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$18,032,000 Non-Recourse Acquisition/Bridge Loan Secured by Orange County Office Portfolio

Rate: 3.75% + 1-Month LIBOR
Term: 3 Years + 2, 1-Year Extension Options
Amortization: Interest-Only During Initial Term, 30-Year Amortization Schedule During Extension Period
LTC/LTV: 66% of cost/53% as-stabilized value
Prepayment: 15-month spread maintenance
Guarantee: Non-Recourse

George Smith Partners successfully arranged non-recourse, floating-rate bridge debt on an 85%+ occupied but under performing portfolio of multi-tenant office properties located in Orange County. The portfolio includes four newly acquired office properties and the retiring of a loan encumbering a fifth office property owned by the client. Proceeds of the loan will be used to reposition all of the properties through the implementation of a strategic renovation and leasing program. In addition, the terms of the loan provide the partnership with the autonomy to execute its value-add strategy as well as the flexibility to distribute operating cash flow along with net sales proceeds resulting from the sale of properties thereby maximizing the portfolio-level returns.


Related Financings

  • $25,500,000 Non-Recourse Bridge Financing for an Acquisition of an Office Building; Phoenix, AZ

    December 18, 2019

    Transaction Description:

    George Smith Partners arranged $25,500,000 in non-recourse bridge financing for the acquisition of a 230,000 square foot Class A office building located in the heart of Phoenix, Arizona’s Midtown District. Positioned on a heavily trafficked thoroughfare of a major professional corridor, the site benefits from its central location, proximity to Downtown Phoenix and abundance of local economic drivers. The Project, built in 1982, had been well-maintained but was running a below-market occupancy rate of 82% due to the recent expiration of a large tenant lease. This bridge facility allowed the Canadian-based Sponsor to purchase the asset and undergo a proposed renovation, bringing the design up to competitive market standards in order to successfully lease-up and stabilize the asset.

    By focusing attention on sophisticated bridge lenders active in the local area, GSP identified a capital provider who understood the growth of the market. The selected Capital Provider structured around the Project’s current vacancy, recognizing the strength of the Sponsor and their ability to successfully execute on the intended business plan of value creation. The loan was structured with minimal cash management language and featured pari passu funding throughout the term. The interest only non-recourse bridge loan was priced at a spread of 350 basis points over the 30-Day LIBOR, with a three-year term and two 12-month extension options.

    Rate: 30 Day LIBOR + 3.50%
    Term: 36 Months with Two 12-Month Extensions (3+1+1)
    LTC: 65%
    Amortization: Interest Only
    Guaranty: Non-Recourse

  • $31,380,000 High-Leverage Bridge Loan to Acquire & Renovate 89,000 SF Office Building in South Pasadena, CA

    June 6, 2018

    George Smith Partners secured $31,380,000 of non-recourse bridge debt to purchase and renovate a multi-tenant Class A office property in South Pasadena. The Sponsor purchased the property with the intent to add significant value through increasing rents and occupancy. The Sponsor purchased the property because of the very strong demographics in South Pasadena and intends to lease to tenants that will pay a premium to be near their clientele. The challenge was convincing the appraiser to use Downtown Pasadena rents since there are no comparable properties in the immediate area. George Smith Partners successfully arranged financing at 85% of cost given the expected increase in value over the next three years.

    Rate: L+565
    Term: 2 years + Two 12 Month Extensions
    LTC: 85%
    Amortization: Interest Only
    Prepayment: 18 Months Minimum Interest
    Guarantee: Non-Recourse

  • $16,900,000 Bridge Financing to Acquire & Renovate a 50,000 sf, 7-Story Office Building in Downtown Los Angeles

    April 4, 2018

    George Smith Partners secured $16,900,000 in bridge financing to acquire and renovate a 7-story office building (first floor retail) in the Jewelry District and historic core of Downtown Los Angeles. The property was originally built in 1913 with open floor plates and is perfectly designed for a conversion to creative office. Even though the project is well-located in the path of DTLA development, some challenges included a lack of both Sponsor experience and credit tenant preleasing. Moreover, being a purchase transaction added additional pressure to close without delays. GSP sourced a Capital Provider to get comfortable with the Sponsor’s team, business plan execution ability, and guarantor of the main leaseholder. While the original financing request estimated a 35% prelease, the Sponsor was able to obtain 60% preleasing by loan funding.

    Rate: Libor + 505
    Term: 36 months
    Amortization: IO
    Loan-to-Cost: 69% LTC
    Guarantee: Non-Recourse

  • $5,500,000 Acquisition Bridge Loan for a 70% occupied Los Angeles Office

    April 26, 2017

    Transaction Description:
    George Smith Partners arranged $5,500,000 in acquisition proceeds on a 15,122 square foot Los Angeles office building. Floating at Prime + 0.5%, the 3 year loan is interest only for 18 months before amortizing over 25 years for the balance of the term. Sized to 65% of the purchase price, there is no prepayment penalty for this loan.

    Despite the prime location, the subject had somewhat aged interiors and exteriors and was just 70% occupied when our Sponsor executed the purchase contract.  The income was below break-even debt coverage on the proposed loan. Most of the in-place tenants were paying well below market rent. One tenant was under a month to month lease and several others were facing lease roll in the next six months. On-site property management was charging an above market rate. Actual historical cash flow was well below potential.

    GSP researched comparable rent and competitive operating data that proved out our Sponsor’s pro forma rents and business plan. Our Sponsor’s considerable success adding value to similar office properties over the past several years supported the business plan for the loan request. An aggressive lease campaign was initiated during due diligence, securing letters of intent from multiple tenants that would bring occupancy to 95%. A small debt service reserve was structured until the tenants took occupancy to cover all operating loss and mortgage expenses in the short interim.

    Term: 3 years
    Rate: Prime + 0.5%
    Amortization: 18 months IO; 25 years thereafter
    Prepayment Penalty: None
    LTC: 65% maximum
    Origination Fees: 0.5%