very high because tenants like the unique features of the building. Additionally, our team demonstrated the Sponsor’s successful track record bringing operating expenses in line with typical office properties. As a result, the selected lender was able to underwrite to a normalized expense ratio. The Phase II report indicated that no remediation is required. The loan closed in about 60 days.

    Rate: 4.85% fixed for 5 years
    Term: 5 years
    Amortization: 25 years
    Prepayment Penalty: 3,2,1,0 with 5% principal annual repayment allowed
    LTV: 60%
    DCR: 1.30x
    Guaranty: Non-Recourse

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    75% Leverage, 4.95% Coupon Non-Recourse Permanent Financing for a Neighborhood Retail Center in a Tertiary Southwest Market

    April 10, 2019

    Transaction Description:

    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.

    Rate: 4.95%, Fixed
    Term: 10 years
    Amortization: 1 Year Interest Only; 30 Year Amortization thereafter
    Loan to Value: 75%
    Prepayment: Yield Maintenance
    Lender Fee: None

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    $15,880,000, 70% Loan-to-Cost Financing at LIBOR + 1.95% on an 82% Occupied Suburban Office Building with Near-Term Tenant Roll

    April 3, 2019

    Transaction Description:

    GSP arranged the $15,880,000 partial-recourse first mortgage from a national commercial bank on a 1980’s-vintage multitenant office building in the Dallas/Fort Worth market. The Property was 82% occupied at loan closing, with an additional 10% of space likely to be vacated by a major tenant approximately six months after closing and an additional 35% of the leased square footage rolling within the three year loan term. The loan is structured as an initial $11,860,000 advance, with a further $4,020,000 to be funded for tenant improvements and leasing commissions tied to future leases. The loan requires no additional leasing reserves, and interest is not paid on the $4,020,000 until drawn.

    The 70% of cost first mortgage priced at one-month LIBOR plus 1.95% and required interest rate protection to hedge no less than 75% of the loan amount for the first two years of the term, to be renewed for 100% of the loan amount prior to year three.

    Rate: 30-Day LIBOR + 1.95%
    Term: Three years plus two 12-month extensions
    Amortization: Interest Only (initial term)
    Prepayment: 0.5% months 1-6; open thereafter
    Lender Fee: 0.5%

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    $28,000,000 Paper Lot Inventory – Land Loan, CA

    April 3, 2019

    Transaction Description:
    George Smith Partners successfully financed a 50% LTV, $28,000,000 “paper lot inventory” land loan on a 59.5 acre property with 334 fully entitled lots in the city of Ventura, California. The financing was designed to provide the Sponsor flexibility in structuring the sales of phases of raw land to public homebuilders. Proceeds from the loan were also used to refinance the maturing entitlement loan and to receive a partial refund of predevelopment expenses.

    Challenges:
    Lenders have a long memory of huge losses taken on loans made on residential land prior to the Financial Crisis. Many have decided not to make new land loans, particularly for residential development, in this economic cycle; those that are lending are doing so very conservatively. With mortgage rate increases and property tax non-deductibility affecting home-ownership affordability, absorption rates and the rate of price increases have slowed, as well, in some markets which also feed lenders’ concerns.

    Solution:
    GSP approached many traditional and non-traditional sources for financing on residential land. Terms that were proposed by commercial banks and others either supplied insufficient proceeds or had troublesome covenants. GSP arranged the financing with a lending group which included a family office and a debt fund.

    Terms: Confidential

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    80% LTC Financing at 7.99% Fixed for the Reposition of a 100% Vacant Apartment Building in Los Angeles

    March 27, 2019

    Transaction Description:

    GSP arranged the non-recourse first mortgage from a regional balance sheet lender. Due to the Sponsors and Sellers requirement for a quick close, the Lender was able to close and fund the loan in under three weeks. The Property was acquired 100% vacant at loan closing. The loan is structured as an initial 80% advance based on the purchase price and past tenant buyouts, with a further 80% ($280,000) to be future funded for the reposition and lease-up of the Property. Interest is not paid on the future funding until drawn. Furthermore, there is no lockout period providing the Sponsor with unlimited flexibility to refinance or sell the Property without a burdensome prepayment penalty.

