$13,500,000 Non-Recourse Bridge-to-Bridge Loan with a Cannabis User at 6.90%; Echo Park, CA

Rate: 6.90%
Term: 12-month term with one 12-month extension option
LTV: 60%
Guaranty: Non-recourse

Transaction Description:

George Smith Partners arranged $13,500,000 in quick-close, cash out, bridge-to-bridge financing for a multitenant retail center in Echo Park, California. The Sponsor approached GSP with intentions of taking out their existing lender due to an issue with lease approval for a cannabis tenant. In order to purchase an outparcel on the Property, the cannabis user needed a lease in place so it could obtain a license from the local jurisdiction. If approvals were not granted, the Sponsor would have the ability to break the lease. GSP identified a non-bank lender who was comfortable approving a lease on a space which may never be occupied. The Lender’s flexible prepayment structure allowed the Sponsor to execute their business plan as the cannabis tenant planned to acquire an outparcel on the Property after receiving approvals from the City. The first trust deed was sized to 60% of value with no hold back requirement for interest reserve or capital expenditures. The non-recourse, interest only loan does not carry any prepayment penalties. The Sponsor plans to take out the loan within 12 months with long-term fixed rate debt.


Related Financings

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    $1,500,000 Non-Recourse Rate & Term Office Refinance; Southern California

    September 16, 2020

    Transaction Description:

    George Smith Partners placed the non-recourse refinance of a Southern California single-tenant office and instruction center owned and operated by a 501c3 approved charity. This office is configured for classroom training, instruction and traditional administrative office use. Deemed an essential business, operations were never delayed as a result of the COVID-19 pandemic. Due to the ownership structure, there is no recourse or carve-out guarantees beyond the charity entity. The cash neutral loan financed all closing costs and reduced the Borrowers’ mortgage constant by 190 basis points for significantly improved cash flow.

    Rate: 2.77% Fixed
    Term: Seven Years
    Amortization: 30 Years
    LTV: 60%
    Recourse: Entity Level Only inclusive of Carve-Outs
    Loan Fee: 25 Basis Points

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

    September 16, 2020

    Transactions Description:

    George Smith Partners placed a $11,700,000 construction loan to build a logistics yard that includes trailer parking, auto parking and a maintenance facility. The fenced and secured facility is being built on a speculative basis although there is unmet demand.
    The marketing of the asset during the COVID-19 pandemic was difficult given bank resources first went to asset management and then PPP. The lenders in the market wanted “easy” deals such as low leverage multifamily, build to suits and infill industrial. The Sponsor’s expertise, market knowledge and demand for the product created a competitive lending environment. After talking to over 50 capital providers we had three compete for the loan. Structure, pricing, certainty of execution and speed to close narrowed the lender choice. The chosen Capital Provider went to full credit committee before issuing the application given the specialty nature of the asset. The credit committee also approved all terms negotiated/changed in the application before the process began. This gave us confidence that the chosen Capital Provider would execute on the original terms in the application while other Capital Providers have altered terms during the COVID-19 pandemic.

    Rate: Confidential
    Term: 24 months with options
    LTC: 60%
    Lender Fee: 1.00%

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    $13,898,000 for Two Multifamily Properties; Southern California

    September 9, 2020

    Transaction Description:
    George Smith Partners successfully arranged two, 10-Year, fixed rate loans for a total of $13,898,000 on two Southern California multifamily properties.
    The first loan was for $6,125,000 and was used to refinance an 18-unit multifamily property built in 1986, located in Hollywood, CA. The second loan was for $7,773,000 and was used to refinance a 26-unit multifamily property built in 1991, located in Culver City, CA.
    Both properties had undergone significant renovations and upgrades within the past four years. Despite COVID-19 regulations allowing tenants to suspend rent payments, both properties have stayed fully leased throughout 2020, with all tenants continuing to pay rent
    Although the properties had been previously financed with floating rate debt after undergoing their renovation programs several years ago, GSP demonstrated to the Sponsor that despite the requirement to pay a prepayment penalty on their existing financing, this refinancing would:
    1) Reduce the current interest rate by approximately 135 bps
    2) Increase the cash flow
    3) Eliminate floating rate risk
    4) Provide significant net cash-out proceeds
    5) The prepayment expense is offset by the interest savings within approximately 18 months.
    Both loans are fixed at 3.33% and are interest only for the first five years. The loans are not cross-collateralized, are non-recourse and sized at 70% of appraised value.

