Rate: 5-year Treasury + 2.05% (all-in rate 3.5%), no floor
Term: 5 year fixed
Amortization: 25 years
Loan to Value: 46%
Debt Coverage Ratio: 1.25x
Prepayment: 3%, 2%, 1%
Lender Fee: 0.25%
George Smith Partners successfully secured $1,710,000 of rate and term refinancing for an owner-user industrial property in Santa Clarita, CA. The Property is a free-standing manufacturing building with 25% office.. It was built in 1987 with a net rentable area of 23,350 SF. Santa Clarita offers tremendous access to labor and it is conveniently located close to regional distribution centers, studio and entertainment uses, manufacturing and research and development businesses. The loan is sized to 46% LTV , and is fixed for 5 years at 3.50% with 25-year amortization.
The Sponsors are in the aerospace machining and assembly and stock car industries, which are highly specialized. The Sponsor plans to sell the Property in 5 years. Although investors have a strong appetite in industrial properties, this Property faces a comparative disadvantage as it only has grade level loading capacity as opposed to dock high loading. Additionally, the Property is built upon single tenant capacity, and it offers a functional obsolescence of 25% office ratio.
GSP sourced a lender who has a group specializing in the Aerospace and Defense industry. This lender underwrote and understood the opportunities and challenges in the business. The Lender provided a 5-year term, with the last two years open with no prepayment penalty.
Acquisition Permanent Financing for a Multifamily Property, Sized to 75% LTV and a 1.15x DCR; West Adams, Los Angeles, CA
December 11, 2019
George Smith Partners arranged permanent acquisition financing for a multifamily property in the West Adams submarket of Los Angeles, California. The 1960’s vintage property had significant deferred maintenance and below market rents, but the Sponsor required permanent financing from a portfolio lender in order to take advantage of today’s low interest rates. GSP sourced a regional bank that was willing to fund 75% of the purchase price with no holdback based on underwriting the in-place cash flow to a 1.15x DCR. The loan carried a five-year fixed rate of 4.00%, a ten-year term and an attractive 3-2-1 prepayment penalty. No deposits were required.
Term: 10-Year Term; 5-Year Fixed
Prepayment Penalty: 3-2-1
Lender Fee: 0.25%
- Advisors: Zachary Streit
December 11, 2019
George Smith Partners secured a $3,700,000 non-recourse refinance for a 14,454 SF mixed-use property in Mission Viejo. The loan is fixed at a rate of 4.10% for seven years. Over the past year, the Property had some leases roll. The Sponsor spent a significant amount of time and effort in order to ensure the new tenant profile was comprised of ecommerce-proof businesses. Although the Property was 100% occupied once GSP commenced the marketing process, the historical vacancy caused some concern with lenders. GSP discussed the strength of the market, asset, and Sponsor in order to mitigate those concerns. In doing so, GSP was able to create a robust market for the Sponsor and source a Capital Provider that understood the value of the Property. The Lender was able to rate lock at application and was ready to close in less than 60 days.
$68,750,000 Non-Recourse, Ground-Up Development of an 885-Bed, Student Housing Project, 80%LTC; Merced, CA
December 11, 2019
George Smith Partners arranged $68,750,000 in non-recourse, senior construction financing for the ground-up development of a 270-unit, 885-bed student housing complex in Merced, CA. The Project is uniquely positioned to serve the growing enrollment of both UC Merced and Merced City College and is the only planned private student housing project in Merced. The high leverage loan will provide 80% of total project cost and significant post-closing flexibility with a capital provider who will act more like a partner than a lender from closing thru development and payoff. Challenges to the transaction included: The Project is located near
University of California, Merced where enrollment is relatively low compared to other UCs. Many capital providers want to be near larger, more established universities. The Project is in a tertiary market. Many capital providers want to be in more densely populated, urban markets. Part of the equity included EB-5 investments. Many capital providers perceive this type of investor as less desirable compared to standard, limited partner investors.
Mitigating factors: While obtaining building permits is next to impossible due to its location at the border of the local city and county municipalities, the Sponsor has already obtained their building permits. There is a limited supply of student housing which is not expected to keep up with demand due to the school’s projected future enrollment. Lastly, the Sponsorship team is well positioned because of its experience and personnel to manage the Project through to completion and stabilization.
GSP was able to arrange a high leverage construction debt solution from a capital partner that understood why the Sponsor’s and Project’s strengths mitigated the challenges. Priced off LIBOR, the two-year loan was sized to 80% of total development costs. There is no repayment guarantee. A warm-body signature was required for the completion and carve-out guarantees.
December 4, 2019
George Smith Partners successfully arranged a $2,800,000 non-recourse, short term acquisition loan for a 4.21-acre parcel near Stevenson Ranch in the Santa Clarita Valley of California. The Sponsor needed financing in a very short timeframe. GSP was able to source a private lender who closed in three business days. The loan offers 60 days of bridge term while the Borrower seeks a construction-to-permanent solution for a fully entitled, six-building, 966-unit, climate controlled, Class-A self-storage facility expected to complete construction in late 2020. The loan is non-recourse and the Lender did not require an appraisal or other third-party reports, thanks to the low leverage and strength of the Sponsor.
December 4, 2019
George Smith Partners secured a $5,230,000 non-recourse refinance for a 40-unit multifamily property in Los Angeles. The loan is fixed at a rate of 3.85% for five years and provides two years of interest only payments. Over the past three years, the Sponsors renovated 28 of the 40 units at a very high investment of $28,000 per unit. GSP sourced a bank lender that gave the Borrowers maximum credit for the higher income that resulted from leasing the newly renovated units. The Lender did not require seasoning on the new leases. The Lender did not have a floor on the rate at a time when many banks are applying floors to keep their rates above a certain threshold. The rate was competitive with Agency financing during a period when Freddie Mac was temporarily slowing down new loan originations. The Sponsors were operating the Property very efficiently with below-market expenses, and the third-party appraiser marked those expenses up to market. This resulted in a capitalized property value that did not meet the lender’s 65% LTV constraint. The Lender accommodated the Borrower by raising the LTV threshold so that loan proceeds and the rate would not be affected. The Lender was able to rate lock at application and was ready to close in about 50 days.
Rate: Fixed at 3.85% for 5 years then floats at 6 Month LIBOR + 2.35%
Term: 30 years
Amortization: 30 years
Prepayment Penalty: 3,2,1,0
Interest Only: 2 Years
$11,200,000 Ground-Up Construction Financing for a High-End, 5-Unit, Mixed-Use Condominium Project; 75% Loan to Cost; North Laguna Beach, CA
December 4, 2019
George Smith Partners secured an $11,200,000 ground-up construction loan for the development of a high-end, 5-unit, mixed-use condominium project in North Laguna Beach, California. The Sponsor purchased the Property over two years ago and successfully entitled it. The completed project will feature two residential units with expansive ocean views over three ground-floor commercial units and includes 30 subterranean parking spots, critical in parking constrained North Laguna Beach. The Sponsor sought maximum leverage, including land lift, and a lender comfortable with both the project’s high basis per unit ($2,240,000) and the Property’s environmental history. Certainty of execution in a short timeframe was also paramount as the Sponsor’s building permits faced a near term expiration.
After an extensive marketing effort, GSP sourced a construction lender comfortable providing 75% loan to cost financing and valuing the land at market, which considerably exceeded the Sponsor’s cost basis. Significant time was spent gathering sales comps supporting the Project’s profitability despite the units’ high cost basis, and a soil removal plan was put in place to mitigate the site’s environmental history. The financing successfully closed prior to the expiration of the Sponsor’s building permit, allowing for an immediate ground-breaking.