Los Angeles: $22,300,000 Ground-Up Development; 51 Rental Units over Retail @ 89% of Cost

Rate: L+375 & 12.25%
Term: Three years plus options
Fee: 0.5% & 1.5%
Recourse: Full plus Completion & Carve-Outs Only

George Smith Partners placed the ground-up development debt for a Koreatown (Los Angeles City District) parcel for 51 rental units over 3,350 square feet of ground-floor retail. Structured as an A/B execution, the senior lender was willing to advance up-to 75% of cost subject to a 65% valuation upon stabilization. The senior loan was trimmed to allow for the layering of a $5,000,000 mezzanine tranche. A partial deferral of the development fee rounded out the capitalization. As added security, the bank underwrote the secondary capital provider and executed a recognition acknowledgement with the junior lender. Bank priced debt at LIBOR plus 375 and a half point for the 36 month term. Subordinate debt will charge 12.25% annually on their tranche but will not participate in any upside. The junior debt only requires a carve-out guarantee while the senior note is a full repayment guarantee along with a completion guarantee.


Related Financings

  • Expand

    $61,392,000 Refinance of a 207-Acre, Two Million Square Foot Pharmaceutical Campus in Tri-State Area

    April 15, 2020

    Transaction Description:

    George Smith Partners arranged $61,392,000 in first mortgage debt for the refinance of a mixed-use office, industrial and lab campus in the Tri-State area (New York, New Jersey, Connecticut). The corporate user developed the campus in phases between 1906 and 2008, and the improvements consist of over two million square feet of laboratory, pharmaceutical manufacturing, office and support buildings including a central utility plant. The user still owns some buildings, and leases others on the campus. The Sponsor purchased the asset in 2015 with a long-term redevelopment goal to create a life sciences destination that will build on the existing laboratory, manufacturing, and office uses. The Property will ultimately feature shopping, dining, meeting and educational experiences as part of a cohesive “work/live/play” community.

    GSP sourced a loan from a capital provider that was able to underwrite in-place income with flexibility for an ever-evolving business plan. The three-year, interest only initial loan term is structured as an initial advance of $42,940,000 with the remaining $18,452,000 future funded for approved capital expenditures and tenant improvements/leasing commissions for to-be-leased space. No interest is due on funds until drawn. The loan is open for prepayment at any time subject to a 24-month minimum interest payment.

    Term: Three years plus two 12-month extensions
    Amortization: Interest Only during Initial Term
    Max Loan to Stable Value: 60%
    Prepayment: 24 months minimum interest
    Lender Fee: 1%

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    $19,100,000 Construction Financing to 92.5% LTC on a 111-Unit, Class-A Apartment Community; St. Louis City, Missouri

    April 8, 2020

    Transaction Description:

    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.

    Rate: Confidential
    Term: Twenty-four-month initial term with one, 12-month extension option
    Amortization: Interest only
    LTC: 92.5%
    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)

  • Expand

    $60,100,000 Cash-Out Permanent Financing on a Newly Constructed 235-Unit Mixed-Use Apartment Community; St. Louis City, Missouri

    March 11, 2020

    Transaction Description:

    George Smith Partners successfully placed $60,100,000 in permanent debt to take out a construction loan and fund the buyout of a major equity partner on a newly built, mixed-use property located in the trendy St. Louis City neighborhood of The Grove. The 82% leverage loan is a combination of a $50,000,000 non-recourse senior loan to 70% loan-to-value and a $10,100,000 non-recourse mezzanine loan to 82% loan-to-value with a blended fixed-rate coupon of 4.89% for the duration of the ten-year term. The financing provided significant cash out to the Borrower that allowed both the buyout of a major equity partner as well as substantial cash-out above what was needed for the partnership buyout. Additionally, the financing structure replaced a recourse construction loan with a non-recourse, fixed-rate permanent loan with full-term interest only to maximize cash flow. GSP leveraged its expertise of the St. Louis market, long-standing lender relationships, and capital markets creativity to achieve the Borrower’s goals.

