$4,900,000 Co-Living Construction Loan in Los Angeles, CA

Rate: LIBOR + 400
Term: Two Years + 1 Six Month Option
LTC: 70%
LTV: 60%
Guaranty: Recourse

Transaction Description:

George Smith Partners placed a $4,900,000 construction loan for a shuttered assisted living facility to be converted to a 42 bed co-living facility targeted toward young working professionals. As rental housing prices continue their rise many developers are addressing affordability with smaller units that offer common living amenities to maintain lower costs. The co-living concept of a singular bed/unit is popular in New York, Seattle, San Francisco and has a strong foot-hold in the Hollywood market of Los Angeles. Located adjacent to Downtown Los Angeles, the Subject Property proved challenging to comp as it is not located in Hollywood and co-living is a new concept in this market. Partially or fully furnished bedroom units are supported by a central communal kitchen. Some units will share a bath. Utilities are provided, including heat, cable and WiFi allowing residents to move-in with simplicity and ease. Social connections are encouraged through property gatherings and a movie room. A business center will also be offered to residents. This is the first co-living development for this sponsorship team. Priced at L+400, the two-year term was constrained by 70% of capitalization and 60% of “As-Stabilized” value. There is a six month option to extend for an additional 50 basis points.

Advisors

Related Financings

  • Expand

    $21,700,000 Construction-to-Perm Loan for Self-Storage Project; Santa Clarita Valley, CA

    May 20, 2020

    Transaction Description:
    George Smith Partners successfully secured a high leverage $21,700,000 non-recourse, Construction-to-Perm loan to develop a six-building, 966-unit, climate controlled, Class-A self-storage facility near Stevenson Ranch in the Santa Clarita Valley, California.

    Challenges:
    The Sponsor, while very experienced in other asset classes, engaged GSP to source the full capital stack (debt, equity and carve-outs guarantor) for his first self-storage project. New Building & Safety codes that took effect in 2020 resulted in increased costs and delays. In order to obtain certified pads by the end of 2019, the entitlements in-place had to be vetted and the horizontal work needed to start prior to securing construction financing. The impacts of Covid-19 resulted in multiple delays from subcontractors, County inspectors, and in pulling permits due to County offices being closed.

    Solutions:
    GSP was able to source an investor from its pool of strong relationships who provided the equity. GSP focused on the market necessity for storage units in the desirable and growing community of Santa Clarita Valley, and successfully negotiated an agreement with Public Storage to operate the facility. GSP identified a capital provider to not only extend the financing commitment multiple times, but also to execute a structured, non-recourse, low-rate loan with the same terms agreed upon prior to Covid-19.

    Rate: 4.75% Fixed
    Term: 1 + 5 (12 Months Construction, then 5 Years Perm)
    Amortization: 3 Years I/O then 30 Years Amortization
    LTC: 80%
    Guaranty: Completion Guarantee

  • Expand

    $7,025,000 Non-Recourse 77% LTC Adaptive Re-Use Construction to Perm; 3.50% Fixed for 10-Years; Southern California

    April 29, 2020

    Transaction Description:

    George Smith Partners arranged $7,025,000 in non-recourse construction to permanent financing for the adaptive re-use of an existing vacant bank branch building to a medical office building. Located in a prime Southern California submarket and sized to 77% loan to cost, the construction facility consists of an initial funding of $4,825,000 with future draws of $2,200,000 to complete the reposition of the Property. The non-recourse loan is fixed for 10-years at a rate of 3.50% with three years of interest only then converting to a 30-year amortization schedule for the remaining loan term. The loan is structured with a step-down pre-payment schedule of 4%,3%,2%,1% and open thereafter with no pre-payment penalty for added flexibility.

    Rate: 3.50% Fixed
    Term: 10-Years
    Amortization: 3-Years Interest Only, 30-year amortization thereafter
    LTC: 77%
    Prepayment: 4%, 3%, 2%, 1%, 0%
    Guaranty: Non-Recourse

  • Expand

    $19,100,000 Construction Financing to 92.5% LTC on a 111-Unit, Class-A Apartment Community; St. Louis City, Missouri

    April 8, 2020

    Transaction Description:

    George Smith Partners successfully placed $19,100,000 in construction financing, which funded 92.5% of the total project cost for the construction of a 111-unit second phase of a larger mixed-use multifamily and retail project located in the trendy St. Louis City neighborhood of The Grove. The financing structure included a senior loan to 85% LTC and a preferred equity investment with last-dollar exposure to 92.5% of total project cost. The preferred equity investment is non-recourse and the senior loan provides for only a 50% repayment guarantee that burns down to 25% upon certificate of occupancy. Additionally, the Lender and preferred equity investor gave credit for a lift in land value above the Borrower’s actual cost due to the Sponsor having owned the land since 2016 and it being the second phase of a larger project. GSP leveraged its expertise of the St. Louis market, long-standing lender relationships, and capital markets creativity to achieve the Sponsors goals of minimizing cash equity invested into the project due to how much value is being created in this phase of the project.

