$3,350,000 Bridge Loan for Purchase of 13-Unit Multifamily Property; 70% LTC; LIBOR+3.65%; Los Angeles, CA

Rate: Floating at 1 Month LIBOR + 3.65%
Term: 2+1+1
Amortization: Interest Only
Fees: 1.0% in/0.5% out
Prepayment Penalty: None
LTC: 70%
LTV: 75%
DY: None
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners secured $3,350,000 in proceeds for the purchase of a 13-unit multifamily property located in an infill area of Los Angeles. The loan is structured as $1,963,000 at closing and $1,387,000 in holdbacks for capital expenditures and interest reserves. Six of the thirteen units were vacant at close. The fully funded loan represents 70% of the project capitalization.

The Sponsor requested a loan with both low pricing and non-recourse execution. Several challenges were encountered in meeting both goals. The small size of the loan ruled out almost all debt fund lenders, who typically seek financings larger than $10,000,000. While banks offered rates in the 5% range, they required the Sponsor to sign full recourse. Private money lenders quoted the deal with prohibitive interest rates above 8.0%.

The selected Capital Provider was the only one to provide non-recourse execution with a rate in the 5’s. The loan did not stipulate a required debt yield based on the stabilized cash flow. Additionally, the Lender released additional money at closing for expenses the Buyer incurred while in escrow. This amount totaled $260,000 in reimbursements for soft costs. The loan closed about 45 days from the signed application.

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    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

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    Acquisition Bridge Loan for an 11-Unit Multifamily Property; 72.5% Loan to Cost; Arlington Heights Area of Los Angeles, CA

    October 16, 2019

    Transaction Description:

    George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in the Arlington Heights Neighborhood of Los Angeles, California. The 11-unit, 1960’s vintage property had significant deferred maintenance and below market rents. The Sponsor’s business plan was to reposition the Property, buyout tenants and release the units at market rents. Sized to 72.5% of total project cost, the loan includes 100% of future funding for tenant buyouts, a full gut renovation of unit interiors and an exterior upgrade.

    The two-year bridge loan is interest only and floats at a rate of Prime plus 0.50% (5.75% today) with no floor rate, which is important in a declining interest rate environment. The loan carries no prepayment penalty, and interest is not charged on the holdback until funds are drawn. The lender fee was negotiated down to 0.5%.

    Rate: Prime + 0.5%
    Term: 2 Years
    Amortization: Interest Only
    LTC: 72.5%, including 100% of future funding
    Prepayment Penalty: None
    Recourse: Full Recourse
    Lender Fee: 0.5%

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