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
$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
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.
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.
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. Challenge: The Borrower’s previous construction projects were financed by a bank that had stopped lending on construction following the credit crises. While the previous projects were successes, the Borrower struggled to attract debt without a clear pipeline of future projects and the personal capital to build out all of the proposed developments. The Borrower’s private equity sources were reluctant to sign full personal repayment guarantees. Solution: GSP worked with the Borrower to demonstrate a clear pipeline of projects based on existing assets and future business plans. The Borrower was able to secure capital partners through his private network. The new investors agreed to sign on the current loan but only in a secondary position after all other remedies for cure have been solved. This bolstered financial strength of the request, combined with a clear pipeline of future business gave the lender sufficient confidence to proceed with the loan. To shield the private investors, GSP negotiated a several pro-rata recourse agreement for the investors to a capped amount, which is significantly less than the loan amount. This gave the investor partners comfort that they are not exposed to the full repayment guarantee.
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