Blended Rate: 8%
Term: 24-month, plus a one 12-month extension option
Loan-to-purchase: 55%
Prepayment Penalty: 6 months minimum interest
Transaction Description:
George Smith Partners secured financing for twelve acres of raw land located in the Western U.S. Our Sponsor plans to get a variance for this land to build out five, forty-unit multi-family buildings, with shared open air common areas and a pad for a restaurant. This financing was especially challenging due to the land being unentitled, without water, the location, low loan amount, and lenders being more restricted due to COVID.
Due to GSP’s vast networks and strong relationships, we were able to secure attractive financing for this Project. GSP arranged a 55% loan to purchase at 9.25% interest only, with a 24-month term and 12-month extension option. GSP’s ability to secure this financing in just 10 business days allowed the Sponsor to renegotiate the purchase price and get a hefty discount.
Most land lenders are restricted to 40%-50% leverage. This high-leverage financing structure allows our Sponsor to start pre-development, including entitlements and pulling permits. The extension option gives flexibility to the Sponsor should they face delays in getting to entitlement due to COVID effects. There’s additional flexibility because there is no prepayment penalty. Per our long-standing relationship with the capital provider, we were able to close this transaction in 14 days from receiving the request.
Related Financings
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Land Acquisition Financing for 6.8-Acre Development Site; Denver, CO
December 22, 2022
Transaction Description:
George Smith Partners successfully placed $6,000,000 (66% Loan to Purchase Price) in acquisition land financing for a 6.8-acre site to be developed into 120 units in the Denver Metropolitan area. An infill site originally zoned agricultural; the Sponsor invested significant time and capital to change the site’s use to residential. The ability to develop attainable housing is the driver for both the city and the developer, as the finalized project will provide much-needed affordable housing to the increasingly expensive Denver Metro. With preliminary entitlements achieved, the Sponsor is working through civil engineering to receive final entitlements and sell the fully-entitled site to a well-known build-to-rent developer.
GSP was able to source debt with favorable leverage, a fixed-rate, and most importantly, without the need for an appraisal.
Term: 12 Months
Rate: 9.25% Fixed
LTV: 66%
Prepayment: No Prepay
Guaranty: Non-Recourse
