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

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

Subscribe Here

$26,118,000 Mixed-Use Construction Loan Take-Out; Boise, ID

Rate: 4.63%
Term: Ten Year Fixed
Amortization: Full Term Interest Only
Prepayment: Yield Maintenance
Recourse: Carve-Outs Only

Transaction Description:

George Smith Partners placed a ten-year permanent loan for “The Fowler”; a recently constructed 159 unit mixed use multifamily development in Boise, ID. GSP placed the construction loan in Spring 2016 and the Borrower received its final Certificate of Occupancy in March 2018. The Property has become one of the most architecturally significant buildings constructed in downtown Boise. It includes live work units as well as 4,000 square foot of retail.

Our Sponsor obtained +95% physical occupancy in September and was looking to secure a perm loan before year end. Given the rapid lease-up and forecasted rate increases, GSP was commissioned to source the construction loan take-out that would allow for a partial return of equity upon stabilized occupancy but with limited stabilized operating history.

Boise was recently named the fastest growing city in the United States, and the capital markets embraced the Boise MSA’s market dynamics by offering multiple aggressive sizing and pricing structures. Our Sponsor selected an option that allows for a “second bite” for an additional recapitalization once cash flows are further documented and supported by stronger historical operating history. Priced at 153 basis points over the Ten-Year Treasury, the full-term interest only loan allows for future secondary financing.

Advisors

Related Financings

  • $15,500,000 Non-Recourse Bridge Financing for a Mid-Construction 3-Property Multifamily Portfolio; Los Angeles, CA

    December 16, 2020

    Transaction Description:

    George Smith Partners secured a $15,500,000 bridge loan for three newly constructed, pre-Certificate of Occupancy multifamily assets located in Los Angeles, CA. The non-recourse loan provided significant cash-out proceeds to the sponsor, refinanced outstanding construction debt and capitalized construction completion costs. The loan is sized at 70% LTC on a 4.90% fixed rate, non-recourse, 12-month term. The loan did not require an interest reserve or capitalized carrying costs.

    The loan is secured by three new construction multifamily assets in the Koreatown and Eagle Rock submarkets of Los Angeles, totaling 57 units, in various stages of completion. All will be complete by Q1 2021, with lease up occurring throughout the balance of 2021. Given COVID related delays and slower-than-anticipated leasing velocity, GSP was able to identify a lender comfortable with the high quality, new construction product, and the long-term stability of these submarkets. The loan closed three weeks from term sheet execution.

    Rate: 4.90% Fixed
    Term: 12 Month
    Amortization: Interest Only
    LTC: 70%
    Guaranty: Non-Recourse
    Lender Fees: 1.00%
    Prepayment: Open

  • $40,700,000 Non-Recourse Ground-Up Apartment Construction Financing to 85% LTC with a Blended Rate of 6.80%; San Diego, CA

    December 9, 2020

    Transaction Description:

    George Smith Partners successfully placed the $40,700,000 construction financing, which funded up to 85% loan to project costs for the construction of a 170-unit apartment community located in a southern San Diego submarket. The financing structure included a senior construction loan up to 55% loan to cost and a mezzanine tranche up to 85% of total project costs. The non-recourse mezzanine tranche is structured on an accrual basis, further reducing the total economic impact of the mezzanine financing on the project. The full capital stack is non-recourse. Additionally, the capital partners gave credit for a lift in land value above the actual cost due to the Sponsors prior entitlement work and achieving approvals. While navigating these unprecedent times in the capital markets brought upon us by the COVID-19 Pandemic, GSP utilized our extensive experience, long-standing lender relationships, and capital markets creativity to achieve the Sponsors goals in order to break ground and deliver a much-needed product type in the market.

