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$38,600,000 Limited Recourse, Cash Neutral Mid-Construction Financing for a 122-Unit Multifamily; Santa Rosa Beach, FL

Term: 12-month term with 6-month extension option, extension fee @ 1.25%
LTC: 85%
Fee: 2 points in – 0 points out

Transaction Description:

George Smith Partners successfully arranged a $38,600,000 mid-construction refinance loan for a multifamily project in Santa Rosa Beach, Florida. The limited-recourse loan refinanced out the existing debt and provided additional proceeds to complete the development and flexibility to explore a condo sell out. The 122-unit Project will include state-of-the-art facilities, including a general store, a fully equipped restaurant, fitness center for guests, and a workspace. The Project is expected to receive certificate of occupancy by September 2021.
GSP was retained when the Project was 70% complete with an expected certificate of occupancy by September 2021. Since the Project began in 2019, nearly all the land in the area had been purchased by developers at a higher basis and condos began to sell at higher than $500/psf. The Sponsors seized the opportunity to add additional equity, bringing the Project to condo-specifications and the ability to sell out at a higher valuation. GSP canvassed a broad range of lenders with long-standing relationships and fielded multiple proposals. GSP worked with the Sponsor to find a lender that reached a higher proceeds level and provided the flexibility to lease up the Property as multifamily, sell units as condos or a mix of the two.


Related Financings

  • $58,000,000 Life Co. & Preferred Equity Non-Recourse Construction Financing; Culver City Adjacent, CA

    April 28, 2021

    Transaction Description:

    George Smith Partners successfully closed $58,000,000 in non-recourse construction financing for a seven-story, mixed use development across from Sony Pictures Studios and adjacent to Culver City, CA. The Project features 139 apartment units over 1,969 SF of ground floor retail. The Sponsor received a density bonus thanks to TOC incentives, in exchange for allocating 14 affordable units.

    While this is the second U.S. project – the first was also financed by GSP – for a successful international developer, the pool of capital providers was significantly reduced due to the borrowing entity being headquartered in a foreign country. Presenting this deal during the height of the COVID-19 pandemic also presented significant challenges. GSP leveraged its structured financing expertise, lender relationships, strength of the Project and the Culver City market to negotiate the most desirable terms for the Sponsor.

    The financings are comprised of $42,000,000 in senior construction debt from a Life Co. lender and $16,000,000 in preferred equity and includes a substantial amount in recap funds to the Sponsor at closing. The term is five years, with interest only payments and no prepayment penalty upon Certificate of Occupancy. The senior note is LIBOR + 390 and the preferred equity investment’s interest will be fully accrued during the entire term, thereby reducing the amount of interest reserve and the Sponsor’s initial cash equity contribution.

    Rate: L + 390 (senior)
    Term: 5 Years
    Amortization: Interest Only
    Prepayment: None upon Certificate of Occupancy
    Guaranty: Non-Recourse; Completion Guarantee with Standard Carveouts to an Entity

  • $7,685,000 Senior Construction Financing for a Mid-Developed Construction Building; Los Angeles, CA

    March 31, 2021

    Transaction Description:

    George Smith Partners secured a $7,685,000 construction loan for the completion of a development project in Los Angeles, California. The construction project was being fully paid out of pocket and had just finished two levels of subterranean parking. At this point of completion, the Sponsors decided to finance the remaining project costs instead of coming out of pocket the rest of the way. Many lenders didn’t want to finance the Project due to the mid-construction risk and those that did wanted some sort of banking relationship/deposit to come with the Project. GSP secured a capital source that was comfortable with the mid-construction project and didn’t require the Sponsors to bring in any fresh equity nor did they require any banking deposits.

    Rate: 5.50%
    Term: 24 months + two 6-month options to extend
    Amortization: Interest Only
    LTC: 55%
    Guaranty: Full recourse

  • 97% Financing; $39,650,000 Construction Debt and $18,750,000 Equity for 153-Unit Multifamily Opportunity Zone Development; Downtown Sacramento

    March 24, 2021

    Transaction Description:

    George Smith Partners successfully placed $39,650,000 in construction debt and $18,750,000 in limited partner equity for the ground up construction of an Opportunity Zone multifamily development with ground floor retail in Downtown Sacramento, at the peak of COVID. The challenges included uncertainty regarding COVID during the pre-vaccine period, political uncertainty, an offshore borrower, and California’s tenant friendly policies. Many investors were too cautious to make a commitment in the middle of COVID with no anticipated end in sight. These risks were offset by exceptional sponsorship, a strong market, and a well margined deal.
    The 153-unit Project is the first in a series of planned multifamily developments in the region by Anthem Properties Group of Canada. GSP leveraged its expertise and relationships to find a lender to serve the Sponsor and push through an arduous due diligence process to an expeditious closing. GSP helped structure the partnership agreement to best serve Opportunity Zone taxation rules and ensure the most beneficial long-term returns between the Capital Providers and the Sponsor.

    All Terms Confidential

  • $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%

  • $60,200,000 Ground-Up Construction Financing, 85% LTC, 6.65% Blended Coupon on a 307-Unit, Class-A Apartment Community; St. Louis City, MO

    February 17, 2021

    Transaction Description:

    George Smith Partners successfully placed $60,200,000 in high-leverage construction financing, which funded 85% of total project cost for the construction of a 307-unit mixed-use multifamily and retail project located in the trendy St. Louis City neighborhood of The Grove. GSP leveraged its lender relationships, capitalization structuring acumen, local market expertise, and strong project fundamentals to arrange the most accretive financing structure available in the market during the peak of the COVID-19 pandemic. The capitalization included a senior loan to 60% loan-to-cost and a preferred equity investment with last-dollar exposure to 85% of total project cost. The preferred equity investment is non-recourse and the senior loan required only a top-end 25% repayment guarantee. Additionally, the Lender and preferred equity investor gave credit for a lift in land value above the Borrower’s actual cost due to the Borrower having created substantial value through entitlements and development incentives.

    Rate: 6.65% (blended coupon)
    Term: Three-year initial term plus two, 12-month extension options
    Amortization: Interest only
    LTC: 85%
    Prepayment: 2%, 1%, open
    Guaranty: 25% repayment guarantee on senior loan only; does not apply to the non-recourse preferred equity investment
    Lender Fee: 0.82% blended

  • $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