    Amounts: $6,125,000 & $7,773,000
    Rate: 3.33%
    Term: 10 Years, Fixed, 5-Years Interest Only
    Recourse: Non-Recourse
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    90% LTC for Acquisition of 6 Units – Closed in 12 Days; Los Angeles, CA

    September 2, 2020

    Transaction Description:

    George Smith Partners arranged $3,183,000 of senior and mezzanine financing for the acquisition of a 6-unit multifamily building located in Los Angeles, CA. The combined debt was sized to 90% of purchase price. The Property was purchased with the intention of future development. The proposed project would add more units to the supply-constrained submarket. The senior loan was sized to 60% of purchase and carries a 7.50% fixed interest rate. The mezzanine financing provided the remainder (up to 90%) and is priced at 12.00%. The financings were closed within 12 days of the term sheets being signed.

    Senior Loan
    Amount: $2,118,000
    Rate: 7.50%
    Term: 12 Months
    Amortization: Interest Only
    LTV: 60%
    Loan Fee: 1.00%
    Prepayment Penalty: None

    Mezzanine Loan
    Amount: $1,065,000
    Rate: 12.00%
    Term: 12 Months
    Amortization: Interest Only
    LTV: Up to 90%
    Loan Fee: 3.00%
    Prepayment Penalty: None

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    $2,950,000 Permanent Financing for a 12-Unit, Multifamily Property; West Hollywood, CA

    August 26, 2020

    Transaction Description:

    George Smith Partners arranged $2,950,000 in permanent financing for a 12-unit multifamily property located in West Hollywood, California. In July of 2019 GSP arranged the acquisition financing for the Sponsor who now retained us to refinance the 85% bridge loan. Even with the current economic uncertainty, GSP was able to increase the loan size while dramatically decreasing the interest cost. GSP obtained a fixed rate of 3.70% for the first 5 years which allowed the Sponsor to recoup some of the capital invested in the rehab. This was particularly difficult to accomplish in light of the previous high leveraged loan.

    With the COVID-19 global pandemic and uncertainty in the market, it was critical to select a capital provider who could provide certainty of execution. Borrowing costs are on the rise as lenders ratchet up their credit standards. With the current crisis, lenders were 100% focused on rent collections and overwhelmed with new financing requests as several other lenders pulled out of the market.

    GSP selected a capital provider that we have a strong relationship with and have closed numerous financings with. We knew the loan officer would stay focused on the need to close on time and keep the agreed-upon rate and proceeds through the completion of the loan. Because GSP is in the debt market every day, we were able to ensure that the capital provider was truly closing deals and meeting deadlines. GSP’s experience working with appraisers, inspectors and title/escrow during the COVID-19 pandemic was critical to getting this transaction completed. It is now common during the COVID-19 pandemic that Capital Providers require a 12-month interest reserve. Due to our strong relationship with the selected Capital Provider, we were able to negotiate that those funds be applied to the first 12 months of the loan payments.

    Rate: 3.70% Fixed
    LTC: 55% LTC
    Amortization: 30 Year / 5 Year Fixed Term
    Prepayment: Within first 3 years – 1.75%, after that 1%

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    $20,000,000 Non-Recourse 10-year loan on Specialty Storage

    August 19, 2020

    Transaction Description:

    George Smith Partners placed a $20,000,000 refinance for a 30-year-old specialty storage facility in California. The high security, temperature and humidity-controlled facility is used for specialty uses, and other high value items. The COVID-19 pandemic made the Sponsor’s request more challenging as it consisted of non-recourse financing for a specialty asset. George Smith Partners reached out to several dozen Capital Providers to find a relationship lender that would meet the Sponsor’s needs. The Property has performed well historically and continues to perform very well during the COVID-19 pandemic.

    Rate: 3.54%
    Term: 10 Years
    Amortization: 5 years interest Only
    LTV: 65%
    DSCR: 1.25%
    Loan Fee: Par

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