Term: 12 months + 6 month extensions
Guaranty: Full Recourse
Prepayment: 6 months minimum interest on DTLA and San Fernando. Open prepay on South LA
Lender Fee: 3 points
George Smith Partners secured a $17,600,000 bridge loan for the acquisition and renovation of three separate commercial and retail buildings in the Los Angeles area. The first building is located in DTLA. Proceeds from the financing will be used for the purchase and adaptive reuse of this 43,000 SF mixed-use building. The second and third buildings are located in the San Fernando Valley and South LA, respectively. Proceeds from the financing will be used for major remodels on both buildings. The building in the San Fernando Valley will undergo a full repositioning of a flower shop into a new state-of-the-art, standalone coin-laundromat. The South LA mixed use asset is 75% complete. It is comprised of a two-story commercial building containing a 9,000 sf laundromat on the ground level with two residential units on the second floor. The entire Property was taken down to the studs, and a portion of this financing will cover the remaining cost of completion.
Despite the strength and experience of the Sponsor, we faced four major issues in obtaining financing for our Sponsor. The first challenge was unresolved past title issues. The second challenge we were up against were maturing interim loans. Next, due to the high volume of projects in the City of LA, power connection to one of our sites was delayed. Lastly, the initial financing request was for 85% LTC. After GSP’s full analysis, we discovered that the financing needed to payoff existing liens and provide the working capital needed for a successful execution was closer to 100% LTC.
GSP worked with a private balance sheet lender that provided a tailored bridge loan for the full capital stack. The initial term is for 12 months plus extensions. Because of GSP’s past experiences with this lender, we were confident in their ability to navigate such a complicated structure and their certainty of execution.
Senior Vice President
Assistant Vice President
May 1, 2019
GSP recently arranged a $6,500,000 bridge loan on a vacant 30-unit apartment community near the Los Angeles CBD. The Property had structural issues and was red tagged by the City. The owner took the 1913 building down to the studs and completely rebuilt the Property. In order to reduce cost and finalize construction, the ownership requested bridge financing.
With no cash flow and no signed leases several lenders were concerned about repayment. Using GSP’s relationships and market expertise we were able to place a Libor floating rate bridge loan. This financing provided the Sponsor the ability to payoff of the current loan. In addition, there was enough capital left over for completion construction and an interest reserve for lease-up.
This take-out financing replaced more expensive financing and provided the Sponsor with the capital needed to finalize the renovation and move to permanent financing. With no prepayment premium and no interest rate cap, it was a very affordable way to bridge between the loans.
April 24, 2019
George Smith Partners successfully placed $25,000,000 financing on a 150-room recently completed hotel in the Southwest. Despite ongoing construction arbitration on the Property, GSP sourced a lender who understood the seasonality of the market and the MSA. The Property is the first new-build luxury hotel in this community in over 30 years. Proceeds from the loan were used to pay off the construction financing and provide working capital.
April 17, 2019
George Smith Partners secured $43,500,000 in bridge financing collateralized by a 95% vacant, 2.2MM square foot industrial building in a secondary Midwestern market. The building was constructed through the 1950s and 1960s by a major retailer and used for many years as a major distribution center. As internet retail ate into the tenant’s business, the building slowly lost its business importance to the prior owner. The Borrower, a well known owner and operator in the area bought the Property off market unoccupied approximately one year ago and has been improving the property and been in leasing talks with an array of strong tenants. The lease that occupies 5% of the building is attributed to a third party logistics subsidiary of the Borrower.
Sized to 80% of stabilized value, proceeds from the bridge loan take out the Borrower’s original acquisition loan and bought out an institutional Preferred Equity investor. The Borrower now owns the property free of all third-party equity investors. Additional loan proceeds will also be used to cover closing costs and fund future work, including CapEx and leasing costs associated with repositioning the 60-year-old building. The financing secured by GSP not only allowed the Borrower to recap out their equity partner and claim exclusive ownership rights to the asset, but also gave them the final renovation dollars required to attract new tenants and eventually bring to Property to stabilization.
Rate: One-Month LIBOR + 5.50%
Term: Two years plus two one-year extension options
Loan to Value: 80% (121% of Purchase Price / New Basis is 140% of Purchase Price)
Amortization: Interest only during the loan term
Lender Fee: 1.00%
Prepayment: 1% for first 12 months; Open thereafter. Waived if lender does take-out.
March 27, 2019
George Smith Partners secured $101,300,000 in non-recourse bridge debt to refinance out an existing senior loan and mezzanine loan for a regional Southern California shopping center. The Property is a 373,000 square foot open-air, dual grocery anchored shopping center currently midway through a center-wide reposition. The Property is 96% leased but requires additional funds to complete the stabilization, including the construction of a new pre-leased pad building. The Center required a major leasing and re-leasing effort to modernize the 37 acre site into a true lifestyle center. Loan proceeds repaid the existing financing, covered closing costs, and will fund 100% of future CapEx, tenant improvement, and leasing commission costs associated with stabilizing the Property. The loan offers a 24-month initial term plus three extension options with durations of one year each, which provide the Borrower maximum flexibility. The non-recourse floating-rate loan priced at 3.20% over One-Month LIBOR and offered full term interest only payments.
Rate: One-Month LIBOR + 3.20%
Term: Two years plus three, one-year extension options
Amortization: Full-term interest only
Loan to Initial Value: 75%
Loan to Stable Value: 70%
Lender Fee: 0.75%
Prepayment: 15-month spread maintenance
March 20, 2019
George Smith Partners arranged $4,235,000 of acquisition/bridge financing for a 19 unit residential mixed-use property in Santa Barbara, CA. The Property, originally constructed as a 10 unit apartment building in 1951, was converted to mixed-use with a second and third floor office and residential penthouse addition in 1973. The change in use was a response at the time to demand for office given the Property’s close proximity to the popular State Street retail corridor just a block away. The Borrower plans to seek approval to convert the 1973 office addition portion of the project back to residential use and lease all but two front commercial units with long term leases. The challenge was finding a Lender that could underwrite the business plan and get comfortable with take-out financing of this mixed-use residential/office project. GSP was successful in identifying a lender that could get comfortable with the uncertainty of the Borrower’s ability to convert the project to mostly residential.
December 5, 2018
George Smith Partners secured $8,700,000 of non-recourse, bridge acquisition financing for a 45,000 square foot retail center located in Richardson, TX. The Center, which was built in 1985, has a diverse mix of regional tenants and sits on the corner of two of the main thoroughfares in the area.
The Sponsor purchased the Property with the intent to add value through two approaches: (1) increasing rents for tenants that are rolling and paying below-market rates, and (2) constructing an additional 12,000 square feet on undeveloped land within the parcel. There were complications with parcelizing the existing building and the land, which meant that a single lender needed to fund the entire project. The large renovation and construction budget also resulted in only 41% of the total loan being funded at closing.
George Smith Partners identified a lender that could structure the financing to have two holdback reserves, one for the CapEx and TI/LC’s for the existing space and the other dedicated to funding the construction of the new building. The separate reserves allow the Sponsor to pursue both value-add opportunities simultaneously, which drastically reduces the project timeline and maximizes the Sponsor’s IRR. Our capital source was able to get comfortable with the construction component by requiring 75% of the space to be pre-leased prior to funding.