$11,845,000 Non-Recourse Acquisition and Reposition Financing up to 75% of Cost on a Non-Cash Flowing Retail Property in Los Angeles

Rate: 30-Day LIBOR + 6.00%
Term: Three years plus two 12-month extensions
Amortization: 24 months interest only; 25-year amortization thereafter
Max Loan to Cost: 75%
Prepayment: 15-month lockout; open thereafter subject to 1.00% exit fee
Guaranty: Non-recourse
Lender Fee: 1.00%

George Smith Partners arranged an $11,845,000 first mortgage on a value-add retail property with no cash flow located along the main retail corridor of one of the hippest neighborhoods in Los Angeles. The national balance sheet lender provided a non-recourse loan to up to 75% of total project cost including 100% of future capital expenditure funds to gut renovate the asset and convert the property to high-end retail plus an addition of four apartment units. Due to the lack of cash flow, the lender structured a 20-month interest and carry reserve to cover debt service during the reposition period. Over 50% to total loan proceeds are allocated for future funding. Interest is not charged on funds until drawn.

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Related Financings

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    $8,700,000 Acquisition Bridge Loan for Renovation of Strip Retail Center and New Pad Construction

    December 5, 2018

    Transaction Description:
    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.

    Challenges:
    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.

    Solution:
    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.

    Rate: 1-Month LIBOR + 410
    Term: 36 Months + Two, 12-Month Extensions
    Amortization: Interest Only
    Loan to Cost: 76% LTC
    Lender Fee: 1.0% Origination Fee
    Prepayment: 12 Months of Yield Maintenance
    Guarantee: Non-Recourse

  • Expand

    $3,400,000 Acquisition Bridge Loan of Retail Property in Tertiary Colorado Market – 30 Day Close

    December 13, 2016

    Transaction Description
    George Smith Partners arranged the $3,400,000 acquisition bridge loan for a two-tenant retail property in a small, tertiary Colorado town. Current tenants, Hobby Lobby and Tractor Supply Company, have below-market leases that expire in 2 and 4 years, respectively. The non-recourse loan has a 3-year term with two, 1-year extensions, providing Sponsor with ample time to either extend the current tenants or to re-tenant the space at market rents. Lender got comfortable with short-term leases by underwriting a TI/LC reserve to be released in the event of a new lease. Our Capital Provider funded the loan in 30 days from application to close, in order to accommodate the Sponsor’s purchase timeline. Sized to 65% of purchase price, loan floats 575 over LIBOR.

    Rate: L+575
    LTC: 65%
    Term: 3 Years; Two, 1-Year Extensions
    Amortization: Interest Only
    Non-Recourse
    Lender Fee: 1.0%

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