Term: 1 year
Fees: 1% in/0% out
Term: 1 Year
Fees: 2% in/0% out
George Smith Partners arranged $4,410,000 in quick-close, acquisition bridge financing for a 17-unit, 1960s built, value-add multifamily project in Glendale, California. The Sponsor approached GSP with an extremely tight closing time frame due to a reverse 1031 exchange. He valued certainty of execution above all else so he could close on the Property in short order. The Sponsor will use his own equity to renovate the Property. GSP identified two, non-bank lenders with a long history of providing quick close, bridge execution. The first trust deed is sized to 60% of purchase with no hold back requirement for interest reserve or capital expenditures. GSP also sourced a second trust deed up to 90% of purchase price. Both loans were non-recourse, interest only, and do not carry prepayment penalties. The Sponsor plans to take out the two loans within 12 months with agency or long-term fixed rate debt.
Senior Vice President
Senior Vice President
July 29, 2020
George Smith Partners placed a $5,891,700 recourse loan for the refinance and recapitalization of an approved mixed-use conversion back to 100% multifamily use. The Sponsor acquired the mixed-use office and multifamily project in early 2019. They negotiated the early termination of several long-term office leases and obtained approvals to convert the entire Property back to multifamily. The Sponsor will add kitchens to the office units and converted a large multi-story penthouse unit with ocean views into smaller units increasing the unit count to 23. Soft demolition began in early 2020 with insufficient funds available in the existing acquisition/bridge loan to complete the revised business plan.
GSP placed the original acquisition/bridge loan. Even though the current loan went under application at the start of the COVID-19 pandemic, the only delay was as a result of the appraisal process. The value and the loan were not negatively impacted by the change in market conditions due to the COVID-19 pandemic. GSP identified a bank lender who underwrote to the new business plan and was able to provide capital at less than half of the previous loan cost while providing an additional 40% in proceeds. The bridge loan has an 18-month term at Prime + 0.75%, interest only, with the ability to convert to a 5-year term.
Rate: Prime + 0.75% with a 4% Floor
Term: 18 months
Recourse: Full Recourse
Amortization: Interest only
Prepayment: None during construction period
- Advisors: Alina Mardesich
$62,750,000 Non-Recourse, Bridge Financing for a New 253-Unit, Class A, Mixed-Use Development; Longmont, CO
July 22, 2020
George Smith Partners arranged $62,750,000 in non-recourse, bridge financing on a new construction, mixed-use property with 253 apartment units above 10,000 SF of retail in Longmont, CO—approximately 20 minutes northeast of Boulder. Despite delivering in the early stages of a global pandemic and statewide stay-at-home order, the building has maintained relatively robust lease-up velocity through unconventional marketing methods such as virtual touring. Amid such unprecedented market uncertainty, GSP successfully engaged a newly established debt fund to facilitate a cash-neutral, non-recourse refinance of the project’s maturing high-leverage construction debt, which could not be extended. The 75% loan-to-value bridge facility is priced at L+500 with a 36-month term and two 12-month extension options.
Permanent Multifamily Financing Secured During COVID-19 Pandemic, 3.07% Fixed for 5 Years; Los Angeles, CA
July 15, 2020
George Smith Partners arranged $2,600,000 in permanent financing for the refinance of a stabilized 8-unit, multifamily property in Los Angeles, California. The Sponsor acquired the Property a few years ago and was looking to lower their rate as they finished completion of a light renovation. As the environment was changing drastically day to day with the COVID-19 pandemic, GSP identified a Capital Provider offering fantastic terms. There were no holdbacks, no deposits were required to be held at their branch and provided a flexible prepayment penalty structure that allowed the Sponsor plenty of options during these challenging times.
Term: 5 Years Fixed
Amortization: 30 Years
Prepayment Penalty: 2, 1, 0
Lender Fee: None
Reserve Account: None
Deposits Required: None
- Advisors: Reuven Risch
$8,600,000 Cash-Out Refinance of a 2-Property Multifamily Portfolio During the COVID Pandemic; Los Angeles, CA
July 8, 2020
George Smith Partners was retained to develop and implement a strategy to refinance a 5-Property $50,000,000 multifamily portfolio. GSP divided the properties between two capital providers in order to provide maximum flexibility to the Sponsor. The second part of the portfolio involved obtaining a 70% LTV permanent loan of $8,600,000 to provide the Sponsor with over $1,500,000 in cash-out capital to purchase additional properties during a changing market and maintain a strong cash position. GSP obtained a fixed interest only rate of 3.95% for the first 5 years.
With the COVID-19 global pandemic and uncertainty in the market, it was critical to select a capital provider who could successfully close. Borrowing costs are on the rise as lenders ratchet up their credit standards. The proceeds for this transaction were targeted for the acquisition of an additional asset which had a firm closing date and a large non-refundable deposit. Any delays would have been very costly. With the current crisis, lenders were 100% focused on rent collections and overwhelmed with new financing requests as several other lenders pulled out of the market as well as forbearance requests from their current borrowers. In addition to the usual due diligence requirements, the Lender required much more information. There were complex issues around appraisals and inspections that required lots of hand-holding.
