$22,800,000 JV Opportunity Zone Equity Financing for the Development of a Lifestyle Hotel in Scottsdale, AZ

Transaction Description:

George Smith Partners advised on the $22,800,000 in Joint Venture QOZ (Qualified Opportunity Zone) Equity Financing for the ground-up development of the proposed Scottsdale project, a 169-key high-end lifestyle hotel. It will sit on a highly-trafficked corner of Camelback Road in the heart of Scottsdale, Arizona’s Old Town Entertainment District. The 6-story, 97,058 square foot hotel will feature a subterranean parking garage, restaurant, lounge, an indoor and outdoor fitness center, and an amenity deck complete with a pool and bar for guest entertainment.

Challenges:

Due to of the project’s location in a Qualified Opportunity Zone (QOZ), the sponsor was looking for a QOZ financing partner who would place capital for the required 10 year horizon as per the QOZ guidelines.

Solutions:

George Smith Partners focused on Greater Phoenix’s and specifically Scottsdale’s disparity of comparable lifestyle hotel product, with little to no deliveries over the past decade. The hotel’s location itself was also a major driving point; Old Town Scottsdale, Scottsdale and the Camelback Corridor are part of Phoenix metro’s largest office-employment hubs with approximately 30 million square feet of office space. Additionally, GSP showed that with the location next to the Scottsdale Entertainment District, the hotel would drive tremendous leisure travelers along with a strong F & B offering. Ultimately, an institutional JV Equity financing partner was identified who recognized the Sponsor’s talent and vision for the hospitality development and believed in the sponsor’s ability to execute the phenomenal business plan.

Advisors

Related Financings

  • Expand

    Cash-Out Bridge Loan for Medical Office Building, Laguna Niguel, CA

    November 25, 2020

    Transaction Description:

    George Smith Partners secured a senior bridge loan for a 21,303 square foot office building in Laguna Niguel, CA. The Subject Property was unencumbered; hence the entire loan was comprised of cash-out proceeds which the Borrower is utilizing for a separate project they are developing. The loan represents approximately 60% of the original purchase price and was structured with a 1-year initial term with interest only payments. The loan allows for open prepayment and carries two 6-month extension options.

    The loan was collateralized by a recently renovated 21,303 square foot office building. The building had recently upgraded the facade, landscaping, parking lot, entrance, lobby, bathrooms, HVAC and other interior finishes. A new roof and solar system had also been installed. The building was 47% occupied at loan funding. The first-floor single tenant had vacated at lease expiration several months prior leaving limited debt service coverage and unusually high vacancy compounded by other COVID related issues.

    GSP selected a lender that was able to move incredibly quick to accommodate the Borrower’s development timeline. The Lender’s credit department approved the loan one-week post submission and did not require an appraisal to close. The Lender underwrote to the stabilized asset value, closed with no debt service reserve and no personal recourse.

    Rate: 5.90%
    Term: 12 months
    Amortization: Interest Only
    Loan Fee: 1.0%
    Prepayment: Open
    Options: Two 6-Month Extensions; 0.50% Fee
    Personal Guaranty: None

  • Expand

    $44,000,000 Non-participating Bridge Financing for Industrial Acquisition and Reposition, 95% LTC, West Coast

    November 25, 2020

    Transaction Description:

    George Smith Partners successfully arranged $44,000,000 in non-recourse, non-participating bridge financing at 95% of cost for the lease-up and repositioning of a 5-property, 650,000 SF, industrial complex located on the West Coast. The Sponsor purchased the complex vacant and the seller carried the first mortgage for 4 months. From the open of escrow with the Seller, to the closing of this loan, there was over 82% of the available space leased making up 77% of rent with letters of intent for the remainder of the space. Although this was during the COVID-19 pandemic, and there was considerable deferred maintenance and capital expenditure required to get the properties rent ready, the space leased quickly due to the Sponsor expertise and relationships and a strong submarket.

    The loan provides funds for the deferred maintenance, the capital expenditures, the tenant improvements, leasing commission and carry until the tenants are in and paying rent. Additionally, there is an earn-out of $2,000,000 after the 18th month as the asset has other potential value-add attributes.

