Financings

Recent Financings

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    $13,000,000 Acquisition and Reposition Financing on a 47-Unit Student Housing Property; Adjacent to a Major Southern California University

    May 27, 2020

    Transaction Description:

    George Smith Partners arranged the $13,000,000 first mortgage on a 1960’s vintage, 102-bed student housing property in Los Angeles. The national balance sheet lender provided the Sponsor non-recourse financing at 70% of total project cost including 100% of future CapEx funds totaling $42,500/per unit to complete extensive interior and exterior renovations. Interest expense is not incurred on CapEx funds until drawn. The Sponsor’s cash flow was maximized as the loan is interest only during the initial three-year term. The 30-Day LIBOR plus 3.35% coupon required interest rate risk protection and in order to minimize associated sponsor cost the Capital Provider structured the interest rate cap with a two-year duration at closing plus an obligation to renew for the third year of the initial term. Due to a lack of cash flow for 12 months, the Capital Provider structured an interest reserve to cover debt service during the peak reposition period.

    Rate: 30-Day LIBOR + 3.35%
    Term: Three years plus two 12-month extensions
    Amortization: 36 months interest only
    Max Loan to Cost: 70%
    Prepayment: 21-month minimum interest period
    Guaranty: Non-recourse
    Lender Fee: 1.00%

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    $1,690,000 Freddie Mac Multifamily loan; Killeen, TX

    May 20, 2020

    Transaction Description:
    George Smith Partners secured $1,690,000 in Freddie Mac permanent financing for the acquisition of a stabilized 72-unit multifamily property located in Killeen, Texas. The Property is located four miles southeast of Fort Hood, the largest active-duty armored post in the U.S. military, occupying more than 218,000 acres of land in Bell and Coryell Counties.

    Challenges:
    As GSP went into application, the world was entering into the COVID-19 pandemic. Most lenders had either stopped lending or become much more cautious. Most agency lenders require Borrowers to have a track record with multiple projects before they will be considered for a Freddie Mac or Fannie Mae loan. In this case, the Sponosr was a first-time agency borrower. To make it even more challenging, the Property was in a small market with a high concentration of military personnel and the Sponsor required the ability to have prepayment flexibility.

    Solution:
    GSP used its relationship with a capital provider who closed multiple loans with our firm. GSP recently closed a loan in a similar small market and we were confident that they would understand the demographics and market characteristics. For this type of financing, the Lender’s typical structure is to offer a 10-year term with Yield Maintenance. Thanks to GSP’s long-standing relationship with this Lender, we were able to secure an attractive rate, high leverage, and a step-down prepayment of 3,1,0,0,0 on a 5-year term. The new capital allows the Sponsor to expand their Texas Multi-Family portfolio.

    Rate: 4.59%
    Term: 5 Years
    Amortization: 30 Years
    Prepayment: 3%, 1%, 0%

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    $1,400,000 of Permanent Financing for 5-Unit Apartment Building; Silver Lake, CA

    May 13, 2020

    Overview:

    George Smith Partners secured $1,400,000 to refinance a stabilized multifamily building in Silver Lake, CA. The Property, which was built by the Sponsor in 1991, is 100% occupied. The Sponsor has owned and managed the building for over 25 years, but this is currently the only asset in his portfolio. Refinancing provided the ability to achieve a lower interest rate and return equity to increase his liquidity position. The non-recourse financing carries a fixed interest rate of 4.05% for 5 years.

    Challenges:

    The Sponsor’s lack of real estate experience and non-third-party property management deterred some capital providers from offering non-recourse financing. The Sponsor also had limited pre-closing liquidity which made it difficult to qualify for the most attractive rates. Lastly, the eventual lender required a 6-month interest reserve due to recent uncertainty surrounding the multifamily market.

    Solution:

    Even though the Sponsor has limited real estate exposure, GSP was able to highlight the strong historical occupancy that the Sponsor has been able to maintain while self-managing the subject property for over two decades. GSP identified a lender that only required liquidity equal to 5% of the loan amount to qualify for their non-recourse program. The interest reserve was structured as pre-paid interest that goes directly to pay the first six months of principal and interest payments. This avoids having a held-back reserve that would only release upon hitting certain covenants in the future.

