Rate: Floating at 30 Day LIBOR + 3.55%
Term: 3 Years with Two (12) Month Extensions
Amortization: Interest Only
George Smith Partners secured $42,700,000 in non-recourse construction financing for the development of a ten-building residential community in the Clackamas County submarket of Portland, OR. The nearly 13-acre site, which is a 20-minute drive from the city, offers an affordable alternative to Portland’s ever-increasing rental rates, as well as an exemption for inclusionary zoning, requiring no affordable units.
By leveraging the strength of the Sponsor’s local experience, coupled with the city’s need for housing alternatives to the urban infill product, GSP was able to find a non-recourse lender who was comfortable with the fact that the area had seen little development in recent years and offered no comparable product. The loan was priced at 30-Day LIBOR + 3.55% and was sized to 65% LTC, which is aggressive leverage considering the pricing and the non-recourse structure. As costs rose approaching the final budget, the Lender ratably increased the proceeds of their loan to minimize additional Sponsor dollars in, which ultimately showed a commitment to a long-term relationship; this was their second time working together, the first being another Portland development GSP sourced in 2017.
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Senior Vice President
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$41,100,000 Non-Recourse Stretch Senior Construction Loan for 180 Micro-Unit Multifamily Development; Hollywood, CA
May 12, 2021
George Smith Partners placed a $41,100,000 Non-Recourse, stretch senior construction loan for the ground-up development of a 6-story micro unit/co-living project in Hollywood, California. When complete, the Project will consist of 180 fully furnished, all-inclusive micro units within 49 pods with an average micro unit size of 276 sf. The Project lies in an Opportunity Zone.
Several hurdles presented themselves such as concerns about the newness of the asset class and the availability of direct comparable properties. Also, the Sponsor had already begun excavation & shoring work which created challenges in obtaining full title insurance coverage.
GSP focused on the Project’s per micro unit price rather than a per pod price to get the Lender comfortable with comparable projects. Further attention was given to the Project’s affordability as each micro unit comes fully furnished with an all-inclusive rental rate. GSP also stressed the Project’s unparalleled location, walkability to every major amenity in Los Angeles, the number of local employer hubs, and significant demand drivers from transient tenants looking for fully furnished offerings. GSP worked with the title company to successfully resolve all title insurance challenges that were presented and executing a high-profile marketing campaign to ensure that the capital markets appropriately understood the unique asset type. The process also included structuring and marketing the deal with several different capital stack variations (including a concurrent separate marketing effort for an A/B structure) to find the best financing option for the transaction. These efforts resulted in a successfully expedited process with a close in approximately 45 days from entering application.
$15,500,000 Non-Recourse Bridge Financing for a Mid-Construction 3-Property Multifamily Portfolio; Los Angeles, CA
December 16, 2020
George Smith Partners secured a $15,500,000 bridge loan for three newly constructed, pre-Certificate of Occupancy multifamily assets located in Los Angeles, CA. The non-recourse loan provided significant cash-out proceeds to the sponsor, refinanced outstanding construction debt and capitalized construction completion costs. The loan is sized at 70% LTC on a 4.90% fixed rate, non-recourse, 12-month term. The loan did not require an interest reserve or capitalized carrying costs.
The loan is secured by three new construction multifamily assets in the Koreatown and Eagle Rock submarkets of Los Angeles, totaling 57 units, in various stages of completion. All will be complete by Q1 2021, with lease up occurring throughout the balance of 2021. Given COVID related delays and slower-than-anticipated leasing velocity, GSP was able to identify a lender comfortable with the high quality, new construction product, and the long-term stability of these submarkets. The loan closed three weeks from term sheet execution.
