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

Transaction Description:

George Smith Partners sourced an acquisition loan for a newly constructed 10-unit multifamily property in Florida. The borrower closed on the vacant property just after Certificate of Occupancy was received. Although the loan went into application several months ago, the seller was delayed in obtaining the C of O. Despite fluctuations in the capital markets, the lender held the fixed rate of 10.25%. The loan has a 9-month term with one 3-month extension option. A small interest reserve was structured to cover the initial payments while the property leases up.

Transaction Description:  

George Smith Partners arranged 7 different loans over a 6-month period for a longtime sponsor. The Properties were acquired from multiple sellers. The loans are individual non-recourse loans (no cross-collateralization).

Transaction Description:

George Smith Partners secured an acquisition bridge loan for the acquisition of 10 acres in Laveen, AZ that will be developed with a Humphrey’s designed, 250-unit resort-style multifamily community. The $4,500,000 loan funded 100% of the purchase price plus an interest reserve. The site was put under contract in October 2020 “unentitled” but part of a 35-acre master plan community that includes a 16-bed hospital facility, Big O’ tires, and land for future senior housing development and restaurants. The 35-acre site has a “main and main” location in Laveen which has seen tremendous growth since the opening of Loop 202, a new freeway that connects Laveen and other South Phoenix communities with Interstate 10. The Sponsor fully entitled the site during escrow which included the annexation of 6 of the 10 acres from County to City property.

GSP also advised on the acquisition and procured over $2,000,000 of Co-GP equity to complete predevelopment of the site. GSP was able to find a non-recourse senior lender for the land acquisition that gave 100% value to approximately $2,500,000 of imputed equity. The Sponsor, a Phoenix-based development firm with over 60 years of development experience, will complete its value-engineering during the term of the land loan while GSP procures construction financing.

Transaction Description:

George Smith Partners successfully placed a $25,000,000 bridge loan for the acquisition and renovation of a 200-unit, 1970 vintage apartment community in Irving, Texas. GSP sourced a Lender that was able to maximize proceeds while providing future capital expenditure funding for the sponsor. The loan was sized to 74.1% of As-Is Value and includes future fundings for 100% of the capital improvements and unit renovations. The Sponsor plans on renovating approximately 75% of the units within the initial 3-year loan term.

The lender prices over 30-Day Average SOFR, as opposed to the more common 30-Day Term SOFR. The average SOFR is based on the preceding 30 days rather than the upcoming 30 days and is 60 bps lower in today’s rising rate environment.

Transaction Description:

George Smith Partners arranged $2,250,000 in permanent financing for the acquisition of a stabilized 12-unit multifamily property in Los Angeles, California. The Sponsor acquired the Property as interest rates were soaring and as the environment was changing drastically with the Fed raising rates. GSP identified a Capital Provider who allowed an early rate lock, required no holdbacks of any kind, no deposits to be held at their branch, and provided an extremely flexible prepayment penalty structure. This allows the Sponsor plenty of options during the next 5 years at an aggressive rate.

Transaction Description:

George Smith Partners secured $65,410,000 in proceeds for the acquisition of a 232-unit multifamily property in San Bernardino County. The bridge loan is structured as $63,020,000 at close and $2,390,000 in future funding. The fully-funded proceeds represent 75% LTC. The loan floats at a rate of 30-Day SOFR + 3.20% with a 0.35% floor on SOFR.

GSP discussed the transaction with over 40 different capital providers and received a wide range of feedback. Many lenders declined due to the Property being constructed in the 1970s. Other lenders provided quotes but were limited to a maximum of 70% LTC ($60,800,000). Several quotes had pricing of SOFR + 4.0%.

GSP was able to source a lender that provided 75% LTC with pricing of SOFR + 3.20%, which is well below market. The Lender underwrote to an exit debt yield of only 6.0%, resulting in maximum proceeds. There was no required interest reserve or any type of cash management during the initial loan term. The spread of 3.20% over SOFR was maintained despite many other lenders widening their spreads while the loan was in app. The loan closed with no changes to the original term sheet.

Another challenge facing floating rate bridge loans is the requirement to purchase a cap. Until several months ago, the cost of a cap was negligible. However, the expense has become exorbitant due to the current volatility in interest rates. GSP was able to lower the up-front cap cost by reducing the period of the cap from 3 years down to 2 and increasing the rate at which the cap is triggered (strike price).