$14,400,000 Acquisition & Renovation Bridge Financing for an Office to Retail Conversion

Transaction Description: Gary Tenzer and Henry Elder secured a $14,400,000 non-recourse bridge loan for the acquisition and renovation of a 9,200 square foot medical office building in West Los Angeles. The loan was sized to 80% of total project cost, including reserves to fund 100% of interest, renovation, and TI/LC costs. $11,465,000 of financing will be funded at closing. The remaining $2,935,000 is held in reserve, with no interest paid on reserve funds until disbursement. The loan floats at L+5.85% on an interest-only basis.

Challenge: The asset is located in a micro-market of West Los Angeles, featuring some of the highest per square foot rents and valuations in the country. In addition, the Sponsor’s business plan called for completely vacating the building for several months while it is converted into retail space. Since the property was in the midst of Coastal Commission approval for change of use, the financing required a lender willing to take entitlement risk. This was the Sponsor’s first project as a partnership.

Solution: Through diligent market research, GSP proved out the asset’s lofty valuation and projected rental rates. A competitive process identified a lender willing to take entitlement risk, and structure a 12 month interest reserve, giving the Sponsor a cushion to lease up the new retail space after renovation. The strength of the market, business plan, and Sponsor’s principal’s individual experience mitigated their lack of partnership track record.