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

Rate: 3.00%
Term: 12 Years
Amortization: 12 Years Interest Only
Min DSCR: 1.35x
Max LTV: 65%
Loan Fee: Par
Personal Guaranty: None
Prepayment: Yield Maintenance

Transaction Description:

George Smith Partners secured senior permanent financing for two stabilized multifamily properties in Los Angeles, CA. The two non-crossed loans totaling approximately $26,100,000 were utilized to refinance existing debt and return equity to the Sponsor. Each loan was collateralized by a stabilized multifamily property. The first asset was a 28-unit building that was 100% leased at closing and located in Culver City, CA while the second asset was a 46-unit building that was 97% leased at closing and located in Hollywood, CA. The loans were both structured with a twelve-year term and interest-only payments for the full duration.

GSP secured a lender that was able to refinance the Sponsor’s existing debt, cover prepayment penalties and return equity while simultaneously lowering the Sponsor’s debt service payments for the next twelve years. 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 both loans despite two COVID related delinquencies. Lastly, the Sponsor was completing a complicated partnership dissolution. GSP insured the Lender accommodated the Sponsor’s timeline with an accelerated no-cost rate-lock and an extended closing period.

Advisors

Related Financings

  • $3,825,000 Cash-Out Permanent Financing for 30-Unit, Multifamily Property; Los Angeles, CA

    February 17, 2021

    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.

    Rate: 3.15% (Fixed for 5 Years)
    Term: 30 Years
    LTV: 70%
    DCR: 1.20

  • $54,075,000 Perm at 3.01%, 15-Year Fixed with Cash Out, for a 173-Unit, Multifamily; Ventura, CA

    October 7, 2020

    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.

    Rate: 3.01% Fixed (T+ 2.49%)
    Term: 15 Years
    Amortization: 30 Years with 7 Years I/O
    LTV: 70%
    Guaranty: Non-Recourse

  • $16,300,000 Permanent Multifamily Financing, Seven Years IO, 65% LTV; Boise, ID

    May 27, 2020

    Transaction Description:

    George Smith Partners placed $16,300,000 in cash out refinancing for a recently stabilized for-rent SFR development. The financing includes seven years of interest only, which will maximize cash flow for an asset located in one of the fastest growing markets in the United States. The Project is a key asset for the Sponsorship group which operates over 2,500 units throughout the mountain states and securing a low rate, higher leverage, take-out loan was an essential part of the long-term strategy of the company. GSP utilized our relationships to close the transaction in three weeks from a signed application.

    During the COVID-19 era we have seen significant changes to underwriting standards in comparison to 2019. These new requirements presented an underwriting challenge for the recently stabilized project as collections were increasing throughout 2020. GSP was able to demonstrate the Sponsors overall portfolio performance and three months stabilized occupancy to achieve maximum proceeds.

    Rate: 3.20%
    Term: 10 Year
    Interest Only: 7 years
    Amortization: 30 years
    Guaranty: Non-Recourse

  • $12,933,000 Permanent Loan to Refinance Existing Construction Debt for a Recently Completed 21-Unit Multifamily Property; 65% LTV; 2.92% Fixed, 1.35 DSCR; Los Angeles, CA

    April 22, 2020

    Transaction Description:

    George Smith Partners secured $12,933,000 in proceeds for a recently stabilized 21-unit multifamily building located in the Pico Robertson neighborhood of Los Angeles, CA. The non-recourse, par, permanent Fannie Mae loan was utilized to refinance the existing bank construction debt in the amount of ~$9.45M and return equity to the ownership. The loan represented 88% of cost and carries a 10-year term with 10-years of interest only payments. The loan is secured by a Class A five-story mid-rise multifamily building comprised of four 2-bedroom units and seventeen 3-bedroom units. Amenities at the Subject Property include controlled access entry and parking, an elevator, rooftop deck, and private balconies. The loan was placed into application prior to major Covid-19 concerns thus no index floor was contemplated. GSP worked with the Lender to underwrite revenue to a trailing one month of actual collections carefully navigating the waiver process so as not to trigger new business which would have resulted in an index significantly wider than the actual 10-year Treasury rate. Lastly, a six-month reserve for principal, interest, taxes, insurance, and reserves was held back at closing in the event of a shortfall, enabling the Lender to fund during the global pandemic. The reserve will be released within one year if the Subject Property maintains the minimum 1.35x DSCR for the same period.

    Rate: 2.92% Fixed
    Term: 10 Years
    Amortization: 10 Years Interest Only
    LTV: 56%
    DSCR: 1.35x
    Recourse: Non-Recourse
    Prepayment: Yield Maintenance
    Loan Fee: Par