$11,700,000 Construction Loan on Logistics Yard; Southern California

Transaction Description:

George Smith Partners arranged financing for the construction of a Class-A Assisted Living Facility in Southern California. The Facility was designed similarly to a 4-star hotel property with luxury interior design and a top tier culinary program. Amenities include: gourmet exhibition kitchen and dining area, wellness center, full service spa, hair salon, landscaped outdoor space, private dog park and dog services. The Sponsors have made a tremendous effort to offer a one-of-a-kind experience, with residents being able to tend their own vegetable gardens, attend wellness classes and more. The Facility will also be able to accommodate residents who require memory care.

This is the sponsor’s first Assisted Living project. GSP was able to structure a strategic partnership to boost the experience profile of the Sponsor. This was essential for the capital provider to get comfortable with the project.

The financing structure provides flexibility to the Sponsor; after an initial 18-month construction term, the Sponsor can extend the construction loan for 6 months. After construction, the loan converts to a 24-month bridge loan during lease up/stabilization for a total loan term of up to 4 years.

Transaction Description:

George Smith Partners arranged $19,550,000 of senior construction financing for a ground-up cold storage facility located in Jurupa Valley, CA. The 125,000 square foot facility will serve as the headquarters for West Coast Cold Storage, a “for rent” cold storage provider focused on providing both refrigerated and frozen space to their Southern California customers. Existing cold storage facilities nationwide have an average age of over 40 years, demonstrating the need for new development within the space. With the sudden increase in online grocery orders and delivery, demand for well-located cold storage space has spiked. This flagship building will feature increased energy efficiencies and provide a variety of racking configurations to accommodate customer needs.

Located two blocks from State Highway 60, the Subject Property offers clients immediate access to the entire Inland Empire and Northern San Diego County. This location is also part of the Port of Los Angeles transportation line that handles 20% of incoming U.S. cargo and feeds all Southern California.

Structured to minimize the Sponsor’s equity investment, the non-recourse loan is sized to 81% of development costs and carries an 18-month term. Minimum interest requirements were negotiated to less than 5.5% of the committed loan amount as cold storage has a much shorter construction timeline when compared to other product types. Origination fees were allocated to post Certificate of Occupancy financing to further reduce the cash equity needed to close.

Transaction Description:

George Smith Partners successfully placed $27,180,000 (74% LTC) in construction financing to fund the ground-up development of a first-of-its-kind in the market, multi-property, 168-unit workforce housing project in an infill and trendy neighborhood of Saint Louis, Missouri. GSP leveraged its diverse lender relationships to source a construction loan for the unique project that is comprised of six individual buildings ranging from 18-unit (for rent) townhomes to 35-unit apartment buildings. Compounding the Project’s complexity is the requirement to cap rents, for a period of 10 years, on 51% of the units to be affordable for 80% AMI and the remaining 49% of units to be affordable for 100% AMI. Furthermore, although all six buildings are located within a one-block radius of each other, none of the sites are contiguous. The GSP-sourced loan was tailored to meet the needs of both the Sponsor and its equity partner. The equity partner capped construction leverage to 67.5% LTC, however GSP structured the loan to include a $2,500,000 earnout, which is sized to 74% LTC. GSP and the Sponsor were ultimately successful in obtaining approval from the equity partner for the higher-leverage earnout which is released upon 90% occupancy and a 1.25x DSCR on T-3 income.

Transaction Description:
George Smith Partners successfully secured a high leverage $21,700,000 non-recourse, Construction-to-Perm loan to develop a six-building, 966-unit, climate controlled, Class-A self-storage facility near Stevenson Ranch in the Santa Clarita Valley, California.

Challenges:
The Sponsor, while very experienced in other asset classes, engaged GSP to source the full capital stack (debt, equity and carve-outs guarantor) for his first self-storage project. New Building & Safety codes that took effect in 2020 resulted in increased costs and delays. In order to obtain certified pads by the end of 2019, the entitlements in-place had to be vetted and the horizontal work needed to start prior to securing construction financing. The impacts of Covid-19 resulted in multiple delays from subcontractors, County inspectors, and in pulling permits due to County offices being closed.

Solutions:
GSP was able to source an investor from its pool of strong relationships who provided the equity. GSP focused on the market necessity for storage units in the desirable and growing community of Santa Clarita Valley, and successfully negotiated an agreement with Public Storage to operate the facility. GSP identified a capital provider to not only extend the financing commitment multiple times, but also to execute a structured, non-recourse, low-rate loan with the same terms agreed upon prior to Covid-19.