$25,000,000 Condo Construction Financing; Los Angeles, CA


Transaction Description:

George Smith Partners successfully arranged $25,000,000 in construction financing for a condominium project in an affluent area in Los Angeles County. The Project commenced construction in 2017, however due to construction delays and cost overruns, the Sponsor needed additional money to complete the Project. The existing Lender did not want to upsize their loan. GSP was able to identify two distinct lenders to structure a 1st and 2nd Trust Deed to complete and sell-out the building. The total loan was sized to 75% of the net sell-out value of the Property. The Sponsor has owned the Property for over 10 years so the majority of equity was imputed land equity allowing for loan proceeds of 100% of hard costs.


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    $9,400,000 Construction Financing for Luxury Apartment Development; Los Angeles, CA

    February 5, 2020

    Transaction Description:
    George Smith Partners successfully arranged $9,400,000 in non-recourse construction financing for the development of a 15-unit luxury apartment building in West Los Angeles. The Property will be comprised of a mix of 1-bedroom and 2-bedroom units and will include 28 parking spaces. The Class A asset sits in a prime location that adjoins some of Los Angeles most sought-after submarkets. Upon completion tenants will have world class views and easy access to major thoroughfares of the City.

    The Sponsor has owned the site for over twenty years and after relocating existing tenants to make way for the construction of the new luxury building, he raised an existing 16-unit apartment building. Despite the low land basis, at a total cost at over $1 million per door, it was difficult to find comparables to justify the completed value in support of the requested loan amount.

    GSP accessed its extensive lender network to identify a best-in-class construction lender to provide non-recourse construction financing for the Sponsor. GSP’s longstanding history with this lender allowed for a flexible and streamlined closing process that was favorable to the Sponsor’s project timeline. GSP was able to demonstrate to the Lender that as a family owned, multi-generational asset, the tight spread between development cost and value was a less important metric than for a merchant builder-built building, particularly with a significant equity investment.

    Rate: 1-Month LIBOR + 7.50%
    28 Months
    Interest Only
    Lender Fee: 1% in / 1% out

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    $3,150,000 Construction Loan in Los Angeles, Take-Out; 3.10% Fixed

    November 22, 2017

    George Smith Partners placed the construction loan take-out for a new 12-unit multifamily development in the Koreatown District of Los Angeles. At the time of funding, there was no operating history for the property as the Certificate of Occupancy had just been issued. Our Sponsor lacked 30 days of collections to prove out income. The permanent lender underwrote the rent roll in place in conjunction with proforma operating expenses to determine the underwritten Net Operating Income. Fixed for five years at 3.10%, the ten year term will float at LIBOR plus 275 years six through ten, amortized over 30 years. Sized to 65% of stabilized value and 80% of actual costs, prepayment steps down from 3% and is open after the third year.

    Rate: 3.10% Fixed for Five Years
    Term: 10 Years
    Amortization: 30 Years
    LTV: 65%
    Prepay: 3,2,1, open
    Loan Fee: 0.5%

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    $2,750,000 Non-Recourse Subdivision Construction Loan in Echo Park, Los Angeles, California

    October 22, 2014

    Transaction Description:  George Smith Partners successfully placed the financing to construct a seven-unit lot subdivision in Echo Park a Los Angeles suburb. The Sponsor purchased the land and began the entitlement process in March 2013. The project was designed as an alternative to older, more expensive detached single-family product common to this submarket. The non-recourse loan is funded to 85% of total project cost priced at Prime plus 2.5%, subject to a 6.5% floor. There is no profit participation at this leveraged level.
    Challenge: The Borrower was a first time builder who required non-recourse financing at a high advance rate. While the Echo Park stigma is rapidly diminishing, several capital providers do not yet consider this market as viable on a long-term basis.
    Solution: Mr. Lee recently financed several housing transactions in the immediate area. His recent tombstones and market information demonstrated real demand for additional affordable product so close to downtown Los Angeles. Although a non-recourse loan, GSP featured the financial strengths of the Borrower and his GC to offer assurances that the business plan would execute as prescribed.
    Rate: P+2.5% w/6.5% Floor
    Term: 18 Months
    Amort: Interest Only
    LTC: 85%
    Lender Fee: 1.5%
    Advisors: Jonathan Lee, Adam Candler



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    $11,800,000 Non-Recourse Construction Loan for a 63 Unit For-Sale Los Angeles Townhome Development

    June 6, 2013

    6 – 5 – 13
    Transaction Description:  GSP arranged the financing for the ground-up development of 63 “For-Sale” townhomes in the Silver Lake neighborhood of Los Angeles. The property was purchased all cash by a joint venture between an established local developer and an equity fund. The acquisition of the vacant property included full entitlements and a ready-to-pull grading permit. The construction drawings were finalized post-close. The non-recourse construction loan was sized to 50% of total project cost.
    Challenge: Neither of the joint venture partners were able to guarantee the construction loan or offer a “warm body” for the completion guarantee. The developer had yet to re-establish a building track record since the beginning of the recession in 2007.
    Solution: GSP identified a lender that understood the cache of Silver Lake and the demonstrated demand created by the local public schools and their impact on home prices. GSP negotiated a completion guaranty exclusively from the equity fund and limited the completion guarantee to the entity level. To mitigate cost over-run concerns, GSP had the Borrower establish a dedicated cash account with an initial funding of 8% of the loan amount. The funds are available for cost overruns and will be released at certificate of occupancy.
    Rate: 5.25%
    Term: 2 Years + a 6 Month Extension
    Amort: Interest Only
    LTC: 50%
    Brokers: Jonathan Lee, Shine Cheng

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