Rate: 4.78%
Term: 10 Years
LTV: 65%
Amortization: 10 Years Interest-Only
Guarantee: Non-Recourse
George Smith Partners arranged a $34,900,000 permanent loan to refinance a 60,834 square foot Class A office building in the heart of the Sunset and Vine office corridor in Hollywood, CA. The Sponsors acquired the property in 2016 with significant deferred maintenance. They completed an extensive facelift and interior renovation to convert it to Class A creative office space. The property is now 100% leased to a single-tenant who will take occupancy in 4Q 2018. GSP’s task was to create a competitive market place in an effort to arrange the lowest-priced and most flexible financing available. The chosen lender loved the opportunity so much, they circumvented the market by offering what many might have perceived as above market terms to capture the business. The loan structure includes 10 years of interest-only, no reserves during the entire loan term, and a fixed rate for 10 years at 4.78%.
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Related Financings
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$15,400,000 Non-Recourse Acquisition Financing for Office Tower; 3.68%; 70% LTV; 10 Year Interest Only; San Fernando Valley, CA
August 14, 2019
Transaction Description:
George Smith Partners secured $15,400,000 in non-recourse acquisition financing for an office tower located in the San Fernando Valley. The loan is fixed at 3.68% for 10 years with full term interest only payments. The proceeds represent 70% of the acquisition price.Challenges:
The Property has over 40 tenants and many leases will roll within the next 2-3 years. Shortly before the PSA was signed, a major tenant moved out resulting in vacancy of 10%. The Property receives income both from cell tower leases and excess parking capacity, but many lenders do not give credit for these types of revenue. The seller included both regular operating expenses and capital expenditures in the historical P&Ls.Solutions:
GSP demonstrated that the Property had historically high occupancy above 95% and provided data that demonstrated the strength of the local office market. This made the Lender comfortable with the short term leases and the temporary increase in vacancy. Additionally, while the loan was in application, the Sponsors signed a new lease to bring occupancy back up. The Lender did not require seasoning on this new lease. The Lender was able to include cell tower and parking income based on the historical P&Ls. Finally, GSP obtained the Seller’s general ledgers and was able to separate out major capital expenditures from the P&Ls. The Lender was ready to move quickly and close in about 30 days, but the Seller requested an extension and the loan closed about 50 days from application.Rate: Fixed at 3.68%
Term: 10 years
Amortization: Full Term Interest Only
LTV: 70%
DCR: 1.4
Guaranty: Non-Recourse: Fixed at 3.68%- Advisors: Matthew Kirisits