    Rate: Blended to 4.89%, Fixed (3.86% on senior debt; 10% on mezzanine debt)
    Term: Ten years
    Amortization: Ten years interest only
    LTV: 82%
    Prepayment: Defeasance
    Guaranty: Non-recourse
    Lender Fee: None

  • Expand

    $30,000,000 Development Loan for Institutional Sponsor, Boise, ID

    February 19, 2020

    Transaction Description:

    George Smith Partners secured a $30,000,000 loan for the construction of a 161-unit, Class A mixed use development in downtown Boise, Idaho. The Project is positioned to become the premiere development site in Boise and will serve the continued growth of the greater Treasure Valley. As one of the fastest growing MSA’s in the U.S., Boise has seen an increased demand for more housing to meet its population growth.

    Due to the location, architecture, and amenities, the 8-story project was underwritten to a valuation which included rents 20% above market. This provided a challenge when marketing the transaction as the market, despite the rapid expansion, is less than 750,000 people and only recently started to see an influx of institutional capital. Sized to 60% LTC and 50% LTV the asset ultimately received best-in-class pricing over a three-year term with two, one-year extensions. The high net worth sponsorship was comfortable with recourse in order to obtain a loan from a national institution with flexible capital.

    Rate: L + 235
    Term: 3 years + 1 + 1
    Loan-to-Cost: 60%
    Guarantee: Top 50% only

  • Expand

    The Orchard: $55,000,000 Non-Recourse Ground-Up Mixed Use Construction to 80% of Cost; Azusa, CA

    January 29, 2020

    Transaction Description:

    George Smith Partners placed the ground-up development financing for a 163 unit/31,700 square foot mixed use development in Azusa, California. The Transit Oriented Development was previously owned by the City of Azusa and awarded to the Developer via an RFP in 2016 and will include restaurants and a 3,500 square foot Laemmle art house Theater. The Orchard will be the latest project along Metro’s Gold Line which serves the San Gabriel Valley and connects the Valley to Downtown Los Angeles via a 42-minute commute through Pasadena, offering residents a lower cost of housing with ease of transit to employment centers. The Orchard will be a low-cost alternative to commuters considering similar TOD sites in Sierra Madre and Pasadena, amplifying housing options for the healthcare professionals at City of Hope and Kaiser, and providing relief to pent up student housing demand at Azusa Pacific University and Citrus College.

    Sized to 80% of total cost, which included an increase in land and covered imputed equity once permits were ready-to-issue (RTI). Priced at LIBOR + 7.125%, the non-recourse construction loan limits all carve-outs and a capped completion guarantees to an entity. There are no “warm-body” signatures on any component of the financing. The three-year term allows for two additional nine-month options. Prepayment is limited to a minimum interest payment calculation and a 1-point exit fee.

    Rate: LIBOR + 7.125%
    Term: 36 months + 2 nine-month options
    Fees: 1 in/1 out
    Recourse: No warm bodies; capped at entity level.
    Prepayment: Minimum interest based on lender calculation

  • Expand

    $3,700,000 Non-Recourse Refinance, Mixed-Use Retail and Office Property; Mission Viejo, CA

    December 11, 2019

    Transaction Description:

    George Smith Partners secured a $3,700,000 non-recourse refinance for a 14,454 SF mixed-use property in Mission Viejo. The loan is fixed at a rate of 4.10% for seven years. Over the past year, the Property had some leases roll. The Sponsor spent a significant amount of time and effort in order to ensure the new tenant profile was comprised of ecommerce-proof businesses. Although the Property was 100% occupied once GSP commenced the marketing process, the historical vacancy caused some concern with lenders. GSP discussed the strength of the market, asset, and Sponsor in order to mitigate those concerns. In doing so, GSP was able to create a robust market for the Sponsor and source a Capital Provider that understood the value of the Property. The Lender was able to rate lock at application and was ready to close in less than 60 days.

    Rate: Fixed at 4.10% for 7 Years then Floats at Treasury + 2.55%
    Term: 10 years
    Amortization: 30 years
    LTV: 55%
    Guaranty: Non-Recourse

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