$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.

Advisors

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    $11,760,000 Construction Financing to Develop a 14 Unit Small Lot Subdivision Project in the Silver Lake Submarket; Los Angeles, CA

    September 11, 2019

    Transaction Description:

    George Smith Partners placed $11,760,000 in ground up construction financing to develop a 14 unit small lot subdivision project in the trendy Silver Lake submarket of Los Angeles, CA. The Project is extremely well located within Silver Lake and is walking distance to Sunset Junction. The per unit exit price is projected to represent a 30%+ discount to the cost of single family residences with similar footprints, offering an affordable alternative in an attractive and supply constrained market. Challenges included a sponsor seeking full leverage but requiring an extremely low interest rate, and many lenders refusing to offer competitive bids (or any bids at all) given the Project’s for-sale exit to homeowners.

    GSP secured a capital provider that was comfortable with the Property’s central, urban location and the favorable per unit cost basis relative to both single family homes and the limited number of local competing condominium projects. The loan represents 72.5% of total cost and carries an interest rate of One Month Libor + 2.75%, which is near institutional level pricing for a middle market sponsor. The loan term is 24 months with two six month extensions. It allows for partial release of individual units without a prepayment penalty or exit fee, allowing the Sponsor to sell units at its discretion.

    Rate: Floating at 1 Month LIBOR + 2.75%
    Term: 2 Years with Two (6) Month Extensions
    Amortization: Interest Only
    LTC: 72.5%
    Fees: 1%
    Prepayment Penalty: None
    Guaranty: Recourse

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    $6,500,000 7-Year Construction Loan 18-Unit Multifamily Project; 70% LTC; Prime + 0.75%; Culver City, CA

    August 28, 2019

    Transaction Description:

    George Smith Partners secured a $6,500,000 construction loan for the development of an 18-Unit Class A apartment building located in the greater Culver City submarket of Los Angeles. The interest only loan is priced at Prime + 0.75% for the full 18-month term and includes a 6-month extension option. The proceeds represent 70% of the total project cost. The transaction also includes a 5-year mini perm option priced at the 5 Yr. Treasury + 2.15% with a 30-year amortization schedule, which can be exercised upon stabilization of the Project.

    Challenges:

    Although the Sponsor had previous experience as a general contractor this was his first endeavor as a developer and guarantor. His experience with this Class A asset type was limited and a significant portion of his net worth was tied to a startup technology company with limited operating history. The Sponsor also had a strict deadline he needed to adhere to as his construction permits were reaching their expiration date. Additionally, the construction costs and Sponsor cash equity fluctuated throughout the application process, which complicated the reconciliation of the closing statement and final loan amount.

    Solutions:

    GSP demonstrated that the Sponsor had chosen a capable general contractor to oversee the Project and helped structure a contract that gave the Lender confidence that the development would be completed. With respect to net worth, GSP procured ample evidence supporting the financial growth and stability of the startup. GSP prepared all required closing documents in a timely manner and provided a material portion of the due diligence prior to entering application in order to execute the transaction before the expiration of the Sponsor’s permits. GSP kept a diligent record of costs and equity invested to date. The Lender gave credit for this prior equity and reduced the Sponsor’s required down payment at close.

    Rate: Prime + 0.75%
    Term: 18 Months + 1, 6 Month Extension
    Amortization: Interest Only
    LTC: 70%
    Guaranty: Recourse

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    $17,725,000 Non-Recourse Construction Financing for a 127-Key Cambria-Branded Lifestyle Hotel in the Roosevelt Row Arts District of Phoenix, AZ

    October 10, 2018

    Transaction Description:

    George Smith Partners secured $17,725,000 in non-recourse construction financing for the development of a 127-key Cambria-flagged lifestyle hotel in the Roosevelt Row Arts District of Phoenix, Arizona. This financing facility allowed the Sponsor to begin construction on the first of several projects slated for delivery within Roosevelt Row (Ro2). The Sponsor won a city-led RFP bid earlier this year that provided them with control and ownership of four contiguous city blocks within the core Ro2 area. This was the Sponsor’s first lifestyle branded hotel development and their first hotel development within the state of Arizona. These facts presented a challenge for many groups, despite their extensive experience developing other asset classes, including Monroe 44, the tallest residential building in Arizona.

    GSP sourced a hospitality lender who shared the Sponsor’s vision and excitement about the revitalization of the historic community, recognizing their ability to execute this project under the Cambria Brand. Despite several collateral restrictions presented throughout the application process, GSP was able to facilitate creative alternative scenarios for security of both Lender and Sponsor, ultimately achieving a mutually agreeable solution and additional proceeds to cover the new shortfall. The three year floating rate note was priced at 1 Month LIBOR + 7.50%, and was sized to 68.0% of project costs.

