$3,155,000 Acquisition and Reposition Financing on 32-Unit Multifamily Property; Salt Lake City, UT

Rate: 4.50%
Term: Seven years fixed (Two years interest only stabilization period converting to five year perm. loan)
Amortization: 24 months interest only, converting to 25 year amortization schedule Max Loan to Purchase Price: 88%
Guaranty: Recourse with burn down at stabilization metrics Lender Fee: 1.00%

Transaction Description:

George Smith Partners arranged the $3,155,000 first mortgage on a 1970’s vintage, 32-unit multifamily light value add property. The national bank lender provided financing at 88% loan to purchase price and 70% loan to stabilized value. The seven year facility was structured as a fixed rate facility with a going in 1.00x DSCR. The loan was structured with two-year’s interest only for the stabilization period then converting to a five year permanent loan. The structure of the loan provided the sponsorship the ability to execute the stabilization of the property while maximizing proceeds and utilizing a fixed rate loan in order to mitigate their interest rate exposure.

Advisors

Related Financings

  • Expand

    $4,300,000 Acquisition/Bridge Loan for 18-Unit, Multifamily Property; Long Beach, CA

    August 5, 2020

    Transaction Description:

    George Smith Partners arranged $4,300,000 in acquisition bridge financing for the purchase and reposition of an 18-unit multifamily property located in Long Beach, CA. The Sponsor put the Property under contract during the COVID-19 pandemic. The Property has several vacant units which represents an opportunity for the Sponsor to immediately add value and commence their value-add business plan.

    The loan includes future funding for an extensive renovation of unit interiors and an exterior upgrade. The three-year bridge loan is interest only for the first 18 months and carries a floating rate of Prime + 0.50% with a 4.00% floor. Interest is not charged on the holdback until funds are drawn. The lender fee was limited to a 0.50% origination fee with no exit fee. The loan structure has no prepayment penalty, providing the Sponsor with ultimate flexibility.

    Rate: Prime + .50% with 4.00% Floor
    Term: 3 Years
    Amortization: 18 Months Interest Only
    Loan-to-Cost: 73%
    Prepayment: Open Prepay
    Loan Fee: 0.5% in / No exit fee

  • Expand

    $1,690,000 Freddie Mac Multifamily loan; Killeen, TX

    May 20, 2020

    Transaction Description:
    George Smith Partners secured $1,690,000 in Freddie Mac permanent financing for the acquisition of a stabilized 72-unit multifamily property located in Killeen, Texas. The Property is located four miles southeast of Fort Hood, the largest active-duty armored post in the U.S. military, occupying more than 218,000 acres of land in Bell and Coryell Counties.

    Challenges:
    As GSP went into application, the world was entering into the COVID-19 pandemic. Most lenders had either stopped lending or become much more cautious. Most agency lenders require Borrowers to have a track record with multiple projects before they will be considered for a Freddie Mac or Fannie Mae loan. In this case, the Sponosr was a first-time agency borrower. To make it even more challenging, the Property was in a small market with a high concentration of military personnel and the Sponsor required the ability to have prepayment flexibility.

    Solution:
    GSP used its relationship with a capital provider who closed multiple loans with our firm. GSP recently closed a loan in a similar small market and we were confident that they would understand the demographics and market characteristics. For this type of financing, the Lender’s typical structure is to offer a 10-year term with Yield Maintenance. Thanks to GSP’s long-standing relationship with this Lender, we were able to secure an attractive rate, high leverage, and a step-down prepayment of 3,1,0,0,0 on a 5-year term. The new capital allows the Sponsor to expand their Texas Multi-Family portfolio.

    Rate: 4.59%
    Term: 5 Years
    Amortization: 30 Years
    Prepayment: 3%, 1%, 0%

  • Expand

    $5,575,000 Acquisition Loan for 38-Unit Los Angeles Multifamily Property; Los Angeles, CA

    May 6, 2020

    Transaction Description:

    George Smith Partners placed a $5,575,000 acquisition loan for the purchase of a 38-unit multifamily unit located in the Los Angeles MSA. The loan has a rate of 3.6% for a 7-year term and includes three years of Interest Only payments. The term sheet was signed shortly before the COVID-19 crisis and ensuing economic volatility. Despite these conditions, the original rate and leverage was kept intact.

