Rate: 5.5% for years 1-10 and 5.85% for years 11-15
Term: 15 Years
Amortization: 30 Years
In 2015 GSP financed a mixed-use retail/SRO-Hotel project in the “SoMa” (South of Market area) of San Francisco for $10,000,000. The Sponsor has continued to improve the Property and create additional value. Over the last several years the Property has doubled in value. The Sponsor was looking to recapitalize the original loan and take out $5,000,000 of cash equity.
The Sponsor did not want to pay prepayment penalties or incur a large refinance expense. The existing Lender did not have a program to allow for recapitalization or additional funding of their current loan.
GSP underwrote and proposed a recapitalization program that would allow the Lender, with only a 25 bps increase, to provide a new $15,000,000 loan that provided the Borrower with $5,000,0000 cash-out. This allowed the Borrower to get the proceeds needed without refinancing expenses or prepayment penalties.
Assistant Vice President
Commercial Real Estate $2,925,000 Cash-Out Refinance for a Mixed Use Property in Palm Desert at 87% Loan to Cost
May 30, 2018
George Smith Partners arranged a $2,925,000 cash-out refinance loan for a 20,300 square foot mixed-use office over retail property in Palm Desert, California. The deal presented numerous challenges. First, the sponsor only owned the property for three months. Second, a lease was not available for the anchor restaurant space comprising two thirds of the property’s square footage. Third, the sponsor required extremely high leverage and conventional bank interest rates. Finally, the Sponsor needed to close the refinance transaction in 30 days due to a pending acquisition.
To overcome the challenges George Smith Partners sourced a bank lender with which it had a long history of closing aggressive conventional financing with low interest rates. The property’s attractive location in Palm Desert, between the well-known retail thorofare of El Paseo and Highway 111, was emphasized as well as the Sponsor’s successful track record of purchasing notes on distressed properties, foreclosing on those properties and repositioning them.
Sized to an aggressive 87% of purchase price, the loan included a 6-month interest reserve but did not require a holdback for TIs and LCs. The three year mini permanent loan is interest only for the first 12 months followed by 25 year amortization for the remaining two years. The loan floats at Prime plus 0.5% (5.25% today) with no prepayment penalty, and the lender fee was a minimal 0.5%. The loan closed in exactly 30 calendar days from application, which is an extremely fast closing timeframe for a conventional bank.
Rate: Prime + 0.5%
Term: 3 Years
Amortization: 12 Months Interest Only; 25 Year Amortization Thereafter
LTC / LTV: 87% / 65%
Recourse: Full Recourse
Prepayment Penalty: None
Lender Fee: 0.5%
- Advisors: Zachary Streit
April 25, 2018
George Smith Partners arranged $5,750,000 in bridge financing for the acquisition of a retail building and the refinance of five contiguous office and retail buildings. Together these buildings form half a city block in Burbank, CA. The loan not only allowed for the consolidation of properties, but also provided predevelopment and entitlement capital for the future redevelopment of the city block into a large mixed-use development. Because of the future plans, the Sponsor was charging below market rents and a low cash-flow to value. The 10 year 90%/70% LTC/LTV loan has a fixed interest rate of 4.25% for the first 36 months of the term. Subsequently, the loan transitions to a 1-year ARM set at 2.75% over the 3-year treasury benchmark through maturation. The recourse loan has no prepayment penalty.
The Sponsor required the highest proceeds possible in order to complete the acquisition of the retail building and have enough capital for predevelopment and entitlement expenses for the future mixed-use development. However, the current in-place cash-flow on the five contiguous office and retail buildings severely limited the proceeds most lenders could become comfortable with providing. Additionally, with the impending redevelopment, the Sponsor wanted a loan with no prepayment penalty. Finally, the Sponsor had a tight window to close on the acquisition of the retail building.
George Smith Partners understood based on the in-place cash flow of the five contiguous office and retail buildings, most lenders could not get to the desired proceeds required by the borrower. GSP ultimately utilized its relationships to identify an unconventional lender who used the actual rate rather than an underwriting rate when working through their internal underwriting constraints. As a result, this lender became comfortable with the proceeds number required by the Sponsor. GSP was able to structure the loan to have no prepayment penalty and close the loan timely for the impending acquisition.
Rate: Fixed at 4.25% for 36 months; converting to an ARM for next 7 years at 2.75% over the 3-year treasury
Term: 10 years
Amortization: 30 Years
Interest Only: 3 years
Prepayment Penalty: 2,1
LTC/LTV: 90% LTC/ 70% LTV
Origination Fee: Par