    Rate: 1 Mo. LIBOR + 7.50%
    Term: 3+1+1
    Amortization: Interest Only
    LTC: 68.0%
    Guarantee: Non-Recourse (with standard bad boy carve-outs)

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    $38,000,000 Ground-Up Luxury Condominium Construction Financing to 80% LTC

    February 7, 2018

    George Smith Partners structured a stretch construction debt facility for a 38-unit condominium development in a primary Midwest market. GSP created a two tranche facility with national capital providers who were knowledgeable about the location and marketplace, and comfortable with the Sponsor’s experience and ability to execute the construction project. GSP was able to leverage its relationships to create a favorable funding schedule and minimum interest calculation due to the potential rapid pay down schedule and favorable pre-sales. The total 80% loan to cost facility blended to a rate of LIBOR + 5.60%, over a three-year term with two 12 month extensions.

    Rate: Blended LIBOR + 5.60%
    Term: 36 months plus two 12-month extensions
    Amortization: Interest only
    LTC: 80%
    Guarantee: Non-Recourse
    Prepayment: None

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    $52,285,850 Senior Construction & Mezzanine Development Financing w/Performance Bonds

    June 19, 2013

    6 – 12 – 13
    Transaction Description:  George Smith Partners placed the $52,285,850 Senior Construction & Mezzanine Development Financing w/Performance Bonds for Phase I of a 310 acre master development project in Upper Marlboro, Prince George County, Maryland. Upon completion, the build out will encompass 533,000 sf of retail, 845 “for sale” SFRs & town homes, 2,240,000 sf.of office, 600 key hotels (multiple flags) and 884 multifamily rental units. The financing provided was for Phase I of the development, which consists of the entire infrastructure to deliver 500,000 sf of retail, 348 town homes, 504 rental units and a 150-key hotel. The raw land was initially purchased in February 2012 for $23,700,000.
    Challenge: The foreign based international development company has been extremely active in acquiring land in the United States during the past 5 years from their Canadian HQ. Collectively, they have acquired over 50,000+ acres in Arizona, Texas, Georgia, North Carolina, DC Region and Southern California. While they have been active in developing their land holdings in Canada since 1979, this was their first large financing request in the U.S. (The company owns all of their land un-levered). To add further complexity, the ownership structure in this asset included a Canadian Public Company and a German entity, which owned the asset as a TIC Structure. This precluded the sponsor from using a pledge of membership interest for the mezzanine financing. Sponsorship also had an important deadline to start the development. Negotiating the inter-creditor was paramount in a successful closing of the capital stack between the senior & mezzanine lenders. Prince George County has some of the most difficult performance bonding requirements in the country.
    Solution: GSP immediately embarked on a strategic and national in scope process of marketing that included face-to-face meetings in Boston, New York, Maryland, Virginia, DC, Texas, Arizona & California. The project included many moving parts involving articulating the strengths in multiple disciplines; valuation in retail, single family, hospitality, multifamily rentals, office & residual tract land. Combining this articulation and blanketing the country, GSP was able to secure senior debt from a Texas based bank that understood land development and was excited about the prospects for future development opportunities with this sponsor. GSP then structured the mezzanine loan from a New York based hedge fund making its first investment in commercial real estate. By focusing on market education in structuring and collateral, we were able to successfully complete a complicated inter-creditor agreement and funding by the mezzanine loan. Securing the mezzanine loan as a 2nd trust deed, we were able to provide the mezzanine lender it’s security, rather than by the standard pledge of membership interest. By adding a portion of the bonding capacity from the lender, the Sponsor was able to reduce the overall costs to secure the performance bonds for the project. The Grand Opening of the project is Thursday, June 13th.
    Rate: 7.58% Blended
    Term: 3 Years w/two – 1 Year Exts
    LTC: 66.7%
    Recourse:  50% recourse limited to a corporate entity.

    Advisors:  Malcolm Davies, Peter Kleinberg, Drew Sandler.

    For more information, please visit www.WestphaliaTownCenter.com

  • Expand

    Apartment Construction Loans – $7,850,000, 40 Unit Ground-Up Apartment Construction Loan, Los Angeles, California

    September 28, 2012

    Contact us regarding your construction loan needs and financing.
    Transaction Description: Los Angeles Apartment Construction Loans – GSP arranged the multi-family financing for a 40 unit ground-up apartment development in Hollywood, California. The developer had assembled the land over a period of years, and originally intended to develop a “For-Sale” building. Because of the strong demand in the Hollywood market, coupled with a comparatively low basis in the land, the Borrower was able to attract private, passive JV equity to co-invest in the transactions.
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    Rate: LIBOR+275
    Term: 3 Years + 24 Month Extension
    Amort: 30 Years
    LTC: 65%
    Recourse
    Brokers: Jonathan Lee, Shine Cheng

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