Don't Miss a Fact,
Sign Up for FINfacts!

FINfacts is a weekly newsletter highlighting recent financings and economic insights.

Subscribe Here

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.

Advisors

Related Financings

  • $67,000,000 Construction Financing for the Development of a Mixed-Use Project; Garden City, ID

    April 20, 2022

    Transaction Description:

    George Smith Partners successfully arranged $67,000,000 ($286,324/unit) in non-recourse, construction financing for a 234-unit, mixed-use development in Garden City, ID. This mixed-use development will sit on the edge of the Boise River Greenbelt with stunning views overlooking the water, Boise city and the surrounding mountains. The Project will feature eight retail establishments including a public pub and over 16,000 square feet of open public plaza gathering space. The Project will provide much needed housing to the supply constrained Boise MSA that has seen double digit rent growth in the last few years.

    This mid-construction Project had the horizontal construction work completed. GSP was brought in to secure a debt provider to help recapitalize the Project and to see it through completion. With the recent financings in Boise that GSP had worked on, GSP put together a bespoke marketing process. The Project received a tremendous amount of interest from lenders and was put under application in just 7 days! GSP was able to identify a capital partner that provided the best overall value for the Sponsor with competitive pricing, familiarity with the submarket, comfort with the product type, and a closing timeline matching the Sponsor’s needs. The construction loan closed in mid-April providing the necessary financing to bring this Project to fruition. This Project is expected to begin lease up in the second half of 2023.

    Rate: Libor + 700 bps
    Term: 30 months
    LTC: 85%
    Guaranty: Non-Recourse

  • $47,000,000 Senior Construction Loan for a Mixed-Use Development; Azusa, CA

    April 11, 2022

    Transaction Description:

    George Smith Partners placed a $47,000,000 senior construction loan for the ground-up development of a mixed-use project in Azusa, CA. When complete, the 5-story project will consist of 127 apartment units and approximately 10,000 SF of 1st-floor commercial/retail/restaurant space. The Project is an integral component in the ongoing expansion of the City of Azusa’s Downtown district and is immediately adjacent to the Gold Line Station, which runs from Azusa Pacific University & Citrus College west to Downtown Los Angeles. This is the Sponsor’s second project in Azusa.

    A lack of comparable projects within the submarket posed a challenge. GSP emphasized the supporting employment centers inside a ten-mile radius, including the two colleges and eighteen medical facilities. In addition, a detailed breakdown of the San Gabriel Valley (SGV) submarket helped showcase the presence of a proportionally higher share of younger households than statewide. Data depicting home values that had grown out of reach for those living in a three-mile radius helped the case for a rental project. Further support was provided by the SGV submarket experiencing minor economic impact during the last two years and during Covid.

    GSP executed a full-time marketing campaign and identified the most economically beneficial capital stack scenario for the sponsorship with a stepdown in rate at Temporary Certificate of Occupancy (TCO).

    Rate: Floating rate (SOFR-based) with rate stepdown at TCO
    Term: 36 Months + Two, 12-month Extensions
    Stabilized Loan-To-Value: 70%
    Loan-To-Cost: 85%
    Guaranty: Non-Recourse

  • 4,450,000 Cash Out Refinance Loan For 37-Unit Multifamily Property in Los Angeles, CA; 7 Years Fixed at 3.40%; 5 Years Interest Only Payments

    April 6, 2022

    Transaction Description:

    George Smith Partners arranged $4,450,000 in financing for the refinance of a stabilized 37-unit mixed use property located in Los Angeles, California. The loan is fixed at a rate of 3.40% for 7 years. The new financing is a takeout of the acquisition loan that GSP closed five years earlier. Over the course of their ownership, the Sponsor performed a renovation of the Property and substantially increased the net operating income. As a result, the new loan provided a significant return of equity. The Lender held the rate of 3.40% even though interest rates increased while the loan was in application. Full credit was given for the income from two ground floor retail tenants. The loan has 5 years of interest-only payments.

    Rate: Fixed at 3.40% for 7 years
    Term: 7 years
    Amortization: 5 Years Interest Only
    Prepayment Penalty: 5,4,3,2,1%
    Guaranty: Non-Recourse

  • $25,200,000 Construction Financing for a Mixed-Use, Luxury Multifamily Development; Downtown Culver City, Los Angeles

    February 16, 2022

    Transaction Description:

    George Smith Partners successfully arranged $25,200,000 in senior construction financing for a 54-unit ground-up luxury apartment community featuring 3,000 SF of ground floor retail space in the heart of Downtown Culver City. The Sponsorship Team acquired the Property in 2018, which is now fully entitled and ready to break ground. The Project is expected to deliver in Q4 of 2023.

    As a central and upcoming submarket of Los Angeles, Culver City is peppered with tech startups and major employers from Amazon to Apple, flourishing as an employment hub with over 250,000 high-paying jobs and approximately 8,000 employees within a mile from the Subject site. The best-in-class Sponsorship team has extensive local industry knowledge and recognized the Property’s underlying value, bolstered by the submarket’s immense growth and capital inflow, as well as the area’s historical roots in the movie and entertainment industry. GSP was able to identify a lender who offered highly competitive terms, given the Project’s significant demand and the value of multifamily housing in an ultra-high growth submarket.

    All Terms Confidential

  • $29,250,000 Senior Construction Financing for a Mixed-Use Development; Bellflower, CA

    February 16, 2022

    Transaction Description:

    George Smith Partners placed a $29,250,000 senior construction loan for a ground-up development of a mixed-use project in Bellflower, CA. When complete, the 5-story Project will consist of 91 apartment units and approximately 14,550 SF of 1st-floor commercial/retail/restaurant space. The Subject is located at the northern boundary of the Downtown Bellflower District and is an integral component of the city’s TOD Specific Plan. When complete, residents will be able to access LAX, the South Bay, and DTLA via the Blue and Green Metro lines.

    As the marquee development for the Bellflower TOD Specific Plan, few comparable projects were available in proximity to the Project site. GSP focused interested lenders on the supporting employment centers within a twenty-minute driving distance, including seven medical centers inside of a 5-mile radius. Additionally, while few Class-A style multifamily properties currently exist near the site, GSP used submarket data to show that demographic trends within the immediate area support the need for new product. GSP executed a broad and in-depth marketing campaign to help capital markets understand the opportunity.

    Rate: Prime + 0.75%; Floor 4.375%
    Term: 24 Months + three, 6-Month Extension
    Stabilized Loan-To-Value: 65%
    LTC: 72%

  • $129,000,000 Construction Financing for a Multifamily Asset; Downtown Los Angeles, CA

    January 18, 2022

    Transaction Description:

    George Smith Partners secured $129,000,000 in construction financing for a 280-unit mixed-use multifamily development featuring 25,000 SF of ground-floor retail/office space and best-in-class amenities. Located in the heart of the Cornfield-Arroyo Seco Specific Plan (CASP) area, the Property is adjacent to the high-traffic Los Angeles State Historic Park, USC+LAC Medical Center; the Project site is within a 5-minute walk from more than 34 upcoming bars, restaurants (Momofuku by David Chang), cafes and entertainment venues. The financing provided funding for future capital expenditures and related construction costs.

    The top-tier Sponsorship group focused on minimizing their equity contribution through a high leverage debt facility to execute their business plan. GSP was able to identify non-recourse capital with strong local knowledge and confidence in the long-term fundamentals of the high-growth submarket. These efforts were aided by the site’s development potential, given the prime location and thousands of surrounding demand drivers.

    All Terms Confidential