GSP selected a capital provider that we have a strong relationship with and has closed numerous loans for us. We knew the loan officer would stay focused on the need to close on time and keep the agreed to rate and proceeds throughout the loan process. Because GSP is in the debt market every day, we were able to ensure that the capital provider was truly closing deals and meeting deadlines. Because of the market disruption, borrowing rates jumped by over 100 basis points overnight. We were able to lock the 5-year interest only rate at 3.95%, the following day, rates jumped to 4.75%. It was clear that the Lender was mindful of their reputation with GSP and didn’t want to get a reputation of crazy rate increases or abandoning their customers when they are needed the most. GSP’s experience working with appraisers, inspectors and title/escrow during the COVID period was critical to getting this transaction completed. The loan closed on time and the Sponsor was able to utilize the cash-out to purchase another project. As is now common during the COVID crisis, the Capital Provider required a 12-month interest reserve. We were able to convince the Capital Provider to apply those funds to the first 12 months of the loan payments.
$24,300,000 Cash-Out Refinance of a 3-Property Multifamily Portfolio During the COVID Pandemic; Los Angeles, CA
July 1, 2020
George Smith Partners successfully refinanced a 3-Property stabilized multifamily portfolio with cash-out during the COVID stay at home order in Los Angeles.
The new capitalization provided the Sponsor with over $3,000,000 in cash-out to purchase additional properties during a changing market and maintain a strong cash position. GSP was able to obtain of 70% LTV with a starting fixed interest rate of 3.4% for the first 5 years. The loan is for 30 years with indexed changes every 5 years.
As the world entered into a global pandemic, capital providers were unsure about the future of the real estate market in general and specifically the multifamily market. Within two weeks of application over half of the multifamily lenders canceled all their deals and exited the market. Because of this uncertainty, many capital providers pulled back. When the Federal Reserve cuts interest rates they are impacting the index part of the rates, but the risk spread is determined by factors like supply and demand as well as overall risk. Even when the Federal Reserve cuts treasury rates the overall rate to a borrower can increase on assets like commercial real estate. At GSP our role is to manage the entire financing process including managing the expectations of both the Sponsor and Capital Provider. When our clients hear the Federal Reserve is cutting rates, they naturally expect rates to fall However, because of the huge amount of new risk caused by the COVID-19 crisis, rates for commercial real estate actually went up over 1%.
GSP opted for a Capital Provider with a slightly higher rate. We had a strong relationship with this Capital Provider and felt that we had a better chance of a successful closing. One week after going into application with our chosen capital provider, the Lender we had passed on pulled out of the market. GSP pushed forward with our client keeping focus on closing the transaction. As treasury rates fell sharply, our capital provider warned us to lock if we wanted to maintain our application rate. Following our advice, the Sponsor locked at 3.4%, our application rate. The following day, rates jumped over 1%, with rates going into the high 4% range. The closing process during COVID is more difficult with Capital Providers wanting to verify every dollar of collection and reduce risk as much as possible. As capital providers started seeing borrowers unable to pay their rent, almost every lender implemented upfront reserves. The overall due diligence process was tougher than we had seen in the past. The loan closed at the agreed rate and proceeds. The Lender required a 12-month interest reserve and we were able to convince the Lender to apply those funds to the first 12 months of the loan payments. This is becoming a common practice for almost all lenders since the COVID Crisis.
Cash Out Refinance for 14 Unit Renovated Multifamily Property; 3.5% Fixed; Bank Financing Closed During Covid-19 Pandemic; Los Angeles, CA
June 24, 2020
George Smith Partners secured a first trust deed on an unencumbered 14-unit Los Angeles multifamily property. The loan is fixed at a rate of 3.5% for seven years and has five years of Interest Only payments. The Sponsor acquired the Property in an all-cash transaction 12 months ago and completed a full gut renovation. Unit interiors were updated to a high level of finish with an investment of $27,600/per unit, and the Property was leased up to 100% occupancy. The loan was placed into application with a California based bank about one week before the stay-at-home order was implemented. Despite the resulting economic uncertainty, the Sponsor was able to maintain collections close to 100%. As a result, the Capital Provider made one small change to the original term sheet, adding a twelve-month payment reserve. The payment reserve is based off Interest Only payments and it will be used to make the interest payment on the loan. In order to cover this reserve, the Capital Provider was able to increase loan proceeds from the amount in the original application. As a result, our Sponsor received the same amount of cash out that was originally applied for.
Rate: 3.5% fixed for 7 years, then floating at 6M LIBOR + 2.35%
Term: 30 years
Amortization: 5 years Interest Only followed by 30-year amortization
Prepayment Penalty: 4,3,2,1,0