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$35,000,000 High Leverage Construction Loan for 40 To-Be-Built Condominiums; Near Lake Tahoe

Term: 24 months plus one 1-year extension option
Loan To Cost: 80%
Prepayment Penalty: 12 months minimum interest

Transaction Description:

George Smith Partners successfully secured $35,064,000 (80% Loan to Cost) in non-recourse construction completion debt financing for a luxury condominium property near Lake Tahoe. The 40-unit project is located in a tertiary market near ski resorts and overlooks Lake Tahoe. The Sponsor acquired the land and existing, partially completed, four-story concrete and steel structure and underground parking garage at a deep discount as an REO from a bank in 2015. Engineering and architectural updates were completed prior to loan closing.

The for-sale, residential product in a tertiary market presented challenges to the capital markets. GSP was able to source a lender who was familiar with the market, comfortable with the basis, comfortable with the barriers to entry and strong market demand for the product.


Related Financings

  • $20,530,000 Non-Recourse Construction Financing for a 25-Unit Luxury Beachfront Condominium, For-Sale Development; Cocoa Beach, FL

    September 8, 2021

    Transaction Description:

    George Smith Partners successfully arranged $20,530,000 in non-recourse senior construction financing for The Surf, a beachfront condominium project in Cocoa Beach, FL. The Project consists of 25 luxury residential units with sale prices ranging from $975,000 to $2,500,000, as well as 3 ground floor retail units. The Project is currently 75% pre-sold. Per Florida statutes, any buyer deposit amount over 10% of the purchase price may be used towards development costs, but a large portion of those deposits are not due from buyers until building top off. GSP was able to successfully secure a lender comfortable with crediting future deposits to decrease the Sponsor’s up-front equity requirement.

    The Sponsor’s co-developer and GC tragically passed in early 2020, leading them to engage a new group. While the new GC had extensive experience in luxury housing development, they are relatively new to ground-up, multi-level condominium development. GSP leveraged its extensive lender network, strong pre-sales, and the Orlando-based Sponsor’s strong development track record in this submarket and product type to provide non-recourse construction financing.

    The term is 24 months with interest-only payments and 6 months minimum interest. The senior note was sized to 64% LTC. GSP structured the loan, crediting future sales deposits towards the total equity requirement, thereby eliminating any additional out-of-pocket equity required at closing above the land acquisition and predevelopment costs already spent to date.

    Rate: WSJ Prime +4.50%
    Term: 24 Months + Two 2-Month Extensions
    Amortization: Interest-Only
    Loan to Cost: 64%
    Prepayment: 6 Months Minimum Interest
    Guaranty: Non-Recourse
    Lender Fee: 1% In, 1% Out

  • $16,500,000 Senior Construction Financing, 79% LTC for 57-Unit Multifamily Development; Toluca Lake, CA

    March 3, 2021

    Transaction Description:

    George Smith Partners secured $16,500,000 of senior construction financing for the development of a 57-unit multifamily building in Toluca Lake, CA. The Sponsor purchased three contiguous lots with this development in mind. The combined land area of the lots allowed them to increase the density of the single-building Project.

    The uncertainty brought on by the pandemic had lenders heavily scrutinizing projected rental rates at completion. GSP secured a capital source that understood the long-term growth that the submarket should experience post-pandemic. The strong financial position of the Sponsor, along with the lengthy track record of the general contractor, helped to push the leverage up to 79% LTC. The financing allows the Sponsor to provide the area with quality rental housing, which is sorely needed in the undersupplied submarket.

    The recourse financing is priced at WSJ PRIME + 0.375% with a floor rate of 4.650%. The 18-month term is coupled with a 0.625% origination fee and is open to prepayment. There is also the ability to roll the construction loan into permanent financing at the option of the Sponsor. The rate cannot be locked until building stabilization but would be priced at 2.80% for a 5-year term at today’s rates.

    Rate: WSJ PRIME + 0.375% (4.650% Floor Rate)
    Term: 18 Months plus Two, 3-Month Extension Options
    Amortization: Interest Only
    LTC: 79%
    Prepayment: Open Prepayment
    Guaranty: Full Recourse
    Lender Fee: 0.625%

  • $40,000,000 Construction Completion Loan at 8.00% Fixed, Interest-Only on a 192-Unit Multifamily; Vancouver, WA

    January 27, 2021

    Transaction Description:

    George Smith Partners successfully arranged $40,000,000 in construction completion financing for a 192-unit multifamily community in Vancouver, WA less than 12 miles from downtown Portland, OR.
    The Property consists of three completed buildings that started leasing in late April of last year and were 15.9% leased at the underwritten rents upon closing. GSP was successful in quickly sourcing multiple term sheets and ultimately closed within weeks of going into application with the Lender. The rapid execution allowed the Sponsor to close on an approximately 90% of purchase price (80% of total cost) in a situation where no further extensions were available, and time was of the essence.

