Rate: 30-Day LIBOR + 3.80%
Term: Three years plus two 12-month extensions
Amortization: 36 months, Interest Only
Prepayment: 15-month lockout; open thereafter subject to 0.25% waivable exit fee
Lender Fee: 1.00%
GSP arranged the $26,400,000 first mortgage on two 1970’s vintage multifamily assets in Glendale, California. The national balance sheet lender provided a non-recourse loan at 70% of total project cost including 100% of future CapEx funds to complete an extensive interior and exterior renovation. Interest expense is not incurred on CapEx funds until drawn, and sponsor cash flow is maximized as the loan is interest only during the initial three-year term. The 30-Day LIBOR plus 3.80% coupon requires interest rate risk protection. In order to minimize associated sponsor cost the lender structured the interest rate cap with a two-year duration at closing plus an obligation to renew for the third year of the initial term. Due to low going in cash flow, the lender structured an interest reserve to cover debt service during the peak reposition period. The assets are cross-collateralized with the ability to release individual properties subject to debt yield and loan to value hurdles.
May 25, 2022
George Smith Partners secured permanent financing for a 15-unit multifamily property located in Houston, Texas. The financing is fixed at 3.54% for 5 years. The deal went into application right before the Federal Reserve increased rates and before we experienced a run-up in treasuries. GSP’s good standing with the Lender ensured the original terms were honored until closing, notwithstanding the loan extension that took place and the rapid increase in the interest rate environment. The financing does not require any deposit relationship with the bank or any funds to be held back for reserves. The Lender’s processing/application fee was $2,000 and they had no origination fee.
Rate: 3.54%, Fixed for 5 Years
Term: 30 Years
Amortization: 30 Years
Prepayment: 4, 3, 2, 1%
Depository Relationship: None Required
- Advisors: Reuven Risch
May 18, 2022
George Smith Partners secured an acquisition bridge loan for the repositioning of a Class-C apartment community in San Diego. The financing includes a holdback that will be used to renovate both the interior and exterior of the Property over a 12-month period including the addition of a single ADU (garage conversion).
Given the Sponsors’ track record and their successful ability to substantially increase rents in this niche market, GSP was able to secure a Lender that could close quickly (within 25 days), without an appraisal, and allow a $1,000,000 2nd TD up to 98% of the total cost of the Project to accommodate an additional private party investment in the Property.
Rate: 7% Fixed
Term: 18 months + 6-month extension
Min DSCR: 1.15:1.0
Origination Fee: 1.5%
- Advisors: Alina Mardesich
May 4, 2022
George Smith Partners arranged $3,600,000 in acquisition financing for a 16-unit multifamily property in West Hollywood, CA. The Property came with five vacant units that were previously leased at well below market rents. The Sponsor, a repeat client, planned to renovate the vacant unit interiors and increase rents accordingly. GSP leveraged its network of relationships to source short-term, non-recourse, fixed rate financing with interest only payments with an early rate lock. However, the delayed appraisal report uncovered two units that were not legally permitted, which the lender excluded in its underwriting. GSP worked with the Lender, Appraiser and Sponsor on creative solutions to get as close to the original loan terms as possible. These negotiations required several extensions on the closing. Also, the rate lock eventually expired. Ultimately, GSP was able to get a $3,600,000 loan amount thanks in part to additional analysis and data provided to the Lender. GSP also leveraged its relationship with the Lender to secure a 4.25% fixed rate. While this was higher than the original locked rate, it was well below the current market rate.
Highly Leveraged, Quick Close Acquisition of $2,335,000 for 10-Unit Multifamily Property; West Adams – Los Angeles, CA
March 30, 2022
The Sponsor approached George Smith Partners for highly leveraged (80% Loan-to-Purchase), quick purchase financing. GSP secured this financing which allowed the Sponsor to purchase the 10-unit multi-family property well below the market value. Although the Property is currently 100% occupied, rents were below market because the Seller self-managed and the Property needs exterior and interior improvements. GSP arranged a $2,335,000 in non-recourse financing for the acquisition. The loan was structured with a first trust deed from a debt fund as well as a preferred equity B piece. There’s additional flexibility for the Sponsor because there is no prepayment penalty. This loan structure allows the Sponsor to implement their business plan of renovating units, increasing rents, and refinancing into a permanent loan within a few months. The non-recourse facility was priced at an interest-only fixed rate with a blended rate of 8.05% with a 12-month term plus a 6-month extension. Thanks to GSP’s long-standing relationship with this debt fund and preferred equity investor, we were able to close this transaction in less than 10 days from signing the term sheet.
February 23, 2022
George Smith Partners sourced a $3,925,000 loan for the acquisition of a 21-unit property in West Los Angeles. The loan provided 65% leverage and is fixed at a rate of 3.15% for 3 years. The Lender gave the Borrower full credit for newly signed leases and was able to underwrite to the most recent month’s income. Net operating income was underwritten at the actual note rate, which resulted in higher proceeds compared to other lenders. The Property had some deferred maintenance, but the Lender was willing to have the borrowers complete it after closing. The 3-year declining prepay fit with the Borrower’s value-add business plan.
January 26, 2022
George Smith Partners secured a $3,060,000 loan for the acquisition of a 114-unit multifamily property located in Oklahoma City, OK. To meet the sellers 60-day closing requirement, GSP used its relationship with a lender we had closed multiple loans with. This lender recently closed a similar loan in this market which allowed them to feel comfortable with the market characteristics. Although the Property is currently over 90% leased, rents were below market because the Seller self-managed and the Property needs exterior and interior improvements. The Sponsor wanted to lock in a low rate to allow for more cash flow to be used towards their value-add strategy. This was cheaper and more efficient than a traditional bridge loan. During the close of this loan, GSP was simultaneously helping the Sponsor purchase the Property directly next door. The long-term business plan is to combine both properties to become one property within 2 years. The loan represents 70% of the purchase price and was structured as a fixed rate 5-year term, with the first-year interest-only. The interest-only period allows for more property cash flow to be used towards building improvements. Additional flexibility is also provided with a prepayment equal to 3-1-0-0-0. The prepayment flexibility will allow the Sponsor to cash-out refinance once they have implemented their value-add strategy.