- Hold Period: Three
Transaction Description: GSP arranged a new $3,200,000 equity infusion, enabling the Sponsor to execute a discounted note purchase (DPO) of his mixed use/office-retail property, plus an adjacent finished lot. The Clients’ loan was in maturity default and in-place cash flow did not support new debt. Depressed market rents made a bridge loan unlikely. GSP assisted with the discount negotiations and structuring of the new ownership, as well as identifying an equity investor willing to underwrite this size of a request in a secondary market. Because a potential major tenant (a trade school), required significant TIs, they only would execute their lease once an entity purchased the property with capacity to pay for improvements.
Challenge: The building was completed in late 2010 at a cost of $6,000,000, necessitating a bank discount in addition to fresh equity. Identifying an equity partner willing to invest less than the typical $5,000,000 allocation in a secondary market added to the complexity. The sponsor had no liquidity, requiring the partner to post 100% of the cash to purchase.
Solution: As this process had been on-going for some time, the Bank was realistic in their value expectations. There were few other bidders for the note purchase and our proposal provided them the highest net proceeds and higher certainty of close. GSP located a private equity fund that is not adverse to secondary California markets and focuses on smaller transactions. The equity fund accrued the sponsors management fees to address the liquidity issue and supplement their co-invest.