    The equity stack was highly structured with multiple tranches of GP and LP equity.

    Rate: 8.00% Fixed
    Term: 18 Months
    Amortization: Interest-Only
    LTC: 80%
    Guaranty: Non-Recourse

  • Construction Debt – 79% LTC – 81 Multifamily Units, Los Angeles, CA

    January 20, 2021

    Transaction Description:

    George Smith Partners secured senior construction financing for a new multifamily development in the Lincoln Heights neighborhood of Los Angeles, CA. The $10.5M loan will be utilized to complete the 81-unit project. The loan represents approximately 79% of the project cost and was structured with an 18-Month initial term and interest only payments for the duration. The Project will be comprised entirely of studio units configured at 540 square feet; each unit will include one bathroom, a full kitchen, modern appliances, and a washer and dryer. Amenities for the project include a roof top deck, barbeque area, gym & recreational room, bicycle storage, secured parking, and access to a swimming pool.

    GSP secured a Lender that understood the future path of development and was comfortable with the emerging market; the current neighborhood is primarily industrial with limited residential product in proximity. The Lender accepted the Sponsor’s imputed equity from entitling the site; this increased leverage to 79% of cost while keeping pricing at a level accretive to the overall yield. The loan was structured with a shorter initial term to minimize upfront points and interest reserves. GSP worked with the Lender to resolve several budget issues that arose during diligence due to the rising price of lumber and concrete; proceeds were successfully increased by $250,000 to ensure the Project would be fully capitalized without additional equity.

    Rate: 5.00%
    Term: 18-Months; Two 6-Month Extensions
    Amortization: Interest Only
    Max LTC: 79%
    Max “As-Complete” LTV: 60%
    Min Stabilized DSCR: 1.15x
    Loan Fee: 0.75%; 0.25% per each extension
    Guaranty: Recourse

  • $40,700,000 Non-Recourse Ground-Up Apartment Construction Financing to 85% LTC with a Blended Rate of 6.80%; San Diego, CA

    December 9, 2020

    Transaction Description:

    George Smith Partners successfully placed the $40,700,000 construction financing, which funded up to 85% loan to project costs for the construction of a 170-unit apartment community located in a southern San Diego submarket. The financing structure included a senior construction loan up to 55% loan to cost and a mezzanine tranche up to 85% of total project costs. The non-recourse mezzanine tranche is structured on an accrual basis, further reducing the total economic impact of the mezzanine financing on the project. The full capital stack is non-recourse. Additionally, the capital partners gave credit for a lift in land value above the actual cost due to the Sponsors prior entitlement work and achieving approvals. While navigating these unprecedent times in the capital markets brought upon us by the COVID-19 Pandemic, GSP utilized our extensive experience, long-standing lender relationships, and capital markets creativity to achieve the Sponsors goals in order to break ground and deliver a much-needed product type in the market.

    $29MM – Senior Construction Loan
    Rate: L + 4.50% (4.95% floor)
    Term: 36 months
    Guaranty: Non-recourse
    Fee: 1.00%

    $11.7MM – Mezzanine Loan
    Rate: 11.25%, fully accrued (this is huge in bringing down the effective cost of capital down)
    Term: 36-month (with 18 months min. interest)
    Fee: 1.00%

  • $9,400,000 Construction Financing for Luxury Apartment Development; Los Angeles, CA

    February 5, 2020

    Transaction Description:
    George Smith Partners successfully arranged $9,400,000 in non-recourse construction financing for the development of a 15-unit luxury apartment building in West Los Angeles. The Property will be comprised of a mix of 1-bedroom and 2-bedroom units and will include 28 parking spaces. The Class A asset sits in a prime location that adjoins some of Los Angeles most sought-after submarkets. Upon completion tenants will have world class views and easy access to major thoroughfares of the City.

    The Sponsor has owned the site for over twenty years and after relocating existing tenants to make way for the construction of the new luxury building, he raised an existing 16-unit apartment building. Despite the low land basis, at a total cost at over $1 million per door, it was difficult to find comparables to justify the completed value in support of the requested loan amount.

    GSP accessed its extensive lender network to identify a best-in-class construction lender to provide non-recourse construction financing for the Sponsor. GSP’s longstanding history with this lender allowed for a flexible and streamlined closing process that was favorable to the Sponsor’s project timeline. GSP was able to demonstrate to the Lender that as a family owned, multi-generational asset, the tight spread between development cost and value was a less important metric than for a merchant builder-built building, particularly with a significant equity investment.

    Rate: 1-Month LIBOR + 7.50%
    28 Months
    Interest Only
    Lender Fee: 1% in / 1% out