    Rate: 4.05% Fixed
    Term: 5 Years
    Amortization: 30 Years
    LTV: 62%
    DSCR: 1.15x
    Recourse: Non-Recourse
    Prepayment: 1.75% for Years 1-3, 1.00% for Years 4-5
    Loan Fee: Par

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    $5,575,000 Acquisition Loan for 38-Unit Los Angeles Multifamily Property; Los Angeles, CA

    May 6, 2020

    Transaction Description:

    George Smith Partners placed a $5,575,000 acquisition loan for the purchase of a 38-unit multifamily unit located in the Los Angeles MSA. The loan has a rate of 3.6% for a 7-year term and includes three years of Interest Only payments. The term sheet was signed shortly before the COVID-19 crisis and ensuing economic volatility. Despite these conditions, the original rate and leverage was kept intact.

    The Property has several vacant units which represented an opportunity for our Sponsor to add value. The Capital Provider was able to underwrite the income on these units to post-renovation market rents. Market comparable data was used to support the buyer’s conservative rent assumptions. Additionally, the Capital Provider used a market vacancy factor and proposed to withhold 12 months of Principal and Interest reserves at loan closing. GSP pointed out that the loan had IO payments during the first 3 years. After discussion, the reserve was changed to 12 months of interest payments only. The loan closed in less than 60 days.

    Rate: 3.60% Fixed
    Term: 7 Years
    Amortization: 3 Years Interest Only
    Loan-to-Value: 60%
    DSCR: 1.20x
    Prepayment: 3,2,1
    Loan Fee: Par

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    $4,410,000 Non-Recourse Acquisition Bridge Financing up to 90% of Purchase Price; Glendale, CA

    April 29, 2020

    Transaction Description:

    George Smith Partners arranged $4,410,000 in quick-close, acquisition bridge financing for a 17-unit, 1960s built, value-add multifamily project in Glendale, California. The Sponsor approached GSP with an extremely tight closing time frame due to a reverse 1031 exchange. He valued certainty of execution above all else so he could close on the Property in short order. The Sponsor will use his own equity to renovate the Property. GSP identified two, non-bank lenders with a long history of providing quick close, bridge execution. The first trust deed is sized to 60% of purchase with no hold back requirement for interest reserve or capital expenditures. GSP also sourced a second trust deed up to 90% of purchase price. Both loans were non-recourse, interest only, and do not carry prepayment penalties. The Sponsor plans to take out the two loans within 12 months with agency or long-term fixed rate debt.

    1st TD:
    Rate: 7.10%
    Term: 1 year
    LTV: 60%
    Fees: 1% in/0% out
    Guaranty: Non-Recourse

    2nd TD:
    Rate: 12%
    Term: 1 Year
    LTV: 90%
    Fees: 2% in/0% out
    Guaranty: Non-Recourse

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    Trophy Gas Station; 3.1% Interest Rate for 10 Years; Orange County, CA

    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.

    Rate: 3.10% Interest Rate
    Term: 10 Year Term
    LTV: 40% LTV
    Amortization: 20 Years
    Lender Fee: Par
    Guaranty: Full Recourse

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    Abbot Kinney Co-Working Creative Office Conversion Bridge-to-Permanent Financing; Venice, CA

    April 15, 2020

    Transaction Description:

    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

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    $11,150,000 Acquisition and Reposition Financing on a Multifamily Property; 4% Debt Yield at Closing; Los Angeles, CA

    April 8, 2020

    Transaction Description:

    George Smith Partners arranged the $11,150,000 first mortgage on a 1980’s vintage, 42-unit multifamily property in Northridge, California adjacent to a major Southern California University. The national balance sheet lender provided non-recourse financing at 63% of total project cost including 100% of future CapEx funds. This equated to $64,200/per unit to complete an extensive interior and exterior renovation. Interest expense is not incurred on CapEx funds until drawn, and Sponsor cash flow is maximized as the loan is interest only during the initial three-year term. The 30-Day LIBOR plus 3.25% coupon requires interest rate risk protection and in order to minimize associated sponsor cost the Capital Provider structured the interest rate cap with a two-year duration at closing plus an obligation to renew for the third year of the initial term. Due to low going in cash flow (4.15% debt yield), the Lender structured an interest reserve to cover debt service during the peak reposition period.

