Rate: 30-Day LIBOR + 2.60%
Term: Three years plus two 12-month extensions
Amortization: Interest Only during Initial Term
Max Loan to Value: 65%
Prepayment: 1% months 1-12; open thereafter
Transaction Description: George Smith Partners arranged $116,000,000 in non-recourse debt to refinance a suburban office portfolio in conjunction with an institutional equity recapitalization. George Smith Partners invested six months to optimize execution due to recent capital markets turmoil.
The first mortgage loan is cross-collateralized across the four properties in order to mitigate tenant rollover risk on the individual asset level, and features release provisions to allow flexibility in the event of a future sale of one or more of the assets. Proceeds are structured as an initial $109,000,000 loan, with up to $7,000,000 of additional funds available during the initial term for tenant improvement costs, leasing commissions, and free rent across the portfolio. The loan requires no additional reserves with interest is not paid on the $7,000,000 until drawn.
The first mortgage debt priced at one-month LIBOR plus 2.60% and required a LIBOR cap with a 3.00% strike price for the first two years of the term with a renewal for the third year, thereby reducing the overall cap cost to Borrower by shortening the cap’s duration. The loan features Interest Only payments for the three-year initial term in order to maximize cash flow available for distribution to investors.
June 1, 2022
George Smith Partners successfully placed the non-recourse rate and term refinance of a 112,000 square-foot, mixed-use office and fitness anchored retail center facing loan maturity. Although several tenants were mandated to close by State Regulators during COVID, Center occupancy was not significantly impacted. The sit-down restaurant remained open and adapted operations for take-out only. The restaurant has since expanded, leasing an additional suite, and now permanently offers take-out beyond their traditional dining room facilities.
The maturing loan, SWAPed at inception, has 90 days remaining on their existing SWAP contract. GSP successfully negotiated that contract through the first three months of the new loan, saving the Sponsor over $30,000 in SWAP breakage costs. Priced at SOFR plus 225, the replacement debt is a three-year term with two, 1-year options to extend, and amortized over 30 years. A SOFR cap will be purchased effective upon the existing SWAP expiration, offering a hedge to higher future interest rates. The cap will only be for the initial first two years of the loan and then extended annually to maintain a lower cap cost.
Rate: SOFR + 2.25%
Term: 3 Years + Two, 1 Year Options
Amortization: 30 Years
Fee: 50 Basis Points
Prepayment: 2, 1, 0%
Hedge Protection: Cap Purchase
- Advisors: David Stepanchak
May 25, 2022
George Smith Partners arranged a SBA 504 financing for a recently renovated single-tenant, creative office building in Glendale, CA. The Property will become the new headquarters for the Sponsor’s company. GSP leveraged its long-standing relationships with an institutional SBA lender and a leading Certified Development Company (CDC) to structure and close at 85% LTC. Though the appraisal value came in below the initial purchase price, GSP offered additional market analysis and local area expertise that helped the Sponsor negotiate a reduced price of nearly half a million dollars.
March 16, 2022
George Smith Partners successfully arranged $3,000,000 in acquisition financing for a 20,000 SF office/retail single story building in Sacramento. The Seller will occupy the Property paying no rent but will cover the operating expenses until the client provides 90 days’ notice to vacate. Centrally located in Midtown Sacramento, the Sponsor purchased the property for its land value, as they will entitle and assemble adjacent properties to be developed into a new ground-up multifamily project. Requiring a three-week closing timeline over the holiday season, George Smith Partners successfully sourced financing within the tight schedule.
$9,000,000 for the Refinancing of a 7,100 SF Office; Southern California & 28,500 SF Industrial Facility; Colorado
January 5, 2022
George Smith Partners successfully secured $9,000,000 for the refinancing of two single-tenant assets in Southern California and Colorado. The Southern California industrial property had challenges due to the high dollar per square foot. The Colorado asset had challenges due to the tertiary location. In addition, the tenant for both properties had credit issues.
Despite the risks associated, GSP was able to successfully navigate these hurdles. This execution is fixed at 4.25% for 5 years and was sized to 75%.
$19,570,000 Non-Recourse Acquisition Bridge Financing for a 163k SF Office Campus; Ventura, Los Angeles, CA
November 29, 2021
George Smith Partners successfully secured $19,570,000 in senior acquisition debt financing for a 4-building, garden style office campus located in Ventura. Situated on a rare 7.72-acre infill site, the Property consists of 162,717 net rentable square feet across the 4 buildings and is within walking distance to the high-traffic retail hubs, Mills Street, and the Pacific View Regional Mall. The financing capitalized the Property acquisition as well as a focused capital expenditure program aimed at increasing operational efficiencies and targeted deferred maintenance.
Despite COVID-19 related challenges in the office sector, the Property maintained 70% occupancy through its granular tenant base. While some lenders expressed concern with the going-in debt yield and market leasing dynamics, GSP broadly marketed the Project and was able to identify a lender who understood the underlying value of the asset, the Sponsor’s business plan, and Ventura’s fast-growing market. The interest-only financing was sized to 70% loan to cost, including 100% of future funding for capital expenditures, tenant improvements and leasing commissions. The loan carried a 3-year term and was priced at 1 Month Libor + 500 basis points with a 5.15% floor. Due to an excellent purchase price, the financing had a very tight closing timeframe, and the selected Lender was able to close in 30 days from term sheet execution.
Rate: L+500 (5.15% floor)
Term: 3 Years (Two 12-Month extensions)
Interest-Only: Full Term
3.15% Fixed Rate, Interest-Only Cash-Out Refinance for Owner-User Office Building; Beverly Hills, CA
November 23, 2021
George Smith Partners arranged $6,650,000 in owner-user financing for a multi-tenant, 50% owner-user office property located in Beverly Hills, CA. The Sponsor approached GSP to help assist with taking equity out of the Property to reinvest in their company. The Sponsor requested a low interest rate and $2,500,000 cash out. The multi-tenant component, along with a decreased appetite for office lending due to “Work-from-Home”, made it difficult for capital sources to get comfortable with the cash-out and interest-only request. GSP had to identify a capital source that could provide competitive terms, and a certainty of execution. Being in the market daily, GSP was able to successfully structure a first trust deed from a conventional lender and provided the Sponsor with a below-market interest rate of 3.15% fixed, and interest-only payments for the first 5 years of the 10-year term. Thanks to the low-rate and interest-only component, the Sponsor was able lower their debt service from their previous loan, while simultaneously securing over $2.,500,000 in cash-out.