$26,141,000 Permanent Debt – 12-Years Interest Only – Stabilized Multifamily; Los Angeles, CA

Transaction Description:

George Smith Partners secured $17,820,000 of permanent financing for the refinance of a 164-unit multifamily complex located in Mesa, AZ. The Property, which was originally built in 1979, recently completed a renovation project that included updating unit interiors and exterior amenities. The unit mix is comprised of 1-bedrooms (49%) and 2-bedrooms (51%). Amenities include a pool, an open pet area, and an on-site laundry facility. GSP was able to a secure a 7-year fixed rate of 3.30%. The financing is interest-only for the entire term and non-recourse to the Sponsor. Refinancing provided the Sponsor with a much lower rate and a significant return of equity. The loan is sized to 60% LTV and a 1.35x DCR.

Transaction Description:

George Smith Partners arranged cash-out permanent financing (65% LTV) for the refinance of a 4-unit multifamily property located in West Hollywood, CA. The Sponsor had purchased and renovated the Property all cash. Building improvements included complete gutting of the units and exterior renovations. The recent improvements allowed the Sponsor to quickly lease-up the Property at market rents, thus increasing the value of the Property. Because the Sponsor had purchased the building and paid for most of the capital expenditures more than 12 months prior to the loan request, this was considered a 100% cash-out financing. This combined with the low unit count made securing a conventional lender challenging. GSP was able to leverage its resources and provided the Sponsor with a 5-year term at a low rate of 3.50%. GSP was able to structure the loan with 12 months of interest only payments, before converting to 30-year amortization thereafter. The prepayment structure is 5-4-3-2-1, giving the Sponsor additional flexibility in the coming years. The Sponsor had a short closing timeline to pull his equity out of this deal to purchase another property already in escrow. GSP worked closely with the Lender and closed the transaction in just 35 days. The Sponsor is using the cash-out proceeds to continue their business plan of purchasing and renovating additional properties.

Transaction Description:

George Smith Partners successfully placed $14,250,000 ($229,839/unit) in a cash-out, uncrossed (two loans) refinance of two multifamily properties totaling 62 units in Los Angeles, during the COVID-19 pandemic. The loan is fixed at rate of 3.350% for the first 7 years, then converts to a floating rate. Despite the economic uncertainty during the transaction, GSP leveraged the firm’s collective production and relationship with the Lender to close the loans with loan terms as originally structured. GSP worked the lender to diligently ensure a quick closing and to maximize proceeds while addressing COVID related concerns. Both properties had undergone extensive renovations and upgrades since the acquisition in 2018 and have maintained over 95% occupancy throughout 2020 despite the pandemic.

Transaction Description:

George Smith Partners secured senior permanent financing for a stabilized multifamily property in Los Angeles, CA. The non-recourse debt totaling $12,300,000 was utilized to refinance existing debt and return equity to the Ownership. The loan was structured with a 10-year term and interest only payments for the full duration. The loan was collateralized by a Class-A 34-Unit multifamily building, the Subject was 94% leased at closing and located in a highly desirable West Los Angeles neighborhood.

GSP selected a lender that was able to refinance the Sponsor’s existing debt, cover prepayment penalties and return a significant amount of equity to the Borrower, while simultaneously locking in interest only payments for the next ten years at a very desirable rate. GSP worked with the Lender to minimize debt service reserves while addressing Lender concerns for potential COVID related shortfalls; cash-out proceeds were secured on the loan despite several COVID related delinquencies.

Transaction Description:

George Smith Partners arranged $3,825,000 in cash-out permanent financing (70% LTV) for the refinance of a 30-unit multifamily property located in Los Angeles, CA. The Sponsor used GSP with intentions of taking out their existing expensive lender. The Sponsor recently completed exterior and interior renovations including common area upgrades. The recent improvements allowed the Sponsor to increase rents thus increasing the value of the Property. GSP was able to provide the Sponsor with a 30-year term with the first 5 years being fixed at a very low rate. The rate will then reset every 5 years for the remainder of the term. Rather than most loans having a balloon payment in 5,7 or 10 years, this loan structure allows for flexibility because the loan matures in 30 years. The flexible prepayment structure is equal to 1.75% for the first 3 years, 1% for years 4 and 5, and 0% thereafter. The loan structure allows the Sponsor to refinance out of an expensive loan with a fixed rate of 3.15%, while also receiving cash out. The Sponsor is using cash-out proceeds to continue their business plan of purchasing and renovating additional properties.

Transaction Description:
George Smith Partners has secured $54,075,000 in permanent financing for a newly completed and leased, 173-unit, luxury resort-style multifamily community in the city of Ventura, CA. The loan is fixed for 15 years at 3.01% with interest-only payments for the first 7 years and with cash out above the construction loan.

Challenges:
When GSP was initially engaged in January the Project’s final phase had yet to receive its certificate of occupancy. While overall leasing had been strong, its current occupancy was about 60%. The state-mandated COVID-19 stay-at-home orders slowed new leasing activity throughout the Spring. When initially taking the financing proposal to market, GSP faced both the occupancy issue as well as a new-found, COVID-19, lender conservatism which negatively impacted the potential loan terms.

Solution:
GSP continued to work throughout the Summer to make lenders comfortable with the resiliency of the Ventura market, the Property’s quality, as well as the Sponsor’s strength and long-term experience in the market. By late Spring the leasing program regained its pre-Coronavirus lockdown pace. With improving capital markets, GSP was able to narrow the field to the one lender that would provide the optimal combination of loan proceeds, term and rate. Upon reaching 85% leasing the Sponsor executed an early rate lock to hedge against potential swings in the Treasury prior to close. This occurred upon reaching 95% occupancy.