$4,250,000 in Permanent Financing for a Four Property Assemblage in Glendale, CA

Rate: 5.15% Fixed
Term: 10 Years
Interest Only: 3 Years
Amortization: 30 Years
Prepayment Penalty: Stepdown, 10-1%
LTV: 60%
DCR: 1.30x

Transaction Description:

George Smith Partners arranged $4,250,000 of permanent financing for a four-property mixed use located in Glendale, CA. The portfolio totals 25,000 square feet and is 100% leased to a variety of technology-based tenants. The non-recourse financing accomplished the Sponsor’s business plan to refinance an existing loan on three of the properties while adding another parcel to the collateral. The properties are nearly contiguous within a two block area. GSP arranged the original bridge and then perm financing on the original properties in 2013-2015. The existing lender waived prepayment for the existing loan in order to underwrite the new financing. The 10-year permanent loan is sized to 60% LTV and has a stepdown prepayment structure. It includes three years of interest only followed by a 30-year amortization and carries a fixed rate of 5.15% over the life of the loan.


Related Financings

  • Expand

    Non-Recourse Permanent Financing for Downtown Detroit Boutique Hotel

    April 10, 2019

    Transaction Description:
    During the downturn our Sponsor identified a rundown non-operating hotel in downtown Detroit. Investing over $10 million in upgrades/renovations our Sponsor was able to create one of Detroit’s finest trendy boutique hotels and restaurants. From an extremely distressed site the Developer was able to open this 144 room boutique hotel that pays tribute to, “Made in Detroit”. The turnaround of the Property, led to a turnaround of the entire neighborhood.

    Hotels are one of the most difficult property types to finance. Hotels outside major cities are even more challenging and Detroit hotels are the most difficult.

    The result was that most capital providers refused to consider looking at the site. In addition, the Sponsor had the grand opening only about 18 months ago which caused many groups to be concerned about the ability to succeed long-term. Finally, non-recourse hotel financing is problematic because hotels are part real estate and part operating businesses.

    George Smith Partners successfully placed a non-recourse, senior loan which was securitized and sold to investors. GSP determined that by placing the loan within a Mortgage-Backed Securities pool, the overall strong yield would benefit the pool and the location risk would be minimized. With this structure, our Sponsor was able to buy out his partners and repay a personal loan he made to the Property. Because of our expertise in this type of financing, we were able to identify an international bank, which could speed up the process and work with the Sponsor’s attorney to navigate the complex issues of a securitized loan. With interest rates moving down at the end of the process we were also able to reduce the 6.05% floor rate by 35 bps and expand the amortization to 30 years. Within 35 days of going into application we were able to allow our Sponsor to buy out his partners, obtain a non-recourse loan that repaid an internal construction loan and close at better rate and amortization than originally quoted.

    Proceeds: Confidential
    Rate: 5.7% Fixed for 10 Years
    Term: 10 Years
    LTC: 75%
    LTV: 50%
    Lender Origination Fee: None
    Recourse: Non-Recourse

  • Expand

    $22,367,000 Cash-Out Refinance of 200 Secondary Market Rental Units, CA

    March 20, 2019

    Transaction Description:

    GSP placed the $22,367,000 non-recourse cash-out permanent loan for 200 stabilized units in a secondary California market. This represented a substantial return on equity. Loan proceeds were increased post application as the supportable underwritten net cash flow improved during the due diligence process. Occupancy constantly operated at 98% with future increases forecasted at unit turn. Fixed for seven years at 4.73%, the non-recourse loan is interest-only for two years prior to amortizing over 30 years for the balance of the term.

    Rate: 4.73% Fixed
    Term: 7 Years
    Amortization: Two Years Interest Only; 30 Years Thereafter
    Loan-to-Value: 60%
    DCR: 1.35
    Recourse: Carve-Outs Only
    Prepayment: Loss of Yield
    Loan Fee: 0.50%

  • Expand

    $7,600,000 in Non-Recourse Permanent Financing for a Single Tenant Medical Office Property with 100% Lease Roll During the Loan Term

    March 6, 2019

    Transaction Description:

    George Smith Partners secured $7,600,000 in non-recourse permanent acquisition financing for a 38,000 square foot medical office property in Lowell, Massachusetts. The Property was 100% leased to a single tenant with strong credit but with only five years of remaining lease term. Despite the limited lease term, the Sponsor sought long term permanent financing that exceeded the lease term, which is difficult to obtain.

    After an extensive marketing effort, George Smith Partners sourced a national lender with a favorable view of medical office properties and a history of providing permanent financing on properties with significant near term lease roll. Sized to 65% of value, the 10-year fixed-rate execution is non-recourse and amortizes over 30 years. The interest rate was fixed at 5.12% at closing or 242 basis points over the 10 Year Swap Rate.