    $29MM – Senior Construction Loan
    Rate: L + 4.50% (4.95% floor)
    Term: 36 months
    Guaranty: Non-recourse
    Fee: 1.00%

    $11.7MM – Mezzanine Loan
    Rate: 11.25%, fully accrued (this is huge in bringing down the effective cost of capital down)
    Term: 36-month (with 18 months min. interest)
    Fee: 1.00%

  • $19,100,000 Construction Financing to 92.5% LTC on a 111-Unit, Class-A Apartment Community; St. Louis City, Missouri

    April 8, 2020

    Transaction Description:

    George Smith Partners successfully placed $19,100,000 in construction financing, which funded 92.5% of the total project cost for the construction of a 111-unit second phase of a larger mixed-use multifamily and retail project located in the trendy St. Louis City neighborhood of The Grove. The financing structure included a senior loan to 85% LTC and a preferred equity investment with last-dollar exposure to 92.5% of total project cost. The preferred equity investment is non-recourse and the senior loan provides for only a 50% repayment guarantee that burns down to 25% upon certificate of occupancy. Additionally, the Lender and preferred equity investor gave credit for a lift in land value above the Borrower’s actual cost due to the Sponsor having owned the land since 2016 and it being the second phase of a larger project. GSP leveraged its expertise of the St. Louis market, long-standing lender relationships, and capital markets creativity to achieve the Sponsors goals of minimizing cash equity invested into the project due to how much value is being created in this phase of the project.

    Rate: Confidential
    Term: Twenty-four-month initial term with one, 12-month extension option
    Amortization: Interest only
    LTC: 92.5%
    Prepayment: Nine-months minimum interest
    Guaranty: 50% repayment guarantee that burns down to 25% repayment guarantee upon certificate of occupancy (on senior loan only; does not apply to the non-recourse preferred equity investment)

  • $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

  • $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.

    Problem:
    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.

    Solution:
    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%
    Term:
    28 Months
    Amortization:
    Interest Only
    LTC:
    56%
    Lender Fee: 1% in / 1% out
    Guaranty:
    Non-Recourse

  • $14,000,000 in JV Opportunity Zone Equity Financing and $23,000,000 in Non-Recourse Construction Financing for the Development of a 127 Unit Multifamily Property; Vancouver, WA

    September 25, 2019

    Transaction Description:

    George Smith Partners advised on $14,000,000 in Joint Venture QOZ (Qualified Opportunity Zone) Equity Financing and $23,000,000 in non-recourse senior construction financing for the ground-up development of a 127 unit multifamily property in Vancouver, Washington, a suburb of Portland, Oregon. The Property sits across the street from the Vancouver Waterfront, which is undergoing a $1.5B dollar public/private master plan redevelopment. The 6-story, 173,000 square foot property will feature a landscaped third floor courtyard, a community room, balconies, two levels of parking, bike storage and excellent views of the Columbia River and Mount Hood.

    Challenges:

    Due to of the Project’s location in a QOZ, the Sponsor sought a QOZ financing partner who had the ability to place capital for the required 10-year horizon as per the QOZ guidelines. Moreover, many capital sources also expressed reservations related to supply concerns in the greater Portland market.

    Solutions:

    GSP focused on the Vancouver submarket’s strengths, including very limited new supply in contrast to downtown Portland, no state income tax, the more relaxed lifestyle, the proximity to PDX airport, and the Project’s location in very close proximity to the waterfront. Additionally, GSP highlighted the Sponsor’s ability to execute by showcasing its recent Class A multifamily delivery in Vancouver that fielded a large number of offers and traded at a record low cap rate. Ultimately, an opportunity zone JV Equity financing partner was selected who recognized the strength of the location and Sponsor’s best-in-class development history. These attributes also resulted in GSP securing non-recourse construction financing at 60% loan to cost with an interest rate of 1 Month Libor + 3.65%.

    Rate: Floating at 1 Month LIBOR + 3.65%
    Term: 3 Years with Two (1) Year Extensions
    Construction Loan LTC: 60%
    Amortization: Interest Only
    Guaranty: Non Recourse