    Rate: LIBOR + 3.95% with a floor on LIBOR of 50 basis points
    Term: 3 years interest only
    Amortization: Two 1-year extensions with 30-year amortization
    LTC: 95%
    Guaranty: Recourse, Completion of deferred maintenance and Cap-Ex, “bad” acts and environmental
    Lender Fees: 1% origination and 0.25% exit fee

  • Expand

    $4,700,000 Non-Recourse, Bridge Financing for Mid-Construction Apartment Project; Pico-Robertson Area of Los Angeles, CA

    November 18, 2020

    Transaction Description:

    George Smith Partners arranged $4,700,000 in non-recourse, bridge financing for an 85% complete, 13-unit apartment project in the Pico-Robertson area of Los Angeles, CA. Despite marketing this deal as a construction take-out loan for an 85% complete project during the global pandemic, GSP successfully engaged a debt fund to take out the existing construction loan with additional funds to complete construction. The non-recourse bridge facility was priced at an interest-only rate of 5.90% with a 12-month term plus a 12-month extension option. Thanks to GSP’s long-standing relationship with this debt fund, we were able to close this transaction in just 8 business days.

    Rate: 5.90% Interest Only
    Term: 1 + 1
    LTC: 80%
    Guaranty: Non-Recourse

  • Expand

    $6,275,000 Bridge Financing for a 132-Unit Apartment Community; San Antonio, TX

    November 18, 2020

    Transaction Description:

    George Smith Partners placed a $6,275,000 bridge loan for the refinance of a Class-B 132-unit apartment community in San Antonio, TX. The loan is fixed at 6.45% for three years with full term interest-only payments. The term sheet was signed after the COVID-19 crisis and ensuing economic volatility. GSP identified a balance sheet lender with in-house loan servicing to work with the Sponsor throughout the reposition of the asset. The Property underwent a change in property management in the past few years and required some property maintenance in the reposition. GSP worked with the Client on the original acquisition bridge loan and had to re-evaluate the business plan once the market changed and occupancy dipped due to COVID-19.

     

    Rate: 6.45% Fixed
    Term: 3 Years
    Amortization: Full Term Interest-Only
    Loan-to-Value: 65%
    Prepayment: 15 Months Minimum Interest Period
    Loan Fee: 1% Origination Fee, 0.75% Exit Fee
    Guaranty: Non-Recourse

  • Expand

    $13,340,000 Acquisition/Bridge Loan for Six-Property Multifamily Portfolio; Long Beach, CA

    November 18, 2020

    Transaction Description:

    George Smith Partners identified a national balance sheet lender with an intimate knowledge of the submarket and arranged $13,340,000 in acquisition/bridge financing for the purchase and reposition of a six-property multifamily portfolio located in Long Beach, CA. The Sponsor placed the portfolio under contract during the COVID-19 pandemic.

    The loan includes a future funding component in which interest is not charged on the holdback until funds are drawn. This Capital Provider also structured and capitalized an interest reserve to cover the shortfall of cash flow during repositions. The three-year bridge loan is interest only for 36 months and carries a floating rate of LIBOR + 5.00% and includes two extension options for up to a term of five years. Our Sponsor’s business plan included a strategy to sell specific assets during the hold period as allowed for by the favorably structured release provisions.

    Rate: LIBOR + 5.00%
    Term: 3 Years
    Amortization: Interest Only
    Loan-to-Cost: 76%
    Prepayment: 12 months
    Loan Fee: 0.75% in / 0.75% exit

  • Expand

    $8,152,500 Conversion to Co-Living, 68% LTC, Heavy-Lift Bridge-to Perm Loan; San Francisco, CA

    November 11, 2020

    Transaction Description:
    George Smith Partners placed the $8,152,500 bridge-to-mini perm loan for the conversion of an existing 12-unit multi-family community into a 17-unit 44-bed co-living community. The 68% LTC bridge loan converts to a 5-year mini-perm loan fixed at CMT + 2.5% with a 3.75% floor.

    Challenge/Solution:
    The Project came to GSP half-way through construction and was being funded by a lender that had filed bankruptcy with proceeds that were insufficient to complete the new business plan. GSP put the loan under application pre-COVID with a new business plan that included (as a condition in closing) approvals for a 4th floor penthouse/useable roof top level. While in application, the construction and the penthouse level approval process came to a halt due to COVID causing stress on both the existing loan (nearing maturity) as well as the new loan underwriting. The challenges associated with co-living as a new asset class resulted in additional scrutinization from the new lender as well as the appraisal which had a negative impact on value. GSP was able to resolve the valuation issues by successfully arguing the merits of the Project as well as successfully negotiating a waiver of the exit fee on the previous loan which resulted in zero impact to the loan proceeds and the Borrower’s out of pocket cash required at closing.

    Construction Loan:

    Rate: Prime plus 1% with 5% floor
    Term: 18 Months
    LTC: 68%
    LTV: 65%

    Mini-perm Loan:

    Rate: CMT + 2.25% with 3.75% floor
    Term: 5 Years
    Amortization: 30 years
    Prepayment: 5, 4, 3, 2, 1 open

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

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

Subscribe Here