$19,071,000 Senior Construction Financing for 55+ Active Adult Community

Transaction Description: George Smith Partners placed the ground-up construction of an age restricted active adult community in the Pacific Northwest. The loan equates to $170,277 per door for the 112 luxury unit complex. Sized to 60% of cost, the three year loan does not require a warm body repayment guarantees. A 60% Limited Recourse component is exclusive to a capitalized entity during construction but burns down to 30% at stabilization. There are no warm body repayment, completion or carve-out guarantees. Priced at LIBOR + 350; the capital structure did not require additional mezzanine debt to execute.
Challenge: A top west coast Multifamily Development & Investment Company was embarking on their first Age Restricted Development. The 112-Unit Development plans called for luxurious amenities, large floor plates, all elevator access units catering to the 55+ Active Adult Community. This significantly increased construction costs over similar market rate multifamily developments in the region. While these amenities matched the consumer demand, it was necessary to articulate that the revenue demand generated by this would match and/or exceed the additional construction cost expenditures. While the Active Adult Single Family markets are well accepted, the Multifamily Active Adult sector is still in its infancy.
Solution: Initially retained to secure mezzanine financing for this transaction, GSP proved their contribution by working with the Sponsor and demonstrating their knowledge of Adult Active Communities and product demand in this market. The Borrower then retained GSP to secure the entire capital stack. GSP secured a Senor Loan without the necessity of more costly mezzanine debt by utilizing a combination of deferred fees and excess land as equity contribution which accounted for over 10% of the capitalization. GSP negotiated all guaranties solely to the capitalized corporate entity including all standard ‘warm body’ carve-outs.