Rate: Interest only 7.9%
Term: 2 years
LTV: 65% of Sale Value/90% Capitalized Value
Amortization: Interest Only
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.
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.
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.
Assistant Vice President
December 5, 2018
George Smith Partners secured $8,700,000 of non-recourse, bridge acquisition financing for a 45,000 square foot retail center located in Richardson, TX. The Center, which was built in 1985, has a diverse mix of regional tenants and sits on the corner of two of the main thoroughfares in the area.
The Sponsor purchased the Property with the intent to add value through two approaches: (1) increasing rents for tenants that are rolling and paying below-market rates, and (2) constructing an additional 12,000 square feet on undeveloped land within the parcel. There were complications with parcelizing the existing building and the land, which meant that a single lender needed to fund the entire project. The large renovation and construction budget also resulted in only 41% of the total loan being funded at closing.
George Smith Partners identified a lender that could structure the financing to have two holdback reserves, one for the CapEx and TI/LC’s for the existing space and the other dedicated to funding the construction of the new building. The separate reserves allow the Sponsor to pursue both value-add opportunities simultaneously, which drastically reduces the project timeline and maximizes the Sponsor’s IRR. Our capital source was able to get comfortable with the construction component by requiring 75% of the space to be pre-leased prior to funding.
5-Day Close $6,350,000 Non-Recourse Bridge Refinance of a Multi-Tenant Retail Center in Northern California
November 7, 2018
George Smith Partners successfully arranged a $6,350,000 bridge refinancing for a fully occupied un-anchored, 7-tenant retail center located in downtown San Mateo, California. The Property has a total net rentable area of 13,303 SF. Tenants include a convenience store and local restaurants. The Sponsor will utilize a portion of the loan proceeds to pay off existing lenders, and the rest of the proceeds will be invested into other investments. The Sponsor’s preferred exit is to sell the Subject Property through a 1031 exchange.
All tenants are on short-term or month-to-month leases by the time of funding. Although lacking a strong cash flow, the Sponsor requested maximum cash out. As a result of rising interest rates, several capital providers passed on this opportunity because the Property’s cash flow becomes tighter after applying a higher underwriting rate. The underwritten value was affected by a high debt service coverage ratio as the Property is classified as “un-anchored”. In addition, capital providers challenged the Property’s low capitalization rate given it is located on a busy corner with a signal in a downtown area.
GSP identified an asset based private money lender who offers simple and quick closing without requiring an appraisal or third party reports. GSP worked with the Lender to structure a 24-month loan, fixed at 6.90% (months 1-12) and 7.90% (months 13-24), interest only payments, no upfront TI/LC holdbacks and on-going reserves. There is no prepayment penalty.
March 14, 2018
George Smith Partners secured a $9,200,000 private money bridge loan to enable the renovation and re-tenanting of an unanchored retail shopping center in Orange County, California. The loan included $850,000 for future tenant improvements, renovations, and leasing commissions. The non-recourse interest only loan closed in 5 days.
The renovation of the shopping center had experienced significant construction cost overruns and needed another $850,000 for completion. Several tenants were in the process of significantly upgrading their spaces and had unfinished renovations in place. The sponsors also needed to close the loan within a 2-week time frame.
GSP used its experience and relationships to identify a lender who could understand the greater value of the project and was able to demonstrate both the inherent value of the property due to its extraordinary location as well as the future value of the project as completed. As a result, the lender became comfortable with the loan’s basis per square foot and closed the loan in 5 days.
January 10, 2018
George Smith Partners secured $17,800,000 of non-recourse bridge debt to refinance the Home Ranch Shopping Center, a 60,500 square foot multi-tenant retail shopping center in Yorba Linda, California. Of the total financing, the lender provided $13,700,000 in initial funding and $4,100,000 in future funding to pay for tenant improvements and leasing commissions. Pre-leasing activity increased significantly during due diligence and the Sponsor was able to bring the executed leasing from 56% to 97%. Once stabilized, the business plan will be to refinance into a CMBS takeout. GSP was able to source a Bridge Capital Provider to get comfortable with refinancing out another bridge loan as well as allocating a favorable basis for the Sponsor by adding in costs invested to-date since the initial purchase. Our Sponsor requested a return of equity upon completion of their business plan and preferred a new capital provider who would provide these funds at a lower fixed rate cost.
80% Loan-to-Value, $11,250,000 Refinance of a 44% Occupied Retail Center Shadow Anchored by an Independent Grocery Chain
August 16, 2017
GSP successfully placed $11,250,000 in non-recourse, floating-rate bridge debt on a 44% occupied, but 97% leased, 1960’s vintage Salt Lake City metro multi-tenant retail property. Although the property was only 44% physically occupied at loan application as a result of a planned re-tenanting program, the borrower recently executed two leases with large-format retailers that will bring occupancy to 97%. GSP identified a lender comfortable with the story behind the property’s 1) low physical occupancy at time of application, 2) grocery shadow anchor, 3) temporary tenants paying below-market rent during transition period, and 4) lack of supporting sale comps for the market. The short-term bridge loan was sized to 80% of as-is value, 75% of stable value, and included future funding to cover 100% of lease-up costs with interest not paid on unfunded proceeds until drawn.
Rate: 30-Day LIBOR + 4.75%
Term: 24-month initial term plus two 12-month extension options
Amort: Interest only (initial term)
LTV: 80% as-is, 75% as-stable
Prepayment: 15-month spread maintenance
Lender Fee: 1%
July 12, 2017
George Smith Partners secured a $3,000,000 non-recourse bridge loan to demolish and begin the redevelopment of a fire damaged retail building on a prime corner in Downtown Los Angeles. After the fire, the sponsor decided to demolish and rezone the property. The long term plan is to redevelop the property into a mixed use building with ground floor retail, office, and condos. GSP used its experience and relationships to identify a private money lender who could understand the greater value of the project and was able to demonstrate both the inherent value of the property due to its extraordinary location as well as the future value of the project as completed. The lender was able to close in 5 days. The interest only loan is priced at 7.99% and represents 55% of the property’s current value. The loan has a 1-year term with a 1-year extension option and no prepayment penalty.