Term: Ten Year Fixed
Amortization: Full Term Interest Only
Prepayment: Yield Maintenance
Recourse: Carve-Outs Only
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.
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$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
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.
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.
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%.
$25,500,000 Bridge Loan for VACANT Newly Constructed 65 Unit Multifamily Property; 100% LTC; Fixed at 4.95%; Los Angeles, CA
September 11, 2019
George Smith Partners secured $25,500,000 in proceeds for the refinance of a construction loan on a newly constructed 65-unit multifamily property located in Los Angeles. The loan represents 100% of project capitalization and is fixed at 4.95%. The Property had recently received Certificate of Occupancy, but was still completely vacant at close. The bridge loan is intended to give the Sponsor time to lease up the property to stabilization. The fixed rate is unusual for a bridge loan; most capital providers offered floating rate financing and required the purchase of a cap.
Because the Property was still vacant, the Sponsor’s proforma rents were not yet proven out by signed leases. This was a challenge because the rents are several hundred dollars higher than those of typical multifamily properties in the submarket. GSP was able to overcome this challenge by pointing out that the brand new units at the Subject Property were considerably larger than those in the comp set. This provided support for the premium rents. Another hurdle was the 90% loan-to-cost constraint imposed by most capital providers. The selected lender allowed for 100% of cost, subject to a 7.0% debt yield on the stabilized cash flow.
Rate: Fixed at 4.95%
Term: 12 months with one 6 month extension option
Amortization: Interest Only
Prepayment Penalty: None (no required minimum interest)
Stabilized DY: 7.0%
Fees: 1% in/0% out
Guaranty: Non-Recourse: None (no required minimum interest)
September 3, 2019
George Smith Partners secured $42,700,000 in non-recourse construction financing for the development of a ten-building residential community in the Clackamas County submarket of Portland, OR. The nearly 13-acre site, which is a 20-minute drive from the city, offers an affordable alternative to Portland’s ever-increasing rental rates, as well as an exemption for inclusionary zoning, requiring no affordable units.
By leveraging the strength of the Sponsor’s local experience, coupled with the city’s need for housing alternatives to the urban infill product, GSP was able to find a non-recourse lender who was comfortable with the fact that the area had seen little development in recent years and offered no comparable product. The loan was priced at 30-Day LIBOR + 3.55% and was sized to 65% LTC, which is aggressive leverage considering the pricing and the non-recourse structure. As costs rose approaching the final budget, the Lender ratably increased the proceeds of their loan to minimize additional Sponsor dollars in, which ultimately showed a commitment to a long-term relationship; this was their second time working together, the first being another Portland development GSP sourced in 2017.
$6,500,000 7-Year Construction Loan 18-Unit Multifamily Project; 70% LTC; Prime + 0.75%; Culver City, CA
August 28, 2019
George Smith Partners secured a $6,500,000 construction loan for the development of an 18-Unit Class A apartment building located in the greater Culver City submarket of Los Angeles. The interest only loan is priced at Prime + 0.75% for the full 18-month term and includes a 6-month extension option. The proceeds represent 70% of the total project cost. The transaction also includes a 5-year mini perm option priced at the 5 Yr. Treasury + 2.15% with a 30-year amortization schedule, which can be exercised upon stabilization of the Project.
Although the Sponsor had previous experience as a general contractor this was his first endeavor as a developer and guarantor. His experience with this Class A asset type was limited and a significant portion of his net worth was tied to a startup technology company with limited operating history. The Sponsor also had a strict deadline he needed to adhere to as his construction permits were reaching their expiration date. Additionally, the construction costs and Sponsor cash equity fluctuated throughout the application process, which complicated the reconciliation of the closing statement and final loan amount.
GSP demonstrated that the Sponsor had chosen a capable general contractor to oversee the Project and helped structure a contract that gave the Lender confidence that the development would be completed. With respect to net worth, GSP procured ample evidence supporting the financial growth and stability of the startup. GSP prepared all required closing documents in a timely manner and provided a material portion of the due diligence prior to entering application in order to execute the transaction before the expiration of the Sponsor’s permits. GSP kept a diligent record of costs and equity invested to date. The Lender gave credit for this prior equity and reduced the Sponsor’s required down payment at close.
$67,250,000 of Non-Recourse High-Leverage Senior Construction Financing for the Ground Up Development of a 254-unit Multifamily Tower in Phoenix, AZ
July 17, 2019
George Smith Partners arranged $67,250,000 in non-recourse senior construction financing for the ground-up development of a market rate 254-unit, 17 story, multifamily tower in Phoenix, Arizona. The Property is in the Roosevelt arts district of downtown Phoenix near the Valley Metro Rail, Arizona State University graduate schools of journalism and law, as well as the University of Arizona Cancer Center. The Property will feature amenities such as a roof top pool overlooking the downtown skyline and beyond. Sized to 80% of total project cost, the interest only loan will strike a desired balance of debt to equity for the local developer. The Borrower was sensitive to standard bank underwriting decision making and asset management structures. GSP sourced non-recourse construction financing from a non-bank lender with a streamlined and flexible decision-making structure. The capital provider and their asset management team will act more like a partner than a lender from closing through development and payoff.
$42,000,000 Construction Loan for a 252-Unit Mixed-Use Multifamily Project in Downtown Salt Lake City, Utah
April 3, 2019
George Smith Partners arranged a $42,000,000 senior construction loan for the ground-up development of a 252-unit mixed-use luxury apartment community in the Marmalade District of Downtown Salt Lake City, Utah. The mixed-use project will include ground floor retail and features Class A apartments with modern design.
GSP was able to identify several competitive lenders that recognized the Sponsor’s ability to execute large-scale multifamily projects, based on the successful delivery of a similar project they built in the MSA. GSP was able to leverage various lenders in order to help procure the most competitive terms available with a three-year term and two, one-year extension options.