Rate: Prime + 0.75%
Term: 18 Months with one 6 month extension Lender Fees: 0.75%
Amortization: Interest Only
Prepayment Penalty: None
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.
Senior Vice President
May 20, 2020
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.
The Sponsor, while very experienced in other asset classes, engaged GSP to source the full capital stack (debt, equity and carve-outs guarantor) for his first self-storage project. New Building & Safety codes that took effect in 2020 resulted in increased costs and delays. In order to obtain certified pads by the end of 2019, the entitlements in-place had to be vetted and the horizontal work needed to start prior to securing construction financing. The impacts of Covid-19 resulted in multiple delays from subcontractors, County inspectors, and in pulling permits due to County offices being closed.
GSP was able to source an investor from its pool of strong relationships who provided the equity. GSP focused on the market necessity for storage units in the desirable and growing community of Santa Clarita Valley, and successfully negotiated an agreement with Public Storage to operate the facility. GSP identified a capital provider to not only extend the financing commitment multiple times, but also to execute a structured, non-recourse, low-rate loan with the same terms agreed upon prior to Covid-19.
$7,025,000 Non-Recourse 77% LTC Adaptive Re-Use Construction to Perm; 3.50% Fixed for 10-Years; Southern California
April 29, 2020
George Smith Partners arranged $7,025,000 in non-recourse construction to permanent financing for the adaptive re-use of an existing vacant bank branch building to a medical office building. Located in a prime Southern California submarket and sized to 77% loan to cost, the construction facility consists of an initial funding of $4,825,000 with future draws of $2,200,000 to complete the reposition of the Property. The non-recourse loan is fixed for 10-years at a rate of 3.50% with three years of interest only then converting to a 30-year amortization schedule for the remaining loan term. The loan is structured with a step-down pre-payment schedule of 4%,3%,2%,1% and open thereafter with no pre-payment penalty for added flexibility.
$19,100,000 Construction Financing to 92.5% LTC on a 111-Unit, Class-A Apartment Community; St. Louis City, Missouri
April 8, 2020
George Smith Partners successfully placed $19,100,000 in construction financing, which funded 92.5% of the total project cost for the construction of a 111-unit second phase of a larger mixed-use multifamily and retail project located in the trendy St. Louis City neighborhood of The Grove. The financing structure included a senior loan to 85% LTC and a preferred equity investment with last-dollar exposure to 92.5% of total project cost. The preferred equity investment is non-recourse and the senior loan provides for only a 50% repayment guarantee that burns down to 25% upon certificate of occupancy. Additionally, the Lender and preferred equity investor gave credit for a lift in land value above the Borrower’s actual cost due to the Sponsor having owned the land since 2016 and it being the second phase of a larger project. GSP leveraged its expertise of the St. Louis market, long-standing lender relationships, and capital markets creativity to achieve the Sponsors goals of minimizing cash equity invested into the project due to how much value is being created in this phase of the project.
Term: Twenty-four-month initial term with one, 12-month extension option
Amortization: Interest only
Prepayment: Nine-months minimum interest
Guaranty: 50% repayment guarantee that burns down to 25% repayment guarantee upon certificate of occupancy (on senior loan only; does not apply to the non-recourse preferred equity investment)
February 5, 2020
George Smith Partners successfully arranged $9,400,000 in non-recourse construction financing for the development of a 15-unit luxury apartment building in West Los Angeles. The Property will be comprised of a mix of 1-bedroom and 2-bedroom units and will include 28 parking spaces. The Class A asset sits in a prime location that adjoins some of Los Angeles most sought-after submarkets. Upon completion tenants will have world class views and easy access to major thoroughfares of the City.
The Sponsor has owned the site for over twenty years and after relocating existing tenants to make way for the construction of the new luxury building, he raised an existing 16-unit apartment building. Despite the low land basis, at a total cost at over $1 million per door, it was difficult to find comparables to justify the completed value in support of the requested loan amount.
GSP accessed its extensive lender network to identify a best-in-class construction lender to provide non-recourse construction financing for the Sponsor. GSP’s longstanding history with this lender allowed for a flexible and streamlined closing process that was favorable to the Sponsor’s project timeline. GSP was able to demonstrate to the Lender that as a family owned, multi-generational asset, the tight spread between development cost and value was a less important metric than for a merchant builder-built building, particularly with a significant equity investment.
Rate: 1-Month LIBOR + 7.50%
Term: 28 Months
Amortization: Interest Only
Lender Fee: 1% in / 1% out
- Advisors: Gary M. Tenzer
$51,750,000 Senior Construction Financing & $16,200,000 Mezzanine Debt Placement for the Development of a Grocery Anchored Shopping Center; Kona, Hawaii
January 15, 2020
George Smith Partners advised on the placement of $51,750,000 and $16,200,000 Senior Debt and Mezzanine debt respectively for the ground-up development of an institutional quality 204,275 SF outdoor shopping center that will be located along Kuakini Highway, one of the island’s most trafficked thoroughfares. The Property, which sits on a rare fee-simple 20-acre site, will provide patrons with easy access to both Henry Street and Palani Road and over 700 parking spaces (representing a parking ratio of 4:1,000 SF).
Although the Sponsors who partnered with a major life company, had extensive prior career experience in the field of commercial real estate development, the Project represented the Sponsor’s largest development to date. The development of the Project had already commenced adding another layer of complexity to the transaction.
GSP focused on the lack of new retail development on Kona and specifically the anchor tenant’s commitment to relocate their store from an adjacent shopping center (less than 0.50 miles). In addition, GSP was able to convey to capital sources the immense value of the fee simple ownership of the site – a rare occurrence in Hawaii where most land is leased from the State. Ultimately GSP was able to identify two lenders who not only understood the value of the fee simple ownership of the site but also understood the lack of new retail space and the subsequent demand.
$14,000,000 in JV Opportunity Zone Equity Financing and $23,000,000 in Non-Recourse Construction Financing for the Development of a 127 Unit Multifamily Property; Vancouver, WA
September 25, 2019
George Smith Partners advised on $14,000,000 in Joint Venture QOZ (Qualified Opportunity Zone) Equity Financing and $23,000,000 in non-recourse senior construction financing for the ground-up development of a 127 unit multifamily property in Vancouver, Washington, a suburb of Portland, Oregon. The Property sits across the street from the Vancouver Waterfront, which is undergoing a $1.5B dollar public/private master plan redevelopment. The 6-story, 173,000 square foot property will feature a landscaped third floor courtyard, a community room, balconies, two levels of parking, bike storage and excellent views of the Columbia River and Mount Hood.
Due to of the Project’s location in a QOZ, the Sponsor sought a QOZ financing partner who had the ability to place capital for the required 10-year horizon as per the QOZ guidelines. Moreover, many capital sources also expressed reservations related to supply concerns in the greater Portland market.
GSP focused on the Vancouver submarket’s strengths, including very limited new supply in contrast to downtown Portland, no state income tax, the more relaxed lifestyle, the proximity to PDX airport, and the Project’s location in very close proximity to the waterfront. Additionally, GSP highlighted the Sponsor’s ability to execute by showcasing its recent Class A multifamily delivery in Vancouver that fielded a large number of offers and traded at a record low cap rate. Ultimately, an opportunity zone JV Equity financing partner was selected who recognized the strength of the location and Sponsor’s best-in-class development history. These attributes also resulted in GSP securing non-recourse construction financing at 60% loan to cost with an interest rate of 1 Month Libor + 3.65%.