$3,900,000 Cash-Out Permanent Financing with Full Term Interest-Only After Exchange; Los Angeles, CA
July 2, 2019
George Smith Partners financed the purchase of a mixed-use retail/office building in Los Angeles, California, last year, using a 1031 exchange. GSP used our vast experience with tax differed exchanges to arrange a cash-out financing with a seven-year fixed rate and is full term interest-only. The cash- out was used to purchase a new property and the Sponsor was able to reinvest their entire exchange in the purchase to differ any taxable gain. The new refinance allowed the Sponsor to pull cash out from the property tax free and use that cash to grow his real estate portfolio. While the cap rate at purchase was very low, the Property’s value will continue to increase due to its location in a great Los Angeles neighborhood. In a traditional loan, the Borrower would be limited on the loan size and cash flow but structuring the full term interest-only loan allowed the Sponsor to achieve positive cashflow and acquire the new asset without issue.
July 26, 2017
George Smith Partners placed the rate and term refinance of four stand-alone Rite Aid Drug Stores. The loans are structured as four separate un-crossed loans to maintain reposition flexibility. At the time of loan commitment, the Walgreens/Rite Aid merger was still under consideration by the FTC and it was unknown if Walgreens would close any of the subject units. Our Sponsor wanted to maintain options and not to allow one store closure to negatively affect the remaining portfolio. Store sales were not available. Each lease has approximately 9.5 years remaining on the initial term. The balance sheet loan is coterminous with the lease term and does not carry the traditional two-year lease hang-out. No reserve structure is required prior to the tenant notice date, six months before the lease and subsequent loan expiration. Fixed at 4.52% for five years, the rate will float over LIBOR for the remaining loan term and amortizes over 30 years. Prepayment steps down allowing for additional reposition flexibly if needed.
June 14, 2017
George Smith Partners successfully arranged a $5,275,000 non-recourse, 7-year fixed rate, non-CMBS loan for a non-anchored retail center in Imperial Beach, CA. While the property is 100% occupied in a coastal California location, the Sponsor needed a non-recourse loan with a flexible prepayment penalty on a long-term fixed rate basis which is extremely hard to locate outside of CMBS. Life insurance companies were not able to get comfortable with the collateral since the largest tenant was a is a non-credit gym and there is significant near-term lease roll. Other bank lenders would not provide full credit for the significant cell tower income which limited their loan proceeds. GSP was able to identify a typically recourse lender that was willing to provide a non-recourse loan on this property and was able to underwrite the full cell tower income.
$3,700,000 Refinance for “Single Tenant” Subleased Retail Property in Mid-Atlantic Secondary Location
June 7, 2017
George Smith Partners arranged a $3,700,000 loan for a non-credit tenant that subleases a significant portion of the space. The tenant is a middle market grocery chain recently acquired by a hedge fund. The formerly public company is now private with no financials available. The 31,000 square foot grocery store tenant subleases 8,000 square feet to an office supply store. The challenge was finding a lender that could be comfortable with 8 years left on the lease (and the co-terminus sublease) in a secondary location with no continuing sales available. GSP sourced a lender with local expertise that got comfortable with the historic sales that were reported prior to the tenant’s acquisition. The short amortization and recourse were also risk mitigates.
$11,500,000 Non-Recourse Refinance of a Recently Stabilized Los Angeles County Shopping Center Anchored by a National Discount Retailer and Shadow Anchored by a Regional Grocer
June 7, 2017
George Smith Partners successfully placed $11,500,000 of non-recourse, ten-year fixed rate first mortgage debt for the refinance of a 60,000 square foot multi-tenant retail property anchored by an investment grade rated discount retailer and shadow anchored by a successful regional ethnic grocer. The property was 99% leased at loan closing, but only 79% occupied as three new tenants were in a four month build out and free rent period. GSP worked with the lender to avoid a capitalized hold back of over $2,000,000 as the new tenants’ income was included in the underwritten income, but was not being collected yet. Instead GSP negotiated a structured a nominal six month rent and expense reserve held back at closing and released pro rata to Sponsor as the new tenants open for business.
The lender became comfortable with this structure due to a combination of positive factors including a having a highly experienced sponsor, strong shadow anchor sales, below market rent for the anchor tenant with fixed low renewal rates, and a rent roll with over 50% investment grade rated tenancy. The 4.59% fixed coupon loan is sized to an 8.0% debt yield and 1.25x debt coverage ratio and the 10-year term is interest only for the first five years, with a 30-year amortization schedule thereafter.
April 19, 2017
George Smith Partners placed a $7,500,000 refinance of two special use, unanchored multi-tenant retail properties located in the City of Industry. A sizable return on equity (142% of total capitalization) was permitted due to our Sponsors’ 20 year ownership and management history of the asset. This transaction was structured as senior debt funded at $4,300,000 and a $3,200,000 crossed-collateralized stand-by line of credit. Both vehicles were funded by the same capital source. Due to the special-use tenant mix, the senior debt was sized to 60% LTV and priced at Prime plus 1% fixed for five years and amortized over 25 years, while the credit line will float at Prime plus 1.5% for two years. Interest is only paid on funds drawn. There is no prepayment penalty for either tranche.
Special use tenancy at both properties is subject to a CC&R review by the local municipality at the end of 2017. One tenant who occupies 20% of the net rentable square feet went dark and vacated the property during the due diligence process.
GSP identified a regional lender that understood the market and was eager to build a relationship with our Sponsor, who has impressive real estate holdings, a long track record of execution and significant financial strength. By demonstrating that market rents and occupancy levels still allowed for significant debt service coverage, GSP was able to assist the lender in gaining comfort with the properties’ specialty-use and uncertain occupancy future.
Rate: Senior Loan – Prime + 1%; Line of Credit – Prime + 1.5%
Term: Senior Loan – 5 Years; Line of Credit – 2 Years + Extensions
Amortization: Senior Loan – 25 Years; Line of Credit – Interest Only
DCR: Senior Loan – 1.25x; Line of Credit – 1.5x
Lender Fee: 0.75%
- Advisors: Zachary Streit