Financings

Recent Financings

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    Acquisition Bridge Loan, 73% Loan to Cost for a 13 Unit Multifamily Property in South Los Angeles, CA

    June 12, 2019

    Transaction Description:

    George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in the Westmont Neighborhood of South Los Angeles, California. The 13 unit, 1950’s vintage Property had significant deferred maintenance and below market rents. The Sponsor’s business plan was to reposition the Property and release the units at market rents. Sized to 73% of total project cost, the financing includes 100% of future funding for a full gut renovation of unit interiors and an exterior upgrade.

    The two year bridge loan is interest only and floats at Prime plus 0.5% (6.00% today) with no prepayment penalty. Interest is not charged on the holdback until funds are drawn. The Lender only required a recourse obligation from the general partner who represented 10% of the equity, even though there were limited partners representing over 25% of the equity. The lender fee was negotiated down to 0.5%.

    Rate: Prime + 0.5%
    LTC: 70% / 65%, including 100% of future funding
    Term: 2 Years
    Amortization: Interest Only
    Prepayment Penalty: None
    Recourse: Full Recourse
    Lender Fee: 0.5%

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    $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

    Transaction Description:

    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
    Guaranty: Non-Recourse
    Lender Fee: 1%

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    Cash-Out Refinance at 4.35% Fixed for Seven Years, Non-Recourse; Downey, CA

    June 5, 2019

    Transaction Description:

    George Smith Partners secured the cash out refinance of a 15-unit stabilized multifamily property in Downey. Constructed in 1980 the Property is located in the heart of Downey, close to restaurants and retail centers. Fixed at 4.35% for seven years, the non-recourse loan floats at 6-month LIBOR + 2.25% for the remaining 23-year term. The non-recourse loan has 3 years of interest only payments and a 4,3,2,1 step down prepayment penalty.

    Rate: 4.35% Fixed for 7 years; 6 Month LIBOR + 2.25% thereafter
    Term: 30 years
    Amortization: 3 years interest only, followed by 27 years amortization
    Prepayment Penalty: 4,3,2,1
    LTV: 55%
    DCR: 1.15x
    Guarantee: Non-Recourse
    Origination Fees: Par

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    $4,050,000 (85% LTC) Financing for the Acquisition of 3 Contiguous Parcels in Los Angeles, CA

    June 5, 2019

    Transaction Description:

    George Smith Partners secured a $4,050,000 acquisition loan for 3 contiguous multifamily buildings located in Toluca Lake (Los Angeles), CA. While there are currently 11 units on the 3 parcels, the Sponsor is in the process of designing a 57 unit multifamily project. This development is allowed “by right” but must go thru planning commission for final approvals and will utilize the density bonus regulations. The proposed building will feature a mix of 1 and 2-bedroom units and will provide more rental housing for the local community. The final project will have an affordable component, boosting the supply of units for designated for low income tenants. The Project is walking distance to the Universal City metro rail stop. Nearby employers include Universal Studios, CBS, and Warner Brothers.

    The non-recourse financing was sized to 85% of purchase price at an interest rate of 9.50% for 18 months for a 1.5% lender fee. The high leverage loan allowed the Sponsor to minimize their initial equity investment into the deal. The Sponsor plans to replace this loan with construction financing once the Project is ready to break ground. This Lender has the ability to convert some or all of their acquisition loan to a mezzanine position up to 85% of total construction cost behind the future construction loan.

    Rate: 9.50% Fixed
    LTC: 85% of Acquisition Price
    Term: 18 Months
    Amortization: Interest Only
    Prepayment Penalty: 9 Months of Minimum Interest
    Recourse: Non-Recourse
    Lender Fee: 1.5%

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    Acquisition Bridge Financing for a 12 Unit Multifamily Property in South Los Angeles, CA; 70% LTC

    May 29, 2019

    Transaction Description:

    George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in the Hyde Park Neighborhood of South Los Angeles. The 12 unit, 1940’s vintage property had significant deferred maintenance and below market rents. The Sponsor’s business plan was to reposition the Property and release the units at market rents. Sized to 70% of total project cost, the loan includes 100% of future funding for a full gut renovation of unit interiors and an exterior upgrade.

    The two year bridge loan is interest only and floats at Prime + 0.5% (6.00% today) with no prepayment penalty. Interest is not charged on the holdback until funds are drawn. The Lender also only required a recourse obligation from the General Partner, who represented only 10% of the equity, even though there were limited partners representing over 25% of the equity. The lender fee was negotiated down to 0.5%.