    Rate: 7.99%
    Term: 15 month initial term
    Amortization: Interest Only
    Max Loan to Cost: 80%
    Prepayment: None
    Lender Fee: 1.5%
    Exit Fee: 0.5%
    Guaranty: Non-Recourse

  • Expand

    $6,350,000 Cash Out Refinance of 28 Units in Los Angeles; Maximum Credit for Unit Renovations

    March 27, 2019

    Transaction Description:

    George Smith Partners secured $6,350,000 in proceeds for the refinance of two properties comprising 28 units in Los Angeles. Since acquisition, the Borrowers made significant upgrades to the Property including renovating 12 units at a cost of nearly $30,000 per unit. These units were re-leased at market rate, resulting in a considerable increase in income. The selected lender was able to give the Borrower maximum credit for the higher income without using a loan-to-cost constraint. Additionally, two of the renovated units were leased just a week before close. The Lender was able to use the additional income based on the signed leases, without requiring any seasoning. Fixed at 4.4% for 7 years, the loan provides three years of interest only payments before rolling into a 30 year amortization schedule. Proceeds were maximized by using a 1.15x Debt Coverage Ratio on the actual mortgage constant.

    Rate: 4.4% fixed for 7 years, then floating at 6M LIBOR + 2.25%
    Term: 30 years
    Amortization: 3 years Interest Only followed by 30 year amortization
    Prepayment Penalty: 3,2,1,0
    LTV: 65%
    DCR: 1.15x
    Guaranty: Non-Recourse

  • Expand

    $4,235,000 Acquisition Bridge Financing for a 19 Unit Mixed-Use Property in Santa Barbara, CA

    March 20, 2019

    Transaction Description:

    George Smith Partners arranged $4,235,000 of acquisition/bridge financing for a 19 unit residential mixed-use property in Santa Barbara, CA. The Property, originally constructed as a 10 unit apartment building in 1951, was converted to mixed-use with a second and third floor office and residential penthouse addition in 1973. The change in use was a response at the time to demand for office given the Property’s close proximity to the popular State Street retail corridor just a block away. The Borrower plans to seek approval to convert the 1973 office addition portion of the project back to residential use and lease all but two front commercial units with long term leases. The challenge was finding a Lender that could underwrite the business plan and get comfortable with take-out financing of this mixed-use residential/office project. GSP was successful in identifying a lender that could get comfortable with the uncertainty of the Borrower’s ability to convert the project to mostly residential.

    Rate: 9.25% Fixed
    Term:
    2 year term with Two, 6-month extension options and 50 bp extension fee
    Amortization:
    Interest Only
    Loan to Value:
    68% max LTV “as complete”
    Loan to Cost:
    75%
    Yield Maintenance:
    24 months
    Loan Fee:
    1%
    Guaranty:
    Non-Recourse

  • Expand

    $8,400,000 Bridge Loan for Big Box Retail Center in Tertiary Market

    March 20, 2019

    Transaction Description:

    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%.

    Rate: L+425
    Term: 3 Years + Two, 1-Year Extensions
    Amortization: Interest Only
    LTC: 75% LTC
    Prepayment: 18 Months Yield Maintenance
    Lender Origination Fee: 1.0%
    Guaranty: Non-Recourse

  • Expand

    $5,300,000 Acquisition Financing for Creative Office Value-Add in Seattle

    March 13, 2019

    Transaction Description:
    George Smith Partners successfully arranged financing for a 25,000 sq ft office property in the Georgetown neighborhood of Seattle. The Sponsor purchased the Property to capitalize on the success of the adjacent property, the Seattle Design Center, which is showroom space for design-related tenants.

    Challenges:
    While the Sponsor intends to add value through improving the physical appearance of the building and lease it to creative or design-related tenants, the building had existing tenants at below market rent with lease expirations through 2021. Many lenders were not comfortable with the Sponsors ability to negotiate with the existing tenants to vacate. Lenders were also concerned with the depth of tenants in this submarket as it is in the midst of gentrification.

    Solutions:
    George Smith Partners located a lender that was comfortable with the Sponsors track record in the submarket and with the value-add business plan. The Lender was able to provide a short-term, fixed rate loan that provided reserves for the capital improvements to the façade and tenant improvements for the interior units.

    Rate: 6.25% fixed
    Term: 36 Months
    Amortization: Interest Only for the first 24 months, then 30 year amortization
    Prepayment Penalty: 5,4,3,2,1,0
    LTC: 75%
    LTV: 70%

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