$11,000,000 Non-Recourse Multi-Family Construction Loan, 75% LTC

Transaction Description:

George Smith Partners placed a $37,500,000 non-recourse, stretch senior construction loan for a 7-story ground-up development of a mixed-use OpZone Project. When complete, the Project will consist of 151 apartment units (including 14 Live/Work Lofts), approximately 15,000 sf of restaurant space, 10,000 sf of retail, and 12,000 sf of office space. The average apartment size is 730 sf, and most units will have private balconies with unobstructed views of the desert and city.

As the Project is a first of its kind in the surrounding area, finding appropriate comparable projects that would speak to the strength of this market proved to be a challenge. GSP focused on the Project as a marquee development and detailed the new employment opportunities from Google, and a hospital expansion, sports training facility, along with the emerging renaissance happening within the downtown area. GSP was able to demonstrate the immense intrinsic value from the ongoing renovation of the City Hall Plaza and Events Center — a 500-seat canopied amphitheater and 60,000 sf of programmable deck area for hosting community events — that sits directly across from the Project. GSP also worked through the Sponsor’s GMP budget with the Lender during a period of escalating cost, showcasing the strength of the Sponsor group in their local market. In turn, this created a comfort level needed by the Lender with regards to the commercial space of the Project.

GSP executed a broad and in-depth marketing campaign to help capital markets understand the opportunity appropriately. These efforts resulted in a successful close with proceeds achieving the Sponsorship’s objective.

Transaction Description:

George Smith Partners successfully advised on $33,000,000 in construction financing for a 27- unit luxury condominium project to be built in downtown Los Altos, CA. This high-end offering is the first larger scale project for the newly formed, but individually experienced sponsorship group. The Sponsor has significant historical ground-up experience and will self-perform as the General Contractor. GSP worked through several strategies with the Sponsor including preferred equity, mezzanine debt and an all in one, stretch-senior execution. Ultimately, GSP successfully obtained several highly reliable options for each strategy and the Sponsor selected an integrated full-service construction lender. GSP negotiated a land value contribution in excess of cost and as a result, the land lift allowed the Sponsor to invest less up-front equity than otherwise required to close the transaction.

The Sponsor projects completion of the project in late 2023. Due to the supply constrained market for the condo units, they expect the project to be completely sold out shortly thereafter.

Transaction Description:

George Smith Partners placed a $41,100,000 Non-Recourse, stretch senior construction loan for the ground-up development of a 6-story micro unit/co-living project in Hollywood, California. When complete, the Project will consist of 180 fully furnished, all-inclusive micro units within 49 pods with an average micro unit size of 276 sf. The Project lies in an Opportunity Zone.

Several hurdles presented themselves such as concerns about the newness of the asset class and the availability of direct comparable properties. Also, the Sponsor had already begun excavation & shoring work which created challenges in obtaining full title insurance coverage.

GSP focused on the Project’s per micro unit price rather than a per pod price to get the Lender comfortable with comparable projects. Further attention was given to the Project’s affordability as each micro unit comes fully furnished with an all-inclusive rental rate. GSP also stressed the Project’s unparalleled location, walkability to every major amenity in Los Angeles, the number of local employer hubs, and significant demand drivers from transient tenants looking for fully furnished offerings. GSP worked with the title company to successfully resolve all title insurance challenges that were presented and executing a high-profile marketing campaign to ensure that the capital markets appropriately understood the unique asset type. The process also included structuring and marketing the deal with several different capital stack variations (including a concurrent separate marketing effort for an A/B structure) to find the best financing option for the transaction. These efforts resulted in a successfully expedited process with a close in approximately 45 days from entering application.

Transaction Description:

George Smith Partners secured a $15,500,000 bridge loan for three newly constructed, pre-Certificate of Occupancy multifamily assets located in Los Angeles, CA. The non-recourse loan provided significant cash-out proceeds to the sponsor, refinanced outstanding construction debt and capitalized construction completion costs. The loan is sized at 70% LTC on a 4.90% fixed rate, non-recourse, 12-month term. The loan did not require an interest reserve or capitalized carrying costs.

The loan is secured by three new construction multifamily assets in the Koreatown and Eagle Rock submarkets of Los Angeles, totaling 57 units, in various stages of completion. All will be complete by Q1 2021, with lease up occurring throughout the balance of 2021. Given COVID related delays and slower-than-anticipated leasing velocity, GSP was able to identify a lender comfortable with the high quality, new construction product, and the long-term stability of these submarkets. The loan closed three weeks from term sheet execution.

Transaction Description:

George Smith Partners secured $25,500,000 in proceeds for the refinance of a construction loan on a newly constructed 65-unit multifamily property located in Los Angeles. The loan represents 100% of project capitalization and is fixed at 4.95%. The Property had recently received Certificate of Occupancy, but was still completely vacant at close. The bridge loan is intended to give the Sponsor time to lease up the property to stabilization. The fixed rate is unusual for a bridge loan; most capital providers offered floating rate financing and required the purchase of a cap.

Because the Property was still vacant, the Sponsor’s proforma rents were not yet proven out by signed leases. This was a challenge because the rents are several hundred dollars higher than those of typical multifamily properties in the submarket. GSP was able to overcome this challenge by pointing out that the brand new units at the Subject Property were considerably larger than those in the comp set. This provided support for the premium rents. Another hurdle was the 90% loan-to-cost constraint imposed by most capital providers. The selected lender allowed for 100% of cost, subject to a 7.0% debt yield on the stabilized cash flow.

Transaction Description:

George Smith Partners secured $42,700,000 in non-recourse construction financing for the development of a ten-building residential community in the Clackamas County submarket of Portland, OR. The nearly 13-acre site, which is a 20-minute drive from the city, offers an affordable alternative to Portland’s ever-increasing rental rates, as well as an exemption for inclusionary zoning, requiring no affordable units.

By leveraging the strength of the Sponsor’s local experience, coupled with the city’s need for housing alternatives to the urban infill product, GSP was able to find a non-recourse lender who was comfortable with the fact that the area had seen little development in recent years and offered no comparable product. The loan was priced at 30-Day LIBOR + 3.55% and was sized to 65% LTC, which is aggressive leverage considering the pricing and the non-recourse structure. As costs rose approaching the final budget, the Lender ratably increased the proceeds of their loan to minimize additional Sponsor dollars in, which ultimately showed a commitment to a long-term relationship; this was their second time working together, the first being another Portland development GSP sourced in 2017.