    Rate: Confidential
    Term: Twenty-four-month initial term with one, 12-month extension option
    Amortization: Interest only
    LTC: 92.5%
    Prepayment: Nine-months minimum interest
    Guaranty: 50% repayment guarantee that burns down to 25% repayment guarantee upon certificate of occupancy (on senior loan only; does not apply to the non-recourse preferred equity investment)

  • Expand

    $4,500,000 Non-Recourse Self Storage Adaptive Reuse Construction Financing Fixed at 4.75%; Orlando, FL

    March 25, 2020

    George Smith Partners placed $4,500,000 in non-recourse construction financing for the adaptive reuse of a big box retail furniture store to convert to a 1,250-unit state of the art self-storage facility. The Property is located in Orlando, Florida, within a Qualified Opportunity Zone (QOZ) and was capitalized with a QOZ equity partner. Deal requirements included a non-recourse bank execution and best possible rate given the low leverage ask resulting from the QOZ equity partner’s significant investment in the Project.

    GSP identified a bank lender that understood self-storage construction and found the institutional sponsorship attractive. The Capital Provider was willing to offer a simple, non-recourse execution and a swap product that resulted in a 4.75% fixed rate for the duration of the loan. A four-year initial term was offered to accommodate for the longer lease-up velocity common among self-storage properties.

    Rate: 4.75% fixed (Swapped out 1 Month Libor + 315 at closing)
    Term: 4 years with a 2-year extension
    Amortization: Interest only for the initial term; 25-year amortization thereafter
    Prepayment Penalty: None (apart from Swap breakage)
    LTC: 45%
    Guaranty: Non-Recourse

  • Expand

    $12,375,000 Construction Loan for the Development of a 34-Unit Multifamily Property; 75% LTC; LIBOR+2.45%; Los Angeles, CA

    March 25, 2020

    Transaction Description:

    George Smith Partners secured $12,375,000 in proceeds for the development of a 34-unit multifamily property located in the Greater Wilshire/Hancock Park area of Los Angeles. The proposed development will consist of 31 market rate units and 3 affordable units for very low-income households that are to remain affordable for a period of 55 years. Building plans were approved prior to loan funding; construction is scheduled to commence in March 2020 with an estimated completion date of approximately August 2021, resulting in an 18-month construction period.

    The loan has a term of 24 months from closing with two 6-month extension options. The recourse loan will be secured by the land and the to-be constructed building. The fully funded loan represents 75% of the total project capitalization. The loan will be interest only for the 24-month term floating at 30-Day LIBOR + 2.45%. Upon completion the development will represent excellent quality multifamily units in an in-fill Los Angeles neighborhood. There are several projects currently under-construction in immediate proximity that will be competitive with the Subject Property. GSP selected a capital provider that was knowledgeable about the project’s location and the Sponsor’s experience to mitigate the new supply concerns.

    Rate: Floating; 30-Day LIBOR + 2.45%
    Term: 24 months plus two 6-month extension options
    Amortization: Interest only
    LTC: 75.0%
    Fees: .75%
    Guaranty: Recourse

  • Expand

    $30,000,000 Development Loan for Institutional Sponsor, Boise, ID

    February 19, 2020

    Transaction Description:

    George Smith Partners secured a $30,000,000 loan for the construction of a 161-unit, Class A mixed use development in downtown Boise, Idaho. The Project is positioned to become the premiere development site in Boise and will serve the continued growth of the greater Treasure Valley. As one of the fastest growing MSA’s in the U.S., Boise has seen an increased demand for more housing to meet its population growth.

    Due to the location, architecture, and amenities, the 8-story project was underwritten to a valuation which included rents 20% above market. This provided a challenge when marketing the transaction as the market, despite the rapid expansion, is less than 750,000 people and only recently started to see an influx of institutional capital. Sized to 60% LTC and 50% LTV the asset ultimately received best-in-class pricing over a three-year term with two, one-year extensions. The high net worth sponsorship was comfortable with recourse in order to obtain a loan from a national institution with flexible capital.

    Rate: L + 235
    Term: 3 years + 1 + 1
    Loan-to-Cost: 60%
    Guarantee: Top 50% only

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

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

Subscribe Here