$3,624,000 Multifamily Value-Add Recapitalization for 119 Units in San Antonio, TX

Rate: L+535
Term: 36 Months
LTV: 65%
Extension Options: Two 6-month options
Amortization: Interest Only for the initial term, then 20 year amortization during extensions, if exercised
Prepayment Penalty: None
Guaranty: Non-Recourse

Transaction Description:
George Smith Partners successfully arranged $3,624,000 to finance a value-add reposition of a 119-unit apartment in San Antonio, TX. The Lender funded $3,224,000 upon closing and held back $400,000 for capital expenditures to be invested over the next two years.

Challenge:
The Property had been purchased less than 1 year earlier with a 1-year seller note. There was substantial deferred maintenance that had not yet been completed, so the business plan was just starting. The client’s “go-to” lender was not interested in the financing due to the size and the still required “heavy lift”. Most lenders in this this size category require full recourse, which the Sponsor would not provide.

Solution:
George Smith Partners located a lender who the client didn’t previously know and who is accessed only thru a select group of mortgage brokers who looks for these types of transactions. The Lender agreed to provide an additional $400,000 for the renovations. Some negotiations were required to restructure the recourse provisions to springing recourse in the event of involuntary bankruptcy.

Advisors

Related Financings

  • Expand

    $8,745,000 Refinance for 61-Unit Apartment Complex in East Bay, CA

    May 15, 2019

    GSP arranged a refinance that allowed the Sponsor to take cash out and strategically position the Property for future upside. The Sponsor purchased the Property in 2011 with an existing regulatory agreement mandating 80% median rents. The agreement expires in 5 years and the 7 year loan term will allow time for stabilization. The subject Property consists of 12 one-story and two-story stucco over wood frame buildings. It features large 2, 3 and 4 bedroom 2-level townhome style units. The units attract families in a market with barriers to home affordability. Amenities include an outdoor playground and covered parking.

    Rate: 4.05%
    Term: 7 years
    Amortization: Full term interest only
    LTV: 55%
    Lender Fee: 0.50%
    Guaranty: Non-Recourse

  • Expand

    $6,500,000 Bridge Refinance of Vacant Apartment Building with No Cash-Flow in Los Angeles, CA

    May 1, 2019

    Transaction Description:

    GSP recently arranged a $6,500,000 bridge loan on a vacant 30-unit apartment community near the Los Angeles CBD. The Property had structural issues and was red tagged by the City. The owner took the 1913 building down to the studs and completely rebuilt the Property. In order to reduce cost and finalize construction, the ownership requested bridge financing.

    With no cash flow and no signed leases several lenders were concerned about repayment. Using GSP’s relationships and market expertise we were able to place a Libor floating rate bridge loan. This financing provided the Sponsor the ability to payoff of the current loan. In addition, there was enough capital left over for completion construction and an interest reserve for lease-up.

    This take-out financing replaced more expensive financing and provided the Sponsor with the capital needed to finalize the renovation and move to permanent financing. With no prepayment premium and no interest rate cap, it was a very affordable way to bridge between the loans.

    Rate: 5.05 % – 30 Day Libor+ 255bps – No Rate CAP Required
    Term:
    2 Years
    Prepayment Penalty:
    None
    Lender Origination Fee:
    1%

  • Expand

    $25,250,000 Cash-Out Refinance, Non-Recourse, Full Term Interest Only in Los Angeles, CA

    May 1, 2019

    Transaction Description:
    George Smith Partners secured $25,250,000 for the non-recourse cash-out refinance of a newly constructed, ultra-luxury 49-unit multifamily building located in Los Angeles (Brentwood). The Building is situated in one of the most sought after areas and is in close proximity to popular restaurants, bars and entertainment. The construction take-out permanent loan is fixed at 3.96% for ten years with full term interest only and has a yield maintenance prepayment penalty structure.

    Challenges:
    The Building was in the final lease up stage when the financing process started and final Certificate of Occupancy had not yet been delivered. The Building also contains four affordable units, which were the last units to be leased up, due to the City’s application certification process. Thus the owner did not have any seasoning on the newly leased units nor any historical operating expenses.

