4 – 2 – 2014
Transaction Description: GSP successfully placed the $4,500,000 non-recourse acquisition loan for the purchase of a 41,000 square feet commercial office building located in Oakland, California. The property is currently being utilized and serves as the main campus for a local Charter School. Our Sponsor manages the school which has 650 students ranging from kindergarten to eighth grade. The school lease to the prior real estate owner was about to expire and the financing sourced by George Smith Partners allowed the tenant to take advantage and exercise their option to acquire the property. A second trust deed was recorded at closing bringing the total debt allocation to 73% of cost. The interest only, non-recourse loan closed in three weeks from application to funding.
Challenge: The Borrower had been under contract to acquire the property for over 4 months and received several loan rejections as most lenders are not comfortable financing charter schools. Pending litigation threatened the future of the charter and thus the viability to service the debt. Timing became critical as the Seller received other higher bids. A portion of the buyers’ capital was in the form of a recorded second trust deed, typically a prohibition in the debt markets due to “cram-down” should the asset get moved into bankruptcy.
Solution: GSP identified a reliable private equity capital provider who understood the pending lawsuit and is comfortable with the Sponsors’ business plan and the ultimate exit strategy. A higher than anticipated valuation (as confirmed by the sellers’ additional bids) added more comfort to the senior lender; ie allowing a recorded second trust deed, etc. The entire financing process took three weeks to fund and maintain the escrow.
Rate: 10%
Term: 1 Year
Amort: Interest Only
LTC: 60%
Advisors:  Gilda Rivera, Salar Royaei