$2,180,000 Spec Single Family Residence Construction Loan to 75% of Cost; Los Angeles, CA

Rate: Prime + 0.75%
Term: 18 Months with one 6 month extension Lender Fees: 0.75%
Amortization: Interest Only
LTC: 75%
Guaranty: Recourse
Prepayment Penalty: None

Transaction Description:

George Smith Partners placed $2,180,000 in construction financing for a spec single family property in the upscale Cheviot Hills submarket of Los Angeles. The Sponsor’s business plan was to expand and redevelop the existing property into a 5,900 square foot spec luxury single family property. The challenges on this transaction included the need for maximum proceeds (75% loan to cost) and a sponsor embarking on its first ground up development project. Most lenders struggled given these challenges. However, after an extensive marketing effort, George Smith Partners sourced a lender that was comfortable with the leverage request. Given the Sponsor’s limited track record, a completion guarantee from the Sponsor’s general contractor was required, which GSP successfully negotiated. Sized to an aggressive 75% of total cost, the interest only loan is freely prepayable and will float at 0.75% over the WSJ Prime for 18 months.

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    Transaction Description:

    George Smith Partners successfully placed $14,050,000 in construction financing, which funded 89% of total project cost, for the acquisition and reposition of a 79-unit, mixed-use property in a desirable and historic St. Louis City neighborhood. GSP was engaged by the Borrower when its original lender, a national REIT, was forced to re-trade the Borrower on loan terms due to the COVID-19 pandemic. Upon being engaged, GSP was able to source the replacement debt and equity in time to close the transaction without a material delay. The financing structure included a senior loan to 81% loan-to-cost and a preferred equity investment with last-dollar exposure to 89% of total project cost with a 4.90% blended cost of capital. GSP leveraged its expertise of the St. Louis market, long-standing lender relationships, and capital markets creativity to achieve the Borrower’s goals of minimizing cash equity invested into the Project so that it can keep a substantial cash reserve to pursue additional projects which are expected to present themselves during the COVID-19 pandemic.

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    The Next Generation of Co-Living: $14,100,000, 65% LTC Construction Loan for Co-Living Project; Los Angeles, CA

    October 28, 2020

    Transaction Description: George Smith Partners placed the $14,100,000 construction to perm loan for an 86 micro-unit, co-living development located in an opportunity zone for an institutional sponsor and a national private equity firm. Optimized to provide a complete living experience with full in-unit accommodations on shorter term leases, the Project represents the first of its kind in the Los Angeles market. The 65% construction loan converts to a 5-year mini-perm loan fixed at 4.5%, synergizing with the Borrower’s long-term strategy and maximizes the opportunity zone benefits by eliminating future financial risks.

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    $4,690,000 Construction Mini Perm Loan for Medical Office, 3.75% Interest Rate; Oxnard, CA

    September 30, 2020

    Transaction Description:
    George Smith Partners secured a $4,690,000 construction loan with a 2-year term that converts to a 5-year permanent loan upon completion of construction for a total term of 7 years. The loan is for a medical office building in Oxnard, CA. The construction loan floats at Prime plus .5% with a floor rate of 3.75% and the mini perm is expected to have a fixed interest rate of 3.65%. The mini-perm carries a step down prepayment, but there is no prepay during the construction term, allowing the borrowers to secure more advantageous capital depending on the capital markets.

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    The Sponsorship sought long term construction-to-fixed capital shortly after the government-mandated shelter in place which caused significant disruption to the CRE capital markets. GSP needed to secure a high leverage loan to complete the ongoing construction of the Project which had commenced in 2019. With active construction on the Project, GSP needed to secure a lender capable of understanding various lien priorities, a historic building designation that changed construction plans and timelines, vandalism, and a change of general contractors all during the COVID-19 pandemic.

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    $31,500,000 Construction Financing to 72.5% LTC for a 240-Unit Workforce Housing Project; Sheboygan, WI

    September 23, 2020

    Transaction Description:

    George Smith Partners successfully placed $31,500,000 (72.5% LTC; 70%LTV) in construction financing to fund the ground-up development of a 240-unit, workforce housing project in an infill neighborhood of tertiary market, Sheboygan, Wisconsin. GSP leveraged its diverse lender relationships to source a construction loan for this large project located in a small market during the peak of the COVID-19 pandemic. GSP was able to focus lenders on sponsorship quality and how the project was tailored to take advantage of Sheboygan’s strong market fundamentals. This includes an insatiable demand for workforce housing driven by numerous manufacturers being in the county including Kohler, Sargento, and Johnsonville among others. A Tax increment financing (TIF) district was created to offset a portion of the Project’s costs, which added another layer of complexity as GSP was directed to source a lender that would also underwrite the projected TIF cashflows to increase the construction loan leverage.

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    Transactions Description:

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    $21,700,000 Construction-to-Perm Loan for Self-Storage Project; Santa Clarita Valley, CA

    May 20, 2020

    Transaction Description:
    George Smith Partners successfully secured a high leverage $21,700,000 non-recourse, Construction-to-Perm loan to develop a six-building, 966-unit, climate controlled, Class-A self-storage facility near Stevenson Ranch in the Santa Clarita Valley, California.

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