$17,600,000 Acquisition and Bridge Financing for a 30-Unit Asset in Village of La Jolla, CA

Transaction Description:

George Smith Partners secured an acquisition bridge loan for the repositioning of a Class-C apartment community in San Diego. The financing includes a holdback that will be used to renovate both the interior and exterior of the Property over a 12-month period including the addition of a single ADU (garage conversion).

Given the Sponsors’ track record and their successful ability to substantially increase rents in this niche market, GSP was able to secure a Lender that could close quickly (within 25 days), without an appraisal, and allow a $1,000,000 2nd TD up to 98% of the total cost of the Project to accommodate an additional private party investment in the Property.

Transaction Description:

George Smith Partners arranged $3,800,000 (73% LTC) in non-recourse, bridge financing for the acquisition of two parcels of industrial zoned land in Mesa, Arizona. The Sponsors will develop the land into four multi-tenant, speculative industrial buildings catering to small and mid-sized industrial tenants.

With two weeks remaining in the escrow period, and with the Sponsor’s wish to arrange a non-recourse, high leverage land loan, GSP sourced a lender who was comfortable with the value and was able to close in 8 days while giving credit to the lift of the land’s appreciation during the seller’s escrow period. The loan resulted in 73% loan to cost, which is much higher than standard market leverage. Furthermore, the Lender was willing to go even higher at 78% LTC, but the Sponsors ultimately did not end up needing that much leverage.

Transaction Description:

George Smith Partners secured a $3,060,000 loan for the acquisition of a 114-unit multifamily property located in Oklahoma City, OK. To meet the sellers 60-day closing requirement, GSP used its relationship with a lender we had closed multiple loans with. This lender recently closed a similar loan in this market which allowed them to feel comfortable with the market characteristics. Although the Property is currently over 90% leased, rents were below market because the Seller self-managed and the Property needs exterior and interior improvements. The Sponsor wanted to lock in a low rate to allow for more cash flow to be used towards their value-add strategy. This was cheaper and more efficient than a traditional bridge loan. During the close of this loan, GSP was simultaneously helping the Sponsor purchase the Property directly next door. The long-term business plan is to combine both properties to become one property within 2 years. The loan represents 70% of the purchase price and was structured as a fixed rate 5-year term, with the first-year interest-only. The interest-only period allows for more property cash flow to be used towards building improvements. Additional flexibility is also provided with a prepayment equal to 3-1-0-0-0. The prepayment flexibility will allow the Sponsor to cash-out refinance once they have implemented their value-add strategy.

Transaction Description:

George Smith Partners successfully secured $19,570,000 in senior acquisition debt financing for a 4-building, garden style office campus located in Ventura. Situated on a rare 7.72-acre infill site, the Property consists of 162,717 net rentable square feet across the 4 buildings and is within walking distance to the high-traffic retail hubs, Mills Street, and the Pacific View Regional Mall. The financing capitalized the Property acquisition as well as a focused capital expenditure program aimed at increasing operational efficiencies and targeted deferred maintenance.

Despite COVID-19 related challenges in the office sector, the Property maintained 70% occupancy through its granular tenant base. While some lenders expressed concern with the going-in debt yield and market leasing dynamics, GSP broadly marketed the Project and was able to identify a lender who understood the underlying value of the asset, the Sponsor’s business plan, and Ventura’s fast-growing market. The interest-only financing was sized to 70% loan to cost, including 100% of future funding for capital expenditures, tenant improvements and leasing commissions. The loan carried a 3-year term and was priced at 1 Month Libor + 500 basis points with a 5.15% floor. Due to an excellent purchase price, the financing had a very tight closing timeframe, and the selected Lender was able to close in 30 days from term sheet execution.

Transaction Description:
George Smith Partners secured $47,000,000 for an acquisition bridge loan for a two multifamily property portfolio in Houston, Texas. To meet the sellers 30-day closing requirement, GSP used its experience and relationships to quickly identify and close this 80% interest- only financing within the required timeline. GSP was able to execute the Sponsors business plan and secure a high leveraged bridge loan at L+ 3.95 (4.05% coupon). The loan was cross collateralized with both properties, which totaled 624 Units. The Properties were operating at a going-in 5% debt yield when we closed. This interest-only loan included 100% of the capital needed for rehab.

Challenge:
There were multiple challenges regarding timing, leverage, sponsorship experience and property specific issues. Some lenders were not able to quote the transaction in the short timeframe we had to market, identify, and close this transaction. GSP aided a local family office, an international fund and a strong local operating partner who teamed up to purchase this asset in their first effort together. In addition, several lenders were over allocated in the Houston market and could not handle the size of this portfolio.

Solution:
GSP focused on the top three best lenders for this asset type. Due to our great relationships, we were able to quickly pick the best lender and expedite the application process. GSP assisted the Sponsorship team in developing a strong business plan. This included proving the benefits of the multiple sponsorship structure, as well as getting the Lender comfortable with the local partners to operate the properties. GSP understood the dynamics of each sponsorship team and helped the Lender upstand the strategy of operating the Properties as one asset. GSP knew by bundling the two properties together and creating a larger transaction that it would be more appealing to lenders. This would enable lenders to increase proceeds and decrease pricing as compared to financing two separate smaller transactions. GSP ultimately utilized one of our relationship lenders who was willing to invest the upfront time and place aggressive bridge financing, with appealing leverage, proceeds, and terms of 3 years interest-only.

Transaction Description:

George Smith Partners successfully brokered both the sale and acquisition financing for an extended stay hotel conversion located in the Mountain States region. The Seller, initially intending to undertake the Project, engaged GSP to source bridge financing for the 126-apartment conversion. Most of the conversion will be cosmetic changing the feel from hotel to residential. The hotel had been closed due to COVID, but the Sponsor needed to cancel the Management Agreement with the Operator and vacate the hotel. Because the hotel was in foreclosure, the Seller put the asset in bankruptcy before the trustee sale. This complicated the transaction and resulted in closing the deal two weeks from court approval.

GSP found a buyer with experience in hotel conversions who understood the Property’s value proposition and the bankruptcy process. With limited time, GSP represented the Sponsor in sourcing $10,000,000 of 3-month Gap financing for the purchase while concurrently working on inexpensive bridge financing. No appraisal was required for the Gap loan. This was an extremely complicated financing with exceptionally short time constraints. GSP was able to serve the needs of both Buyer and Seller and successfully secure financing.