$3,400,000 Flex Office Refinance with100% Roll; Santa Barbara, CA

Transaction Description:

George Smith Partners arranged $6,650,000 in owner-user financing for a multi-tenant, 50% owner-user office property located in Beverly Hills, CA. The Sponsor approached GSP to help assist with taking equity out of the Property to reinvest in their company. The Sponsor requested a low interest rate and $2,500,000 cash out. The multi-tenant component, along with a decreased appetite for office lending due to “Work-from-Home”, made it difficult for capital sources to get comfortable with the cash-out and interest-only request. GSP had to identify a capital source that could provide competitive terms, and a certainty of execution. Being in the market daily, GSP was able to successfully structure a first trust deed from a conventional lender and provided the Sponsor with a below-market interest rate of 3.15% fixed, and interest-only payments for the first 5 years of the 10-year term. Thanks to the low-rate and interest-only component, the Sponsor was able lower their debt service from their previous loan, while simultaneously securing over $2.,500,000 in cash-out.

Transaction Description:

George Smith Partners placed the cash-in refinance of a net-leased single tenant office building located in a secondary Milwaukee metro-market. Although currently leased to one user, the asset is easily divisible should the tenant choose to exercise their early termination clause in 18 months. Our Portfolio Capital Provider mitigated this event risk in two ways. First, by underwriting the need of the current tenant to operate from this specific single tenant building and second, our Sponsors’ 15% additional capital contribution at close. A personal repayment guarantee was used in place of all escrows, reserves, cash flow sweeps and hold-backs. The tenant continued to operate from this location in a reduced capacity throughout Covid. The 10-year term is fixed at 3.625% and amortizes over 25 years. The net-lease was underwritten to preclude any tax or insurance impounds while this tenant is in occupancy.

Transaction Description:

George Smith Partners successfully arranged $1,500,000 of rate and term refinancing for a multi-tenant office building in Santa Monica, CA. The Property was constructed in 1975, and it has been recently renovated with 6,256 sf net rentable area. The Property is conveniently located near Santa Monica College, Downtown Santa Monica, and it is less than two miles away from Santa Monica State Beach. Santa Monica has been and still is one of the most highly sought-after office locations in the Los Angeles area by tenants and investors. The submarket has very significant supply constraints, though rental rates are lagging the metro average. The purpose of the refinance is to pay off the existing debt and take advantage of the low interest rate environment.

The Sponsor is self-managing the Property. They renovated the units recently and brought the rents up to market rate. The Building was 100% occupied by local and non-credit tenants at closing. All of the leases will roll within the first three years of the loan term.

GSP sourced a lender who is willing to offer a 7-year permanent loan term, without holding back Tenant Improvement and Leasing Commissions reserves. The loan is sized to 31%LTV, it has a fixed coupon of 3.46% with a 25-year amortization schedule.

Transaction Description:
George Smith Partners arranged perm financing for the refinance of a 14-unit office building in North Hollywood, California. The Sponsor was operating his business in the largest unit on the ground floor and was looking for maximum cash out while locking in a new fixed rate before the Fed increased rates. GSP worked closely with a lender who would utilize market rent on the owner user portion in order to increase the debt service coverage ratio and maximize loan proceeds. Despite the fact that the Sponsor didn’t have a lease on himself, GSP and the Lender worked hand in hand to ensure that market rent would be factored into the Lender’s underwriting on the Subject Property.

Challenge:
Most lenders would not utilize market rent for the owner used portion and wanted to internally underwrite the loan to 13 units. This would cut loan proceeds by $320,000 because the owner’s unit made up 18% of the Property’s income. Additionally, the appraisal came back with a remaining economic life of 20-years. As a result, the Lender adjusted their amortization to 20-years matching the remaining economic life of the Subject Property.

Solution:
George Smith Partners worked closely with the Lender to guarantee they used market rent in their underwriting to ensure the cash out proceeds would be met. When the remaining economic life came back at 20-years, GSP provided historical documents and property data to the Lender and the Appraiser illustrating how the remaining economic life of 20-years was incorrect. GSP leveraged their long standing lender relationship and worked carefully with the appraiser to get the amended economic life up to 30-years. , This allowed the Lender to adjust their amortization back to 30-years as well.