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$39,400,000 Acquisition Financing for Five-Building Suburban Office Campus; Southern California

Unique Structure – Two Simultaneous Loan Closings on the Divided Collateral

Loan Amount: $24,800,000
Term: 7 Years
Amortization: Full-Term Interest Only
LTV: 59%
DSCR: 1.60x
Debt Yield: 9.0%
Prepayment: Defeasance

Loan Amount: $14,600,000
Term: 24 Months, plus Three 12-month Extension Options
Amortization: Interest Only
LTV: 75%
Prepayment: 12 Months Minimum Interest

Transaction Description:

George Smith Partners successfully placed two simultaneous loans to acquire a five-building office campus in Laguna Hills, California. The 84% occupied Property sits on a 16-acre site adjacent to a reservoir and contains ample parking (4:1000 square feet). The Properties were built in the late 1980s and completely renovated in 2016-2018. GSP structured the financings to fit the Sponsor’s business plan which involved separating the collateral into a two-building bridge loan and a three-building CMBS loan. These loans allow the Sponsor to place long-term, fixed-rate debt on the stable assets while keeping shorter-term debt on the more transitional buildings.

Loan 1 (3 Buildings): $24,800,000 of non-recourse, seven-year fixed rate first mortgage CMBS debt for the acquisition of three of the office buildings (total 158,000 square feet) which are 84% leased. GSP sourced a lender able to provide seven-year, non-recourse financing and the ability to close with a complicated DST (Delaware Statutory Trust) equity structure in a tight timeframe. The loan was sized to a 9.00% debt yield, 59% LTV, or 1.60x debt service coverage ratio on the 5.93% fixed rate coupon. The Sponsor bought down the interest rate.

Loan 2 (2 buildings) $14,600,000 of non-recourse, 75% LTV, bridge financing for the acquisition of the remaining two office buildings (total 66,000 square feet), which are 79% leased with upcoming tenant rollover. GSP identified a Lender that could provide 75% leverage and a flexible 24-month loan term with three 12-month extensions. The loan is priced at 5.95% + 1 Month Term SOFR and is non-recourse. GSP was able to identify a lending source that not only understood the market and demand for office space in the market.


Related Financings

  • $15,000,000 SBA Acquisition Financing for an Office Property; Beverly Hills, CA

    February 21, 2023

    Transaction Description:

    George Smith Partners arranged $15,000,000 in SBA owner-user acquisition financing for a multi-tenant office property located in Beverly Hills, CA. The Sponsor approached GSP for assistance in acquiring the building they had been occupying as a tenant for many years past. Instead of losing cash to rent, they decided to invest in ownership. The Sponsor had tried securing both conventional owner-user and SBA financing on their own before reaching out to GSP but was unsuccessful. This was primarily due to the state of the market with lenders having a pessimistic outlook on office, and the SBA eligibility requirements becoming increasingly more difficult to meet since the COVID pandemic.

    Upon getting the assignment, GSP quickly put together a concise and marketable package that would present well to both conventional lenders and the SBA. GSP used their expertise to source attractive terms for the Sponsor and structured a total loan facility equal to 88% of the purchase price, at a sub-5% blended rate.

    Additionally, GSP managed to lock the senior portion of the loan despite the volatile interest rate market and quickly worked toward SBA approval to lock the rate on the SBA portion before the next month’s rate hike.

    Securing high leverage and keeping the Sponsor’s equity investment low was crucial to ensure the Sponsor could keep the majority of their liquidity in hand for their operations and potential property renovations. Thanks to GSP, the Sponsor successfully purchased the building with financing terms that exceeded their expectations.

    Senior Loan: $10,000,000
    SBA: $5,000,000
    Rate: Senior Loan: 4.92%
    SBA: 4.87%
    Term: 25 Years
    LTPP: 88%
    Prepayment: 5-5-4-4-3-3-2-2-1-1

  • $10,385,000 SBA 504 Acquisition Financing for Single-Tenant Creative Office; 85% LTC; Glendale, CA

    May 25, 2022

    Transaction Description:

    George Smith Partners arranged a SBA 504 financing for a recently renovated single-tenant, creative office building in Glendale, CA. The Property will become the new headquarters for the Sponsor’s company. GSP leveraged its long-standing relationships with an institutional SBA lender and a leading Certified Development Company (CDC) to structure and close at 85% LTC. Though the appraisal value came in below the initial purchase price, GSP offered additional market analysis and local area expertise that helped the Sponsor negotiate a reduced price of nearly half a million dollars.