$25,500,000 Bridge Loan for VACANT Newly Constructed 65 Unit Multifamily Property; 100% LTC; Fixed at 4.95%; Los Angeles, CA
September 11, 2019
George Smith Partners secured $25,500,000 in proceeds for the refinance of a construction loan on a newly constructed 65-unit multifamily property located in Los Angeles. The loan represents 100% of project capitalization and is fixed at 4.95%. The Property had recently received Certificate of Occupancy, but was still completely vacant at close. The bridge loan is intended to give the Sponsor time to lease up the property to stabilization. The fixed rate is unusual for a bridge loan; most capital providers offered floating rate financing and required the purchase of a cap.
Because the Property was still vacant, the Sponsor’s proforma rents were not yet proven out by signed leases. This was a challenge because the rents are several hundred dollars higher than those of typical multifamily properties in the submarket. GSP was able to overcome this challenge by pointing out that the brand new units at the Subject Property were considerably larger than those in the comp set. This provided support for the premium rents. Another hurdle was the 90% loan-to-cost constraint imposed by most capital providers. The selected lender allowed for 100% of cost, subject to a 7.0% debt yield on the stabilized cash flow.
Rate: Fixed at 4.95%
Term: 12 months with one 6 month extension option
Amortization: Interest Only
Prepayment Penalty: None (no required minimum interest)
Stabilized DY: 7.0%
Fees: 1% in/0% out
Guaranty: Non-Recourse: None (no required minimum interest)
Construction Loans Los Angeles | $6,000,000 Non-Recourse Predevelopment Financing for Construction of 170-Unit Multifamily Project in Tarzana, CA
October 24, 2018
George Smith Partners secured $6,000,000 in non-recourse predevelopment financing for a 170-unit ground-up multifamily project in the Tarzana community of Los Angeles, CA. The site is a collection of five contiguous lots, parceled together by the Sponsor to create an opportunity for larger scale development in the area. This financing facility allowed the Sponsor to recuperate some of the invested equity to be used towards continued advancement of the predevelopment for the Project, including but not limited to design and construction drawings, entitlement costs and permits. The Sponsor is currently building another ground-up multifamily project nearby and is an active local investor and developer, owning several retail and mixed-use assets in the area.
GSP sourced a lender who offered a fixed-rate financing facility to lessen the burden of development costs on the Project, recapturing nearly 65% of invested dollars for a bridge through the pre-development phase; it will ultimately be taken out by the construction loan when the Project breaks ground. The identified capital group was already familiar with the site, and was able to offer a flexible and low-cost structure without a prepayment penalty. The application was an expeditious process; GSP was able to facilitate a closing less than three weeks from the date the term sheet was signed. The twelve month fixed rate note was priced at 6.90%, and was sized to 64.5% of cost basis.
January 31, 2018
George Smith Partners placed an $11,000,000 non-recourse construction loan for the ground up development of 40 multi-family units in the Conejo Valley sub-market of Los Angeles County. The area has high barriers to entry for new product in regards to entitlements and design review, and took several years to gain all necessary approvals. As a result this project will be the first new development that has broken ground in the sub-market since 2004. Equipped with sub-2% market vacancy, GSP secured a non-recourse loan with an institutional capital provider at leverage of 75% LTC and priced at LIBOR + 375. The loan also provides for extension options and has no prepayment penalty.
$53,900,000: $42.6MM “Non-Recourse” Construction + $11.3MM Preferred Equity Financing for 228-Unit Multifamily Development
April 26, 2017
George Smith Partners secured a $42,600,000 non-recourse senior construction loan along with $11,300,000 preferred equity placement to develop a 228-unit Class A multifamily property in Orange County, CA.
The sponsorship required a non-recourse solution at an appropriate leverage to achieve the entire project’s capitalization during a time when many lenders were pulling back on construction financing in general and reducing leverage if able to lend at all.
GSP utilized its significant experience and deep relationships with active capital providers to secure the non-recourse construction financing. GSP was also able to secure preferred equity in lieu of sponsorship bringing in additional equity which allowed the transaction to be appropriately capitalized for the developer to hit their pro forma return on equity.
Rate & Terms: Confidential
- Advisors: Malcolm Davies