Rate: 4.50% Fixed for Five Years; 5 Year CMT thereafter
Term: 10 Years
LTV: 70%
Amortization: 30 Years
TI/LC: None till Year 6
Bank Fee: ½ Point
Prepayment Penalty: None
Guarantee: Recourse
Transaction Description:
Southern California Construction Loan – George Smith Partners placed the take-out of a build-to-suit single-tenant GSA office in a tertiary Southern California market. The ten year term loan matches the investment grade credit lease term. There are no tenant “outs” during the initial term for this gross lease. Fixed for five years at 4.5%, the loan will reset year six at the five-year CMT, floored at the current start rate. Amortized over 30 years and sized to 70% of stabilized value, our Sponsor was able to recoup a portion of his cash equity. There are no TI/LC reserves taken until the beginning of the sixth year and no prepayment penalty at any time.
Challenges:
The application was executed prior to obtaining the Certificate of Occupancy. Additional off-sites mandated by the local municipality added to the development costs and cash equity contribution. State mandated living wage requirements adds an accounting delay that must be signed-off by the State prior to being able to secure lien releases from sub-contractors. Indexes moved against the Borrower, increasing his cost of capital.
Solutions:
Post loan commitment, our portfolio capital provider agreed to increase proceeds by $100,000 to recapitalize our Sponsor for a portion of his cost over-runs. The lender also agreed to a partial set-aside/hold-back until the notice to file mechanics liens had expired. The high construction quality and investment grade credit rated tenant incentivized our portfolio capital provider to hold the applied-for rate through the index run-up.
Advisors
Related Financings
- No related financings.