    Solution:
    GSP identified a capital source that understood the strength of the asset, location and the experience of the Sponsor (Developer). Based on these strengths, the Lender was able to underwrite to in-place income without seasoning and proforma operating expenses, which maximized loan proceeds. The Lender was able to fund once the Property was 95% leased and final Certificate of Occupancy issued. The Sponsor locked a full term interest only structure, which is advantageous to the Property’s cash flow as the new leases begin to season.

    Rate: 3.96% Fixed for 10 years
    Term: 10 years
    Amortization: Interest Only
    Prepayment Penalty: Yield Maintenance
    DCR: 1.55x
    Guaranty: Non-Recourse
    Origination Fees: Par

  • Expand

    $6,350,000 Cash Out Refinance of 28 Units in Los Angeles; Maximum Credit for Unit Renovations

    April 17, 2019

    Transaction Description:

    GSP secured $6,350,000 in proceeds for the refinance of two properties comprising 28 units in Los Angeles. Since acquisition, the Borrowers made significant upgrades to the Property, including renovating 12 units at a cost of nearly $30,000 per unit. These units were re-leased at market rate, resulting in a considerable increase in income. The selected Lender was able to give the Borrower maximum credit for the higher income without using a loan-to-cost constraint. Additionally, two of the renovated units were leased just a week before close. The Lender was able to use the additional income based on the signed leases, without requiring any seasoning. Fixed at 4.4% for 7 years, the loan provides three years of interest only payments before rolling into a 30 year amortization schedule. Proceeds were maximized by using a 1.15x Debt Coverage Ratio on the actual mortgage constant.

    Rate: 4.4% fixed for 7 years, then floating at 6M LIBOR + 2.25%
    Term: 30 years
    Amortization: 3 years Interest Only followed by 30 year amortization
    Prepayment Penalty: 3,2,1,0
    LTV: 65%
    DCR: 1.15x
    Guaranty: Non-Recourse

  • Expand

    $42,000,000 Construction Loan for a 252-Unit Mixed-Use Multifamily Project in Downtown Salt Lake City, Utah

    April 3, 2019

    Transaction Description:

    George Smith Partners arranged a $42,000,000 senior construction loan for the ground-up development of a 252-unit mixed-use luxury apartment community in the Marmalade District of Downtown Salt Lake City, Utah. The mixed-use project will include ground floor retail and features Class A apartments with modern design.

    GSP was able to identify several competitive lenders that recognized the Sponsor’s ability to execute large-scale multifamily projects, based on the successful delivery of a similar project they built in the MSA. GSP was able to leverage various lenders in order to help procure the most competitive terms available with a three-year term and two, one-year extension options.

    Terms: Confidential

  • Expand

    80% LTC Financing at 7.99% Fixed for the Reposition of a 100% Vacant Apartment Building in Los Angeles

    March 27, 2019

    Transaction Description:

    GSP arranged the non-recourse first mortgage from a regional balance sheet lender. Due to the Sponsors and Sellers requirement for a quick close, the Lender was able to close and fund the loan in under three weeks. The Property was acquired 100% vacant at loan closing. The loan is structured as an initial 80% advance based on the purchase price and past tenant buyouts, with a further 80% ($280,000) to be future funded for the reposition and lease-up of the Property. Interest is not paid on the future funding until drawn. Furthermore, there is no lockout period providing the Sponsor with unlimited flexibility to refinance or sell the Property without a burdensome prepayment penalty.

    Rate: 7.99%
    Term: 15 month initial term
    Amortization: Interest Only
    Max Loan to Cost: 80%
    Prepayment: None
    Lender Fee: 1.5%
    Exit Fee: 0.5%
    Guaranty: Non-Recourse

Don't Miss a Fact,
Sign Up for FINfacts!

FINfacts is a weekly newsletter highlighting recent financings and economic insights.

Subscribe Here