Rate: 3.25% Fixed
Term: Five Years
Amortization: Interest Only
Loan to Value: 55%
Debt Coverage Ratio: 1.35 assuming 30 Year Amortization
Origination Fee: Par
George Smith Partners originated a non-recourse cash-out refinance of a Southern California retail center co-anchored by a shuttered fitness center. This location was a top performer in the national chain prior to being mandated to close due to Covid restrictions. Although the fitness center is now opened and operating to partial capacity, the application and due diligence were completed while still dark, as was an adjacent restaurant. The application did not call for holdbacks or reserves for funding as most of the remaining collateral was operational and cash flowing. Sized to 55% of appraised pre-Covid value, the five-year, non-recourse loan was priced at 3.25% on an interest only basis. Debt Coverage Ratio was underwritten on actual collections rather than leased income. A small tenant improvement allowance was reserved at close to address future leasing activity. There is no TI/LC reserve taken from the monthly debt service.
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Cash-Out 2.94%, $12,025,000 Non-Recourse Permanent Refinance on a 100% Leased Discount-Grocer Anchored Shopping Center; Western States
August 4, 2021
George Smith Partners successfully placed $12,025,000 in non-recourse, cash-out permanent refinancing for a 101,096 square foot discount-grocer anchored retail shopping center in a transitory Pacific Southwest MSA. The tenant mix includes several national credit tenants along with local and regional stores, all of which remained in-place during COVID-19. GSP was able to identify a lender who understood the complexities of retail in a post COVID environment. The non-recourse permanent loan was sized to 65% of value, included 10-years of interest only payments at a fixed rate of 2.94% for 10 years. Lender fee is at par.
$11,200,000 Non-Recourse, Cash-Out Bridge Refinance for Two-Story Retail in Koreatown; Los Angeles, CA
January 27, 2021
George Smith Partners secured a $11,200,000 non-recourse bridge refinance with cash-out for a two-story retail plaza in the heart of Koreatown in Los Angeles, CA. Located next to a Metro D (Purple) Line subway station along a very busy stretch of Wilshire Boulevard, the Property is anchored by 7-Eleven and Carl’s Jr. and features a fast-casual food hall on the second floor. However, the food hall has been closed due to COVID.
The Sponsor, a prolific developer and property owner, recently announced plans to replace the plaza with a 17-story, mixed-use apartment tower that includes affordable units and some commercial space. GSP was engaged to source a bridge solution to pay off the existing maturing loan and provide prepayment flexibility once the Project’s entitlements and permits are secured.
GSP focused on the strength of the Sponsor, the bustling and densely populated Koreatown market, home to several large and small-scale projects currently planned or under construction and the Purple Line Extension project which will provide a dependable, high-speed alternative for travel between downtown Los Angeles, Miracle Mile, Beverly Hills and Westwood. The financing closed within 11 days of the term sheet being signed.
November 6, 2019
George Smith Partners secured $9,050,000 for the non-recourse, cash-out refinance of two unanchored, multi-tenant retail centers in Columbus, Ohio. The two properties were cross-collateralized allowing the Borrower to benefit from securing a higher leverage loan. The permanent loan is fixed at 4.25% for ten years with 12 months of interest only and a defeasance prepayment penalty structure.
One of the retail centers had a tenant whose parent company was in bankruptcy proceedings and vacated their space during our loan process. The other retail center, which is newly developed, was in the process of lease up and had a few tenants not yet in occupancy prior to loan closing. The market had very few comparables to support our underwritten value of the Subject Property.
GSP identified a capital source that understood the strength of the asset, location and the experience of the Sponsor. Based on these strengths and additional market support provided, the Lender was able to offer a cross-collateralized structure, which maximized proceeds at 73% LTV with 12 months of interest only payments. The Capital Provider was also able to fund the loan with a few tenants not in occupancy. This allowed the Sponsor to take advantage of today’s low interest rate environment and eliminate interest rate risk.
$11,650,000 (72% Loan-to-Value) Non-Recourse, Cash-Out Refinance of a Grocery Shadow-Anchored Salt Lake City Retail Center
January 15, 2019
GSP successfully sourced $11,650,000 of non-recourse, cash-out, permanent first mortgage debt sized to 72% loan-to-value to refinance out a maturing bridge loan on a 62,500 square foot, grocery shadow-anchored Salt Lake City multi-tenant retail property. The borrower recently completed its re-tenanting business plan that upgraded the tenant base and stabilized the 1960s vintage retail property at nearly 100% occupancy. Although many lenders are increasingly becoming more conservative regarding leverage and interest only terms on retail properties, GSP sourced a lender that relied on the borrower’s substantial real estate experience, strong submarket performance, and a diverse tenant mix to provide a full-leverage, non-recourse loan that repatriated substantial equity to the borrower and included three years of interest only payments followed by 30-year amortization.
August 29, 2018
George Smith Partners secured a $124,250,000 permanent loan to refinance out an existing construction loan on a 560,000 square foot, class-A, mixed-use office and retail property in a Midwest market. The non-recourse loan provided the borrower significant cash out at close in addition to funding 100% of future tenant improvement and leasing commission costs associated with stabilizing the property. It also repaid the existing construction loan and covered closing costs. The existing property is 93% leased, but only 80% occupied, to a mix of credit and non-credit tenants including a boutique cinema. The five-year, floating-rate loan priced at 2.35% over One-Month LIBOR and offered four years of interest only payments with 35-year amortization during the fifth year of the loan term. Other benefits of this loan structure include:
• flexible prepayment
• five-year initial term vs. typical 3+1+1 loan term structures that would have required specific performance hurdles and extension fees
• no forced funding date for the future funding component
• no syndication risk as the portfolio lender (a bank) is holding the entire loan on balance sheet
• generous interest rate hedging requirement of purchasing LIBOR caps for two-year terms to reduce hedging costs
Commercial Real Estate $2,925,000 Cash-Out Refinance for a Mixed Use Property in Palm Desert at 87% Loan to Cost
May 30, 2018
George Smith Partners arranged a $2,925,000 cash-out refinance loan for a 20,300 square foot mixed-use office over retail property in Palm Desert, California. The deal presented numerous challenges. First, the sponsor only owned the property for three months. Second, a lease was not available for the anchor restaurant space comprising two thirds of the property’s square footage. Third, the sponsor required extremely high leverage and conventional bank interest rates. Finally, the Sponsor needed to close the refinance transaction in 30 days due to a pending acquisition.
To overcome the challenges George Smith Partners sourced a bank lender with which it had a long history of closing aggressive conventional financing with low interest rates. The property’s attractive location in Palm Desert, between the well-known retail thorofare of El Paseo and Highway 111, was emphasized as well as the Sponsor’s successful track record of purchasing notes on distressed properties, foreclosing on those properties and repositioning them.
Sized to an aggressive 87% of purchase price, the loan included a 6-month interest reserve but did not require a holdback for TIs and LCs. The three year mini permanent loan is interest only for the first 12 months followed by 25 year amortization for the remaining two years. The loan floats at Prime plus 0.5% (5.25% today) with no prepayment penalty, and the lender fee was a minimal 0.5%. The loan closed in exactly 30 calendar days from application, which is an extremely fast closing timeframe for a conventional bank.
Rate: Prime + 0.5%
Term: 3 Years
Amortization: 12 Months Interest Only; 25 Year Amortization Thereafter
LTC / LTV: 87% / 65%
Recourse: Full Recourse
Prepayment Penalty: None
Lender Fee: 0.5%
- Advisors: Zachary Streit