    Bank 1st 
    TD Rate: 4.978% Fixed for 10 Years
    Term: 20 Years
    Amortization: 25 Years
    LTC: 50%

    SBA 2nd
    TD Term: 25 Years
    Amortization: 25 Years
    Combined LTC: 85%

  • $19,570,000 Non-Recourse Acquisition Bridge Financing for a 163k SF Office Campus; Ventura, Los Angeles, CA

    November 29, 2021

    Transaction Description:

    George Smith Partners successfully secured $19,570,000 in senior acquisition debt financing for a 4-building, garden style office campus located in Ventura. Situated on a rare 7.72-acre infill site, the Property consists of 162,717 net rentable square feet across the 4 buildings and is within walking distance to the high-traffic retail hubs, Mills Street, and the Pacific View Regional Mall. The financing capitalized the Property acquisition as well as a focused capital expenditure program aimed at increasing operational efficiencies and targeted deferred maintenance.

    Despite COVID-19 related challenges in the office sector, the Property maintained 70% occupancy through its granular tenant base. While some lenders expressed concern with the going-in debt yield and market leasing dynamics, GSP broadly marketed the Project and was able to identify a lender who understood the underlying value of the asset, the Sponsor’s business plan, and Ventura’s fast-growing market. The interest-only financing was sized to 70% loan to cost, including 100% of future funding for capital expenditures, tenant improvements and leasing commissions. The loan carried a 3-year term and was priced at 1 Month Libor + 500 basis points with a 5.15% floor. Due to an excellent purchase price, the financing had a very tight closing timeframe, and the selected Lender was able to close in 30 days from term sheet execution.

    Rate: L+500 (5.15% floor)
    Term: 3 Years (Two 12-Month extensions)
    Interest-Only: Full Term
    LTC: 70%
    Guaranty: Non-Recourse

  • $2,450,000 High-Leverage SBA Acquisition Financing for Office Property; North Hollywood, CA

    April 14, 2021

    Transaction Description:

    George Smith Partners arranged $2,450,000 in SBA Owner-User Acquisition (90% Loan-to-Purchase Price) financing for an office/industrial flex property located in North Hollywood, CA. The Sponsor approached GSP to assist with the acquisition of the Property to relocate their company headquarters. The Sponsor required a flexible loan with high leverage and a low interest rate. The Sponsor had already entered escrow at the time of approaching GSP and was on a strict timeline with only 60 days to close. GSP quickly and successfully structured a first trust deed from a bank as well as an SBA B-piece to secure 90% of the purchase price. GSP was able to provide the Sponsor with a 25-year term, with the first 10 years fixed at a blended rate of 3.80%. The flexible prepayment structure is equal to 5-5-4-4-3-3-2-2-1-1. The high leverage loan allows the Sponsor to use equity towards the continued growth of their business. Thanks to our long-standing relationship with the SBA Certified Development Company (CDC), GSP was able to meet the Sponsor’s deadline and close this transaction in under 60 days.

    $1,375,000 Senior Loan @ 4.75%
    $1,075,000 2nd (SBA) @ 2.58%

    Term: 25 Years
    Loan-to-Purchase Price: 90%
    Prepayment: 5-5-4-4-3-3-2-2-1-1

  • $25,500,000 Non-Recourse Bridge Financing for an Acquisition of an Office Building; Phoenix, AZ

    December 18, 2019

    Transaction Description:

    George Smith Partners arranged $25,500,000 in non-recourse bridge financing for the acquisition of a 230,000 square foot Class A office building located in the heart of Phoenix, Arizona’s Midtown District. Positioned on a heavily trafficked thoroughfare of a major professional corridor, the site benefits from its central location, proximity to Downtown Phoenix and abundance of local economic drivers. The Project, built in 1982, had been well-maintained but was running a below-market occupancy rate of 82% due to the recent expiration of a large tenant lease. This bridge facility allowed the Canadian-based Sponsor to purchase the asset and undergo a proposed renovation, bringing the design up to competitive market standards in order to successfully lease-up and stabilize the asset.

    By focusing attention on sophisticated bridge lenders active in the local area, GSP identified a capital provider who understood the growth of the market. The selected Capital Provider structured around the Project’s current vacancy, recognizing the strength of the Sponsor and their ability to successfully execute on the intended business plan of value creation. The loan was structured with minimal cash management language and featured pari passu funding throughout the term. The interest only non-recourse bridge loan was priced at a spread of 350 basis points over the 30-Day LIBOR, with a three-year term and two 12-month extension options.

    Rate: 30 Day LIBOR + 3.50%
    Term: 36 Months with Two 12-Month Extensions (3+1+1)
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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.

    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.

    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
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