Rate: One-Month LIBOR + 2.40%
Loan to Cost: 100% of the projected CapEx/TI/LC costs to stabilization with no additional borrower equity required
Loan to Stable Value: 70%
Term: Three years plus two one-year extension options
Amortization: Two years interest only; 25-year amortization thereafter
Lender Fee: 0.625%
Prepayment: 1% of the outstanding loan balance months 1-12; Open thereafter
George Smith Partners secured $25,500,000 in bridge financing collateralized by a 72% occupied, multi-tenant, 55-acre industrial park in St. Louis, Missouri. Sized to 70% of as-stable value, proceeds from the interest-only bridge loan were used to refinance out two existing permanent loans, cover closing costs and fund 100% of future costs, including CapEx and leasing costs, associated with the final reposition of the 100-year-old industrial park. The borrower had previously upgraded a portion of the Property, including replacing obsolete structures with new tilt-up buildings, however wanted to also take advantage of recent lease expirations within the functionally obsolete suites. The financing secured by GSP will allow the Borrower to modernize and upgrade the structures in an effort to further improve the park and capitalize on St. Louis’s strong industrial market fundamentals, and the Borrower will benefit from the resulting higher rents and additional cash flow after debt service without having to invest additional equity.
The Property’s existing improvements vary with respect to age, functionality and uses, which made it difficult for the borrower to define a specific suite-by-suite future funding budget. In line with the flexibility required by Borrower’s business plan, the Lender allowed the future loan funds to be pooled in lieu of allocating the capital budget on a suite-by-suite basis since the re-tenanting costs will vary based on each future tenants’ specific use. The loan also provides flexibility with interest paid only on drawn funds plus a nominal 1% prepayment penalty during only the first 12 months of loan term allowing payoff at par thereafter.
Senior Vice President
Senior Vice President
Senior Vice President
Assistant Vice President
Multi-State Bridge Loans: $172,300,000 National Portfolio Non-Recourse Bridge Financing; 36 Properties in 17 States
November 6, 2014
Transaction Description: JJay Brooks successfully arranged $172,300,000 of bridge financing for a portfolio of 36 properties spanning 17 states (from Louisiana to Alaska) that had been mired in complex litigation for several years. Assets included regional malls, office buildings, industrial properties and mobile home parks located in secondary and tertiary markets. Although the initial debt was being serviced, the litigation resulted by a loan maturity default during the recession when the capital markets where devastated and the existing lender would not negotiate an extension. Settlement of the litigation required certainty of close with a “drop-dead date” that would have resulted in significant borrower losses had the financing not closed. The final debt structure involved two unrelated lenders with multiple layers of senior and mezzanine debt, structured over five loans. Prepayment and yield maintenance flexibility was a critical component of the structure that allows the borrower to extract properties from the financing in the coming years. Generally speaking, the loans were priced with either a floating (with an interest rate cap) or fixed interest rate with six months to 24-months of yield maintenance. Leverage varied depending on the stability of the asset and the term was structured to provide adequate time to liquidate several assets and identify permanent debt for others. Challenge: Numerous property specific complexities such as ground leases, environmental issues and major capital and tenant improvement projects required underwriting and loan structuring. The stigma associated with properties (and borrowers) involved with litigation associated with a default disqualifies many lenders from considering the financing described. The portfolio size, location and varied property types also create additional complexity and challenges. Certainty of close was mandatory. Solution: GSP identified the lending platforms and professionals that could underwrite, appropriately price and structure the cash flows. The solutions required to solve all the challenges are too long to list although the financing required the cooperation and collaboration of an incredibly talented group of professionals on both the lender side and the borrower side of the financing. All parties came together to solve problems and pull from a depth of knowledge. Rate: Various Non-recourse Advisor: JJay Brooks