$43,500,000 Bridge Financing for Nearly-Vacant Industrial Building in Secondary Market

Rate: One-Month LIBOR + 5.50%
Term: Two years plus two one-year extension options
Loan to Value: 80% (121% of Purchase Price / New Basis is 140% of Purchase Price)
Amortization: Interest only during the loan term
Guarantee: Non-recourse
Lender Fee: 1.00%
Prepayment: 1% for first 12 months; Open thereafter. Waived if lender does take-out.

Transaction Description:

George Smith Partners secured $43,500,000 in bridge financing collateralized by a 95% vacant, 2.2MM square foot industrial building in a secondary Midwestern market. The building was constructed through the 1950s and 1960s by a major retailer and used for many years as a major distribution center. As internet retail ate into the tenant’s business, the building slowly lost its business importance to the prior owner. The Borrower, a well known owner and operator in the area bought the Property off market unoccupied approximately one year ago and has been improving the property and been in leasing talks with an array of strong tenants. The lease that occupies 5% of the building is attributed to a third party logistics subsidiary of the Borrower.

Sized to 80% of stabilized value, proceeds from the bridge loan take out the Borrower’s original acquisition loan and bought out an institutional Preferred Equity investor. The Borrower now owns the property free of all third-party equity investors. Additional loan proceeds will also be used to cover closing costs and fund future work, including CapEx and leasing costs associated with repositioning the 60-year-old building. The financing secured by GSP not only allowed the Borrower to recap out their equity partner and claim exclusive ownership rights to the asset, but also gave them the final renovation dollars required to attract new tenants and eventually bring to Property to stabilization.

Advisors

Related Financings

  • Expand

    $19,775,000 Bridge Loan for Acquisition of Flex Industrial Building; Temecula, CA

    May 6, 2020

    Transaction Description:

    George Smith Partners, on behalf of Stos Partners , arranged $19,775,000 in bridge financing for the acquisition of a specialty flex industrial asset located in Temecula, CA. The Sponsor was able to negotiate a long-term lease renewal for the primary credit tenant, whose term was nearly expired, creating significant value in the process.

    The recently purchased industrial building maintains a mix of specialized uses, as well as an additional near-term vacancy for a smaller flex space, posing both an opportunity and a challenge within the markets. The specialized and varied uses of the building, including laboratory rooms, light manufacturing areas and office/distribution space, required costly buildouts with tenant improvement dollars as the primary tenant expanded into additional space, requiring additional structure. Despite strong market fundamentals, the disruption with the COVID-19 pandemic changed the economy overnight. However, the financials and credit profile of this project only grew stronger and more viable with time.

    George Smith Partners was able to identify a capital source that understood both the quality of the asset and the ability of the Sponsor to execute on the intended business plan. Amidst a time of great market volatility and economic uncertainty, the Capital Provider held their original pre-COVID structure and terms.

    Proceeds: $19,775,000
    LTC: 65%
    Amortization: Interest Only
    Guaranty: Non-Recourse

  • Expand

    $33,000,000 Non-Recourse Acquisition Bridge Financing for an 82% Occupied Multi-Tenant Industrial Business Park

    August 17, 2016

    George Smith Partners successfully structured and placed the non-recourse acquisition bridge loan for a 27 building multi-tenant industrial business park, totaling 475,000 square feet with over 231 tenants in the Pacific Northwest. At acquisition the property was 82% occupied with a going in debt yield of approximately 9.5%. $24,530,000 of the on-book financing was funded at closing with $7,220,000 to be future funded for immediate property improvements, future upgrades which includes funding for the Sponsors’ strategic spec-suite program, as well as future leasing costs. Upon achieving a predetermined net operating income, the lender will advance an additional $1,250,000 earn-out. Interest will not be paid on future funding until disbursement. Floating at L+2.75% for a three year term; the first two years are interest only. There is one (1) two-year extension.

    Rate: LIBOR+2.75%
    Term: 3 Years plus one 2-Year extension
    Amortization: Interest Only for initial 2-Years
    LTC: 65%
    Prepayment Penalty: None
    Release Provisions: Structured release provisions
    Recourse: Non-Recourse
    Lender Fee: 0.50%

  • Expand

    $16,000,000 Non-Recourse Acquisition Bridge Financing for an 85% Occupied, Three Property Multi-Tenant Industrial Portfolio

    May 31, 2016

    Transaction Description: GSP successfully structured and placed the non-recourse acquisition bridge loan for a three property multi-tenant industrial portfolio, totaling 305,000 square feet in the Western United States. At acquisition the portfolio was 85% occupied with a going in debt yield of sub-9.5%. $13,800,000 of the on-book financing was funded at closing with the remaining $2,200,000 is to be future funded for immediate property improvements, future upgrades which includes immediate funding for the Sponsors strategic spec-suite program, as well as future leasing costs. Interest will not be paid on future funding until disbursement. The properties are able to be released as long as the remaining collateral maintains a 1.35x debt service coverage ratio on outstanding loan balance. The interest rate floats at L+2.75% for a three year term on an interest only basis for the initial two years of the term, with one (1) two-year extension.