    Rate: Prime + 0.5%
    LTC: 70% / 65%, including 100% of future funding
    Term: 2 Years
    Amortization: Interest Only
    Prepayment Penalty: None
    Recourse: Full Recourse
    Lender Fee: 0.5%

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    Acquisition Financing for Specialty Use Production Space at 66% LTV in Los Angeles, CA

    May 29, 2019

    Transaction Description:

    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.

    Rate: Prime + 0.25%
    Term: 5 years
    Amortization: 1 year interest only, then 25 years
    Prepayment Penalty: None
    LTV: 66%
    DCR: None for the first year, then 1.25x

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    $3,000,000 Unentitled Land Loan at 76% of Purchase

    May 22, 2019

    Transaction Description:

    George Smith Partners placed the $3,000,000 acquisition loan for the purchase of an under-developed parcel in the Fairfax District of Los Angeles. Although improved with a pair of single family residences, the contract price assumes re-entitlement for residential development. GSP identified a non-institutional lender who underwrote the business plan assuming a re-entitlement for 30 rental units. Their exit will come from the pay-off funded by a to-be-identified construction lender upon re-entitlement. The non-recourse loan was sized to 76% of the contract price and is fixed for the 18 month term at 9.9%. There is one – 6 month option to extend.

    Rate: 9.9% Fixed
    Term: 18 months w/one-6 month option
    LTC: 76%
    Recourse: Carve-Outs
    Fees: 1.5%
    Prepayment: Nine month minimum yield; no exit fee

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    10 Day Close on Retail Bridge Recapitalization Loan to prevent Bankruptcy

    May 22, 2019

    Transaction Description:

    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.

    Challenges:

    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.

    Solution:

    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.

    Rate: Interest only 7.9%
    Term: 2 years
    LTV: 65% of Sale Value/90% Capitalized Value
    Amortization: Interest Only
    No Prepay

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    $4,700,000, 75% LTC Loan-to-Cost Financing Fixed for the Acquisition/Reposition of a Rent Controlled Apartment Building in Los Angeles

    May 15, 2019

    George Smith Partners arranged the $4,700,000 non-recourse first mortgage for the acquisition and reposition of a value-add multifamily asset located within a rent controlled market of Los Angeles. The national balance sheet lender provided a non-recourse loan up to 75% of total project cost which includes $1,925,000 of capital expenditures for property improvements and 100% of the tenant buy-out expenses. Interest on future proceeds is not incurred until funds are drawn. A short spread maintenance schedule provides maximum flexibility to allow the Borrower to quickly execute its value-add strategy, prior to taking out financing with permanent debt or a sale. Cash flow is maximized as the loan is interest only during the initial three-year term and priced at 4.15% over 30-Day LIBOR. Due to low going-in cash flow, the Lender structured an interest reserve to cover debt service during the reposition period.

    Rate: L + 4.15%
    Term: 36 month initial term; Two 1- Year Extensions
    Amortization: Interest Only
    Max Loan to Cost: 75%
    Lender Fee: 1.0%
    Exit Fee: 1.0%
    Guaranty: Non-Recourse

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    $8,745,000 Refinance for 61-Unit Apartment Complex in East Bay, CA

    May 15, 2019

    GSP arranged a refinance that allowed the Sponsor to take cash out and strategically position the Property for future upside. The Sponsor purchased the Property in 2011 with an existing regulatory agreement mandating 80% median rents. The agreement expires in 5 years and the 7 year loan term will allow time for stabilization. The subject Property consists of 12 one-story and two-story stucco over wood frame buildings. It features large 2, 3 and 4 bedroom 2-level townhome style units. The units attract families in a market with barriers to home affordability. Amenities include an outdoor playground and covered parking.

    Rate: 4.05%
    Term: 7 years
    Amortization: Full term interest only
    LTV: 55%
    Lender Fee: 0.50%
    Guaranty: Non-Recourse

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    Non-Recourse Cash Out Refinance of Retail Strip Center in Los Angeles

    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
    DCR: 1.35x
    Origination Fees: Par
    Guaranty: Non-Recourse

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    Acquisition Financing for Single-Tenant Industrial Property in El Segundo, CA

    May 6, 2019

    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.

    Rate: 4.98%
    Term: 10 years
    Amortization: Interest Only
    Guaranty: Non-Recourse
    Lender Fee: Par

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