    Rate: 5.12% Fixed (Spread of 242 basis points over 10 Year Swaps)
    Term: 10 Years
    Amortization: 30 Years
    LTV: 65%
    Prepayment: Defeasance
    Guarantee: Non-Recourse

  • Expand

    $39,300,000 Forward Rate Lock Permanent Financing of a 154-Unit Luxury Multifamily Property in Ventura, CA

    February 6, 2019

    Transaction Description:
    George Smith Partners successfully arranged the permanent financing for a newly constructed luxury 154-unit apartment complex located in Downtown Ventura, one mile from the Pacific Ocean. The Sponsor sought a permanent loan to refinance the construction loan. The Sponsor’s goal was to lock in a long-term, low interest rate in a rising interest rate environment prior to the building reaching stabilized occupancy.

    There was significant lease up risk for the permanent lender, as the Property had not yet stabilized with less than a month of operating history at the time of loan underwriting.

    GSP was able to make the Lender comfortable by highlighting the Sponsor’s successful track record, the Property’s strong position in the market with few comparables available, the Property’s excellent location, and the prospects for strong rent growth. GSP secured an early rate lock at a low 1.47% spread over the 10 Year Treasury for a 16 year fixed rate loan term. Sized to 60% of value, the non-recourse financing includes 2 years of interest only payments, which enhances the cash flow during the early years of the loan. The loan closed in 30 days.

    Rate: 1.47% spread over 10 YT
    Term: 192 months (16 Years)
    Amortization: 2 Years Interest Only; 30-Year Amortization Thereafter
    LTV: 60%
    Guarantee: Non-Recourse
    Prepayment Penalty: Yield Maintenance

  • Expand

    $23,000,000 Construction to Perm Financing at 74% LTC Fixed Rate, Lone Tree, CO

    October 31, 2018

    Transaction Description:

    George Smith Partners secured $23,000,000 in proceeds for the ground up construction of an 80,000 square foot medical office property in Lone Tree, Colorado. The Property consists of a 4.8-acre site located directly across from a hospital campus (Sky Ridge Medical Center). The total project cost is a little over $31M and the loan represents 74% LTC. The Property is only 10% preleased, but it has drawn in a great deal of interest, from potential tenants. The Project is now under construction. This loan was high leverage on a spec deal; 5.25% fixed rate locked at application with 7-year term and non-recourse at stabilization.

    Challenges and Solutions:

    The first challenge was proving Sponsor’s rent proforma which was much higher than the comps which ranged between $21-24 NNN. With the help of the Appraiser and the Sponsor, GSP was able to get the Lender comfortable with the higher proforma. This was achieved due to the Property’s proximity to the Hospital. This location offers the tenants the ability to be close to the hospital without being subject to hospital use restrictions, approval and oversight. The second challenge was starting the Project prior to the rain and snow season. The Lender was able to fund 2 weeks earlier than originally planned enabling the start of construction.

    Rate: 5.25%
    Term: 24-month construction period rolling into a 5-year permanent loan
    Amortization: 36-month Interest Only then 25 years
    LTC: 74%
    Lender Fee: 1.0%

  • Expand

    Refinance of Prime Los Angeles Retail Shopping Center; Fixed at 4.715% for 10 Years

    September 4, 2018

    George Smith Partners secured a 10 year permanent refinance loan for a 17,054 SF retail strip mall shopping center located in a prime neighborhood in Los Angeles. The Property has prominent signage and easy access from a highly trafficked intersection. Several of the tenants have been in place for over 20 years and have a loyal and repeat customer base.

    The Borrower sought a low leverage rate and term refinance but required a flexible prepayment penalty in case he decided to redevelop the Property. The Property also has an onsite dry cleaner that does not use a green cleaning process. The presence of the dry cleaner mandated a Phase II report that would require drilling. In addition, the Property has several tenants that operate under short term leases.

    Instead of a Phase II report, the selected Lender estimated a Maximum Expected Loss if environmental remediation were required. The MEL was deducted from the appraised value of the Property. Since the loan still met the Lender’s LTV constraint, no further environmental testing was required. The Lender’s concern about short term leases was addressed by demonstrating that the Tenants had been located in the Property for many years. Overall, the Property had very little turnover due to the Owner’s skillful management. As a result, the Lender was comfortable with the consistency of cash flow at the Property.

    Rate: Fixed for 10 years at 4.715%, followed by floating at 6 month LIBOR plus 2.25%
    Term: 25 years
    Amortization: 25 years
    Prepayment Penalty: 5,4,4,3,2,1
    LTV: 45% maximum
    DCR: 1.5
    Origination Fees: Par

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

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

Subscribe Here