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$1,200,000 Permanent Refinance on Multi-Tenant Industrial Building for Sponsor with Discharged Bankruptcy; Sun Valley, CA

Rate: 4.90% Fixed; Resets after Year 5
Term: 5 Years + Extension Option for 5 Years
Amortization: 1 Year Interest Only; 25 Years thereafter
LTV: 58%
Guaranty: Recourse

Transaction Description:

George Smith Partners successfully arranged a $1,200,000 permanent refinance for a fully occupied, eight-unit industrial building in the Sun Valley neighborhood of northern Los Angeles, CA. The Sponsor acquired the fully entitled site in 2015 and completed construction in 2016. The Property consists of two buildings totaling 8,084 SF on a 20,452 SF parcel.

The Sponsor had a Chapter 13 bankruptcy due to the impacts of the Great Recession. Having worked diligently to pay off creditors, the bankruptcy was ultimately discharged in 2017. At the same time, the Sponsor’s real estate portfolio grew substantially despite very limited access to capital sources. GSP was engaged in hopes of capitalizing on the low interest rate environment despite the bankruptcy being on record.

GSP focused on the Sponsor’s strong track record and leveraged its longstanding relationship with a lender who provided a 4.90% fixed rate for 5 years, with a 5-year extension option. The loan is interest only the first year and then fully amortizing for the remaining 24 years.

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Related Financings

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    November 4, 2020

    Transaction Description:
    George Smith Partners placed a $4,700,000 refinance loan with cash-out for a single-tenant industrial property in El Cajon, San Diego County. This highly specialized facility is one of only two locations in the US that is approved to manufacture key components and assemblies for military and commercial aircraft currently in service.

    The Sponsor acquired the Property in 2018 with a bridge acquisition loan. In March 2020, GSP was engaged to refinance the maturing bridge loan with permanent financing including cash-out proceeds. However, the California “stay-at-home” order was issued soon thereafter resulting in a challenging lending market for the Property.

    GSP helped the lenders become comfortable by focusing on the low leverage, the strength of the Sponsor and the Tenant, and the fact that the Property continued to operate at full capacity without interruption due to be a critical Department of Defense supplier. In addition, the Tenant recently exercised its third extension option to the existing lease with an increased cash flow closer to market rents, thereby continuing its long-term commitment to the Facility.

    While holdback reserves are increasingly common in the current environment, GSP negotiated to have reserve payments deferred until the fourth year of the loan and on a monthly schedule instead of the typical lump sum holdback at closing.

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    Term: 7 Years
    LTV: 51%
    DSCR: 1.30x
    Prepayment: None

  • 4,950,000 Non-Recourse, 10-Year Permanent Loan with Flexible Prepay

    April 11, 2018

    George Smith Partners secured $4,950,000 of permanent financing for two industrial buildings (one single tenant, one two tenants) located in Castaic, California. The 30-foot clear height buildings are located side-by-side and collectively total 57,825 square feet. One of the properties was constructed in 2011, while the other was built in 2016. The buildings are both 100% occupied but all of the tenants have lease terms that expire within the next four years. GSP was able to identify a capital source that would provide a non-recourse, long-term fixed rate loan. The borrower wanted to maximize cash flow which was achieved by taking minimal ongoing reserves, securing a 30-year amortization, and negotiating four years of interest only. The 10-year loan was priced at 5.17% at 65% LTV and offers a stepdown prepayment structure.

    Rate: 5.17% Fixed
    Term: 10 years
    Amortization: Interest Only for 4 Years then 30-Year Amortization Thereafter
    LTV: 65%
    Prepayment: Annual Stepdown from 10% to 1%
    Guarantee: Non-Recourse