$2,400,000 Refinance of Unanchored Strip Retail Shopping Center with Special-Use Tenant; Murrieta, CA

Rate: 4.16% Fixed
Term: 7/25; 9 months IO
LTV: 46.3%

Transaction Description:
George Smith Partners secured a $2,400,000 recourse loan for the refinancing of a multi-tenant retail center, “The Olivewood Shopping Center” in Murrieta, CA. The Sponsor purchased six parcels totaling four acres in 2010. The construction of five retail buildings was completed in 2013 and the Sponsor sold three buildings prior to the financing. One remaining building is 100% leased to four retail tenants; the other building and adjacent lot have been ground leased to a carwash tenant. There was no debt on the Property and loan proceeds were used to buy out the ownership interest of the other partners.

Challenges:
Over half of the income for the Property was attributed to a carwash ground lease which is a special purpose use that some lenders are uncomfortable financing. While the ground lease was signed at loan closing, the rent would not commence until mid-2020. Also, in place rents did not support the full loan request.

Solution:
A portion of the loan was funded at closing and sized to in-place rents with a future funding occurring when the carwash takes occupancy and begins paying rent. The Sponsor will not pay interest on the future funded portion of the loan until it is disbursed.

Advisors

Related Financings

  • Expand

    5-Day Close for Office Building, Owner-User, Cash-Out Refinancing; Los Angeles, CA

    March 25, 2020

    Transaction Description:
    At the start of the Coronavirus crisis, George Smith Partners secured a $2,000,000 private money bridge loan to enable a business owner liquidity capital needed to grow his business. The loan paid off an existing SBA loan and provided approximately $1,000,000 in cash-out. The monthly payment on the new interest-only loan is lower than the existing financing due to the 20-year amortization. This is true even with the cash-out.

    Challenges:
    At the start of this crisis, we found a lender with liquidity who was able to move quickly and close within 5 days. Even with everyone shifting to working at home because of the crisis, the Lender stayed closed as promised.

    Solution:
    GSP used its experience and relationships to identify a lender who could understand the need to close on time in the middle of a global crisis. The new capital allows the Sponsor to expand their business, as other companies in their field are unable to access capital.

    Rate: 7.9%
    Term: One Year Term With 1 Year Option
    Amortization: Interest Only

  • Expand

    $4,500,000 Non-Recourse Self Storage Adaptive Reuse Construction Financing Fixed at 4.75%; Orlando, FL

    March 25, 2020

    George Smith Partners placed $4,500,000 in non-recourse construction financing for the adaptive reuse of a big box retail furniture store to convert to a 1,250-unit state of the art self-storage facility. The Property is located in Orlando, Florida, within a Qualified Opportunity Zone (QOZ) and was capitalized with a QOZ equity partner. Deal requirements included a non-recourse bank execution and best possible rate given the low leverage ask resulting from the QOZ equity partner’s significant investment in the Project.

    GSP identified a bank lender that understood self-storage construction and found the institutional sponsorship attractive. The Capital Provider was willing to offer a simple, non-recourse execution and a swap product that resulted in a 4.75% fixed rate for the duration of the loan. A four-year initial term was offered to accommodate for the longer lease-up velocity common among self-storage properties.

    Rate: 4.75% fixed (Swapped out 1 Month Libor + 315 at closing)
    Term: 4 years with a 2-year extension
    Amortization: Interest only for the initial term; 25-year amortization thereafter
    Prepayment Penalty: None (apart from Swap breakage)
    LTC: 45%
    Guaranty: Non-Recourse

  • Expand

    $12,375,000 Construction Loan for the Development of a 34-Unit Multifamily Property; 75% LTC; LIBOR+2.45%; Los Angeles, CA

    March 25, 2020

    Transaction Description:

    George Smith Partners secured $12,375,000 in proceeds for the development of a 34-unit multifamily property located in the Greater Wilshire/Hancock Park area of Los Angeles. The proposed development will consist of 31 market rate units and 3 affordable units for very low-income households that are to remain affordable for a period of 55 years. Building plans were approved prior to loan funding; construction is scheduled to commence in March 2020 with an estimated completion date of approximately August 2021, resulting in an 18-month construction period.