    Rate: L+2.75%
    Term: 3 years plus one 2-year extensions
    Amortization: Interest Only for initial 2-years
    LTC: 60%
    Prepayment: Open Prepayment
    Release Provisions: Structured release provisions
    Non-Recourse
    Lender Fee: 0.50%

  • Expand

    $26,750,000 Non-Recourse Acquisition Bridge Financing for an Off-Market, 74% Occupied, Four Property Multi-Tenant Industrial Portfolio

    April 27, 2016

    Transaction Description: George Smith Partners successfully structured and placed the non-recourse acquisition bridge loan for an off-market and significantly undermanaged four property multi-tenant industrial portfolio, totaling 445,000 square feet in the Western United States. At acquisition the portfolio was 74% occupied with a going in debt yield of sub 7.5%. $22,050,000 of the on-book financing was funded at closing. The remaining $4,700,000 is to be future funded for immediate property improvements, future upgrades including funds for the Sponsor’s strategic spec-suite program, as well as future good news leasing expenses. There are release provisions to allow individual buildings to be sold or refinanced. The interest rate floats at L+4.25% for a three year term on an interest only basis, with two (2) one year extensions. Our Sponsor purchased a two year cap at closing with a required renewal in the third year.

    Rate: L+4.25%
    Term: 3 years plus two 1-year extensions
    Amortization: Interest Only
    LTC: 67.5%
    Prepayment: Open Prepayment with 18 month interest make whole
    Release Provisions: Structured release provisions
    Non-Recourse
    Lender Fee: 1.00%

  • Expand

    $25,500,000 Acquisition/Bridge Financing of Multitenant Industrial to 89% of Cost

    November 5, 2015

    Transaction Description: George Smith Partners successfully placed a high leverage non-recourse acquisition/bridge loan for a 78% leased multitenant industrial business park in the Pacific Southwest. This loan provides the Sponsor $2,450,000 for capital expenditures, tenant improvement and leasing commissions to cosmetically rehabilitate and stabilize the asset. Sized to 89% of the total capitalization, $23,050,000 of the on-book financing included mezzanine financing of $5,900,000. The loan will float at LIBOR + 6.00%, until the mezzanine tranche is repaid. The mezzanine loan is pre-payable at any time without penalty. Once the mezzanine loan is repaid, the rate is reduced to LIBOR + 4.25%. Interest only for three years, this loan offers two, 1-year options.

    Rate: L+4.25%
    Term: 3 Years plus Options
    Amort: Interest Only
    LTC: 89%
    Prepayment: 18 Month Yield Maintenance
    Non-recourse
    Lender Fee: 1.0%

  • Expand

    $23,500,000 Acquisition Bridge Financing of two Multi-Tenant Industrial Business Parks to 75% of Total Capitalization 

    December 15, 2014

    Transaction Description: George Smith Partners successfully placed a high leverage non-recourse acquisition bridge loan for two multi-tenant industrial business parks. The bridge loan provides the Sponsor three years to execute a business plan that consists of repositioning, renovating and leasing the properties. At acquisition, the properties were 78% and 74% occupied, respectively. $20,200,000 of the on-book financing was funded at closing with the remaining $3,300,000 to be future funded to cover 100% of CapEx, tenant improvements and leasing commissions, eliminating the need for the Sponsor to contribute additional future equity. Interest will not be paid on future funding until disbursement. Although cross-collateralized at loan closing, the assets can be uncrossed at par upon achieving stable debt yield and loan-to-value hurdles. Floating at L+4.50% for three years on an interest only basis, the loan carries two (2) one-year extensions. A two-year cap was purchased at closing with a required renewal in the third year.

    Rate: LIBOR+4.50%
    Term: 3 Years + Two 1-Year Ext
    Amort: Interest Only
    LTC: 75%
    Prepayment: 18 months Yield Maintenance; Open Thereafter
    Non-recourse

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

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

Subscribe Here