    The Property has several vacant units which represented an opportunity for our Sponsor to add value. The Capital Provider was able to underwrite the income on these units to post-renovation market rents. Market comparable data was used to support the buyer’s conservative rent assumptions. Additionally, the Capital Provider used a market vacancy factor and proposed to withhold 12 months of Principal and Interest reserves at loan closing. GSP pointed out that the loan had IO payments during the first 3 years. After discussion, the reserve was changed to 12 months of interest payments only. The loan closed in less than 60 days.

    Rate: 3.60% Fixed
    Term: 7 Years
    Amortization: 3 Years Interest Only
    Loan-to-Value: 60%
    DSCR: 1.20x
    Prepayment: 3,2,1
    Loan Fee: Par

  • Expand

    $4,650,000 Multifamily Acquisition Financing, 5-Day Close,82% LTV; Los Angeles, CA

    February 19, 2020

    Transaction Description:

    George Smith Partners secured $4,650,000 in financing for the acquisition of a 28-unit multifamily property in the Highland Park area of Los Angeles. The transaction closed in just five days. The new debt on the Property is interest only and does not include prepayment penalties.

    GSP was able to secure a high leverage, value-add multifamily acquisition program for our client. He now has the ability to purchase properties at a discount due to the quick close and small equity requirement. The Sponsor has the opportunity to quickly resell the Property or refinance with a rate of sub-3.75%.

    The Sponsor has been able to achieve investment IRRs in excess of 200% by quickly renovating the Property and selling to long-term investors due to the high leverage and short closing.

    Blended Rate: 8.69% Fixed
    Term: 12 Months
    Amortization: Interest Only
    Loan-to-Value: 80%
    Prepayment: None

  • Expand

    $10,900,000 Cash-Out, Acquisition, Reposition on a 50-Unit Multifamily Property; Los Angeles, CA

    February 12, 2020

    Transaction Description:

    George Smith Partners placed a $10,900,000 non-recourse loan for the refinance of an underperforming stabilized 50-unit multifamily community in Los Angeles. The Sponsor recently acquired the asset at approximately 50% below market from an affiliate party and GSP was able to facilitate approximately $3,000,000in cash out proceeds at closing. A portion of the loan proceeds will be used to renovate units as they become vacant in order to achieve current market rents. GSP identified a non-institutional lender who was comfortable with the cash out proceeds and who understood the history and dynamics of this non-arms-length acquisition. The non-recourse loan is fixed for 1.5 years with a 7.99% interest rate and 4.99% pay rate.

    Rate: 7.99% with 4.99% pay rate
    Term: 18 months
    LTV: 70%
    Recourse: Carve-Outs Only
    Fees: 1.0%
    Prepayment: None; no exit fee

  • Expand

    $10,500,000 Acquisition Bridge Loan For 71-Unit, Multifamily Property; Floating at LIBOR + 2.75%; Seattle, WA

    January 21, 2020

    Transaction Description:

    George Smith Partners secured a $10,500,000 acquisition bridge loan for a 71-unit multifamily property in the greater Seattle area. The loan provides 75% LTC and floats at a rate of LIBOR + 2.75% for a 3-year term. Proceeds are structured as $8,462,000 in initial funding plus holdbacks for interest reserve and capital expenditures.

    When speaking with capital providers, GSP encountered several challenges. The Property is in a submarket about 10 miles south of Downtown Seattle that has yet to experience significant redevelopment. The Seller made limited investments in the Property upkeep in recent years resulting in a significant amount of deferred maintenance. Because of this, the Property showed poorly on-site tours with prospective lenders.

    The selected lender was comfortable with the strength of the Sponsorship and was able to provide 75% LTC at a competitive interest rate. Although LIBOR was about 1.75% on the day of close, GSP negotiated a LIBOR floor of 1.25%. This could be very advantageous for the borrower since the forward LIBOR curve is downward sloping. In order to prove out the proforma market rents, GSP provided examples of several other properties the Sponsor had successfully completed in the area. The Sponsor also provided a very detailed exterior renovation budget that will enhance the appearance and amenities of the Property. The Lender also had true springing cash management. This means that the Borrower did not have to open an account at close and retains full control over the cash flow. The Lender allowed pre-negotiated loan docs that the Borrower had used for a similar transaction. The loan closed in about 45 days even with the end of year holidays.

    Rate: Floating at LIBOR + 2.75%
    LIBOR Floor: 1.25%
    Term: 3+1+1
    Amortization: Interest Only
    Debt Yield In/Out: 5.5%/7.5%
    LTC: 75%
    Fee In/Out: 1%/0%
    Cash Management: Springing
    Guaranty: Non-Recourse

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

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

Subscribe Here