    The loan has a term of 24 months from closing with two 6-month extension options. The recourse loan will be secured by the land and the to-be constructed building. The fully funded loan represents 75% of the total project capitalization. The loan will be interest only for the 24-month term floating at 30-Day LIBOR + 2.45%. Upon completion the development will represent excellent quality multifamily units in an in-fill Los Angeles neighborhood. There are several projects currently under-construction in immediate proximity that will be competitive with the Subject Property. GSP selected a capital provider that was knowledgeable about the project’s location and the Sponsor’s experience to mitigate the new supply concerns.

    Rate: Floating; 30-Day LIBOR + 2.45%
    Term: 24 months plus two 6-month extension options
    Amortization: Interest only
    LTC: 75.0%
    Fees: .75%
    Guaranty: Recourse

  • Expand

    $3,200,000 Cash-Out Refinance for a Multifamily Property Still Under Renovation; Larchmont, CA

    March 18, 2020

    George Smith Partners placed a $3,200,000 cash-out refinance on a multifamily property in the trendy Larchmont submarket of Los Angeles, CA. The Property was a recent acquisition and still undergoing renovations as part of a value-added strategy. Despite this, GSP was able to source a bank lender offering a mini-permanent loan structure that met the Sponsor’s request for cash-out proceeds to re-invest in new development deals. Although the loan included a 12-month interest reserve a holdback for the remaining construction budget was not required. The financing was sized to 70% LTV and carries a rate of Prime + 0.5% (5.25% today). The loan carries a 5-year term and is interest only the first 18 months followed by a 30-year amortization.

    Rate: Prime + 0.5% (5.25% today)
    Term: 5 Years
    Amortization: 18 months interest only followed by 30-year amortization
    LTV: 70%
    Prepayment Penalty: None
    Guaranty: Recourse

  • Expand

    $7,000,000 Cash-Out, Non-Recourse, Refinance on a Single-Tenant Property; Venice Beach, California

    March 18, 2020

    George Smith Partners arranged a $7,000,000 ($901/sf) cash-out, non-recourse, first mortgage from a REIT to refinance a single-tenant, owner-user office property in Venice Beach, California. The Lender was comfortable with providing the cash-out financing, although the single tenant was in bankruptcy protection due to the property’s irreplaceable location which is blocks from the ocean in Venice Beach. The financing provides 12 months of bridge term while the Tenant works through bankruptcy proceedings. Although the loan is non-recourse, the Lender did not require an appraisal or other third-party reports. Sized to 60% of the Lender’s underwritten value, the loan priced at 6.90% fixed for the 12-month loan duration.

    Rate: 6.90% Fixed
    Term: 12 Months
    Amortization: Interest Only
    Loan to Value: 60%
    Lender Fee: 1.00%
    Prepayment: Open Full Term
    Guaranty: Non-Recourse

  • Expand

    $27,270,000 Refinance of 11-Property Portfolio; Fixed For 10 Years at 3.61%; Full Term Interest Only; Los Angeles, CA

    March 18, 2020

    Transaction Description:

    George Smith Partners placed the $27,270,000 refinance of eleven stabilized Los Angeles multifamily properties totaling 302 units. The interest rate is fixed at 3.61% for ten years with full term Interest Only payments.

    Since acquisition several years ago, the Borrower has invested a considerable amount in capital expenditures across the whole portfolio. Invoices were used to separate capital expenditures from recurring R&M expenses. This information helped to provide support for the Lender’s underwritten cash flow and property values. The Lender had previously provided the acquisition loan for the portfolio and is refinancing its own loans. For the refinance, they initially requested a higher level of due diligence than that of the previous loans. GSP worked with the Lender to waive these requirements and provide the same diligence as the loans from acquisition.

    Rate: 11 loans fixed at 3.61%
    Term: 10 years fixed
    Amortization: Full-Term Interest Only
    LTV: 55%
    DCR: 1.30x
    Prepayment Penalty: Stepdown
    Lender fee: 0%
    Guaranty: Non-Recourse

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

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

Subscribe Here