$31,600,000 Bridge Financing for the Refinance of a Retail Center; Central Florida

Transaction Description:

George Smith Partners secured $26,000,000 in proceeds for a bridge loan refinance of a 65-unit multifamily property located in Los Angeles, CA. The loan is floating at LIBOR + 5.45% with a 1.0% LIBOR floor. The Lender provided proceeds of 75% of appraised value, 100% of cost, and did not require any Debt Coverage Ratio test on underwritten cash flow.

The Property was newly constructed and began lease-up towards the end of last year. In early 2020, the COVID-19 pandemic began, and the State issued a safer-at-home directive. As a result, leasing halted for several months with the Property at 60% occupancy. Since the in-place loan was coming due, the Borrower required a bridge loan to provide additional time to reach stabilization.

When initially discussing the transaction with lenders in April, many capital providers were out of the market entirely. Those that quoted the deal provided proceeds of 65% LTV and interest rates around 8%, but these terms did not make economic sense for the Borrower. As the capital markets improved, GSP continued to discuss the transaction with lenders. In June, the selected lender entered the market with a new market-leading bridge loan program. The team quickly signed up the transaction and the loan closed in just 35 days.

Transaction Description:

George Smith Partners placed a $5,891,700 recourse loan for the refinance and recapitalization of an approved mixed-use conversion back to 100% multifamily use. The Sponsor acquired the mixed-use office and multifamily project in early 2019. They negotiated the early termination of several long-term office leases and obtained approvals to convert the entire Property back to multifamily. The Sponsor will add kitchens to the office units and converted a large multi-story penthouse unit with ocean views into smaller units increasing the unit count to 23. Soft demolition began in early 2020 with insufficient funds available in the existing acquisition/bridge loan to complete the revised business plan.

GSP placed the original acquisition/bridge loan. Even though the current loan went under application at the start of the COVID-19 pandemic, the only delay was as a result of the appraisal process. The value and the loan were not negatively impacted by the change in market conditions due to the COVID-19 pandemic. GSP identified a bank lender who underwrote to the new business plan and was able to provide capital at less than half of the previous loan cost while providing an additional 40% in proceeds. The bridge loan has an 18-month term at Prime + 0.75%, interest only, with the ability to convert to a 5-year term.