$10,000,000 Permanent Financing for Two Mixed Use Properties; Hollywood, CA

Transaction Description:

George Smith Partners secured a $10,200,000 cash-out refinance of a 1920s-mixed-use brick building located in Los Angeles. In a growing movement to gentrify the area, this Property features both ground floor retail, and multifamily living. The cash-out refinance allowed our Sponsor to recapture the investment they made in upgrading and repositioning the Property. It is challenging for lenders to finance historic brick buildings and they have trouble getting their arms around mixed-use properties because of the potential risk they pose. GSP offered comfort to the Capital Provider by showing the significant improvements the Sponsor made to the Property, quantifying how retail will enhance the Property value as well as the benefits of being fully leased.

George Smith Partners arranged a $2,925,000 cash-out refinance loan for a 20,300 square foot mixed-use office over retail property in Palm Desert, California. The deal presented numerous challenges. First, the sponsor only owned the property for three months. Second, a lease was not available for the anchor restaurant space comprising two thirds of the property’s square footage. Third, the sponsor required extremely high leverage and conventional bank interest rates. Finally, the Sponsor needed to close the refinance transaction in 30 days due to a pending acquisition.

To overcome the challenges George Smith Partners sourced a bank lender with which it had a long history of closing aggressive conventional financing with low interest rates. The property’s attractive location in Palm Desert, between the well-known retail thorofare of El Paseo and Highway 111, was emphasized as well as the Sponsor’s successful track record of purchasing notes on distressed properties, foreclosing on those properties and repositioning them.

Sized to an aggressive 87% of purchase price, the loan included a 6-month interest reserve but did not require a holdback for TIs and LCs. The three year mini permanent loan is interest only for the first 12 months followed by 25 year amortization for the remaining two years. The loan floats at Prime plus 0.5% (5.25% today) with no prepayment penalty, and the lender fee was a minimal 0.5%. The loan closed in exactly 30 calendar days from application, which is an extremely fast closing timeframe for a conventional bank.