    Rate: 30-Day LIBOR + 3.25%
    Term: Three years plus two 12-month extensions
    Amortization: 36 months interest only
    Max Loan to Cost: 63%
    Prepayment: 15-month minimum interest period
    Guaranty: Non-recourse
    Lender Fee: 1.00%

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    $4,000,000 Non-Recourse Cash-Out Refinance on Two Vacant Creative Office Buildings; Los Angeles, CA

    April 1, 2020

    George Smith Partners placed the non-recourse refinance of two vacant West Los Angeles creative office buildings. The contiguous buildings may be operated independently or as a small single-tenant user campus. The Sponsor was facing loan maturity but is still six months from pulling permits to reposition the assets to maximize their effective utility. These assets have been family held for multiple generations and appreciated significantly due to their ideal in-fill location adjacent to several major transportation corridors and metro line. A return of equity was requested given their low basis. No hold-back or reserve was structured despite the lack of cash flow in place at the time of funding. Fixed for twelve months at 6.90%, the non-recourse loan is interest only and does not carry a prepayment penalty.

    Rate: 6.90%
    Term: 12 Months
    Amortization: Interest Only
    Loan Fee: One Point
    Recourse: Carve-outs Only
    Prepayment Penalty: None

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    $4,517,000 Acquisition of a Multi-Tenant Retail Center, Villa Park, IL; Non-Recourse

    April 1, 2020

    Transaction Description:

    George Smith Partners secured $4,517,000 for the acquisition of a multi-tenant, retail center in Villa Park, Illinois. The non-recourse permanent loan is fixed at 3.75% for ten years with full-term interest only and a defeasance prepayment penalty structure.

    One of the tenants was a newly opened gym franchise with no historical sales information for this center. Also, during the loan process, the Seller was finalizing a subdivision of the parking lot which required multiple levels of municipality approvals.

    GSP identified a capital source who understood the strength of the asset, the experience of the Sponsor and its desirable suburb location, which is 20 miles outside of Downtown Chicago. The Capital Provider worked through the timing of the issuance of the subdivision approval and was able to close as soon as the approval was finalized. The efficiency of our Capital Provider allowed the Sponsor to be able to rate lock and close as soon as the approval was stamped, taking advantage of the low interest rate environment.

    Rate: 3.75% Fixed for 10 years
    Term: 10 years
    Amortization: 30 years
    Prepayment Penalty: Defeasance
    DCR: 1.30x
    Interest Only: 10 years
    Guaranty: Non-Recourse
    Origination Fees: Par

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    5-Day Close for Office Building, Owner-User, Cash-Out Refinancing; Los Angeles, CA

    March 25, 2020

    Transaction Description:
    At the start of the Coronavirus crisis, George Smith Partners secured a $2,000,000 private money bridge loan to enable a business owner liquidity capital needed to grow his business. The loan paid off an existing SBA loan and provided approximately $1,000,000 in cash-out. The monthly payment on the new interest-only loan is lower than the existing financing due to the 20-year amortization. This is true even with the cash-out.

    Challenges:
    At the start of this crisis, we found a lender with liquidity who was able to move quickly and close within 5 days. Even with everyone shifting to working at home because of the crisis, the Lender stayed closed as promised.

    Solution:
    GSP used its experience and relationships to identify a lender who could understand the need to close on time in the middle of a global crisis. The new capital allows the Sponsor to expand their business, as other companies in their field are unable to access capital.

    Rate: 7.9%
    Term: One Year Term With 1 Year Option
    Amortization: Interest Only

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    $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)
    LTC: 45%
    Guaranty: Non-Recourse

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