$5,108,000 Fixed Rate Permanent Financing for 160-Unit Multifamily with 5 Year Interest Only

Rate: 4.77%
Term: 10 Years
Amortization: Interest Only for 5 years; 30-year amortization thereafter
LTV: 65%
Prepayment: Yield Maintenance
Origination Fee: Par

George Smith Partners placed a $5,108,000 permanent loan for a 160-unit class B garden style multifamily building in a tertiary market located in the southwestern United States after arranging the acquisition loan in late 2016.  During underwriting, the existing national management company exited the market on 30 days’ notice with a looming loan maturity. GSP worked with the lender to demonstrate that the Sponsor had assembled an experienced team in their newly formed management company which allowed the lender to get comfortable with the Sponsor self-managing the asset without a track record of management in similar assets.  Fixed for 10 years at 4.77%, the non-recourse loan is interest only for the first 5 years and 30-year amortization thereafter.

Related Financings

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    $22,367,000 Cash-Out Refinance of 200 Secondary Market Rental Units, CA

    March 20, 2019

    Transaction Description:

    GSP placed the $22,367,000 non-recourse cash-out permanent loan for 200 stabilized units in a secondary California market. This represented a substantial return on equity. Loan proceeds were increased post application as the supportable underwritten net cash flow improved during the due diligence process. Occupancy constantly operated at 98% with future increases forecasted at unit turn. Fixed for seven years at 4.73%, the non-recourse loan is interest-only for two years prior to amortizing over 30 years for the balance of the term.

    Rate: 4.73% Fixed
    Term: 7 Years
    Amortization: Two Years Interest Only; 30 Years Thereafter
    Loan-to-Value: 60%
    DCR: 1.35
    Recourse: Carve-Outs Only
    Prepayment: Loss of Yield
    Loan Fee: 0.50%

  • Expand

    $39,300,000 Forward Rate Lock Permanent Financing of a 154-Unit Luxury Multifamily Property in Ventura, CA

    February 6, 2019

    Transaction Description:
    George Smith Partners successfully arranged the permanent financing for a newly constructed luxury 154-unit apartment complex located in Downtown Ventura, one mile from the Pacific Ocean. The Sponsor sought a permanent loan to refinance the construction loan. The Sponsor’s goal was to lock in a long-term, low interest rate in a rising interest rate environment prior to the building reaching stabilized occupancy.

    Challenges:
    There was significant lease up risk for the permanent lender, as the Property had not yet stabilized with less than a month of operating history at the time of loan underwriting.

    Solution:
    GSP was able to make the Lender comfortable by highlighting the Sponsor’s successful track record, the Property’s strong position in the market with few comparables available, the Property’s excellent location, and the prospects for strong rent growth. GSP secured an early rate lock at a low 1.47% spread over the 10 Year Treasury for a 16 year fixed rate loan term. Sized to 60% of value, the non-recourse financing includes 2 years of interest only payments, which enhances the cash flow during the early years of the loan. The loan closed in 30 days.

    Rate: 1.47% spread over 10 YT
    Term: 192 months (16 Years)
    Amortization: 2 Years Interest Only; 30-Year Amortization Thereafter
    LTV: 60%
    Guarantee: Non-Recourse
    Prepayment Penalty: Yield Maintenance

  • Expand

    $7,000,000 Permanent Refinance for a 53-unit Multifamily Portfolio in West Hollywood

    August 15, 2018

    Transaction Description:
    George Smith Partners secured $7,000,000 for the cash out refinance of three stabilized multifamily buildings in West Hollywood containing a total of 53 units. Constructed in the late 1930s and late 1940s these buildings are situated on one of the most sought after streets in West Hollywood and in close proximity to popular restaurants, bars and entertainment. Fixed at 4.55% for seven years, the non-recourse loan floats at 6 month LIBOR + 2.25% for the remaining 23-year term. The non-recourse loans are fully amortizing and have a 5,4,3,2,1 step down prepayment penalty.

    Challenges:
    Many of the buildings have long term residents who have lived at the properties for over a decade. The long term residency leaves the owner with dozens of units with uncaptured market rents, ultimately affecting the amount of loan proceeds.

    Solution:
    GSP worked with a lender who understood the strength of these assets and was able to underwrite to a 1.15x DCR at the actual note rate. Our Capital Provider was comfortable with the future upside of the properties as the Sponsor has plans to raise units to market rent as tenants vacate.

    Rate: 4.55% fixed for 7 YRS, then 2.25% over 6-mo LIBOR
    Term: 30 years
    Amortization: 30 Years
    Prepayment Penalty: 5,5,4,4,3,2,1
    LTV: 65%
    DCR: 1.15
    Guarantee: Non-Recourse

  • Expand

    $7,100,000 Multifamily Acquisition Loan; 4.02% Fixed

    May 31, 2017

    Transaction Description:
    George Smith Partners secured $7,100,000 for the purchase of a stabilized 58 unit Los Angeles apartment building. Fixed at 4.02% for seven years, the loan self-liquidates and will float at 6 month LIBOR plus 2.35% for the remaining 23 years of the term. Prepayment steps down from 5% and has no prepayment penalty the final two years of the seven year fixed period.

    Challenge:
    Our subject property had been operated with unusually high expenses. These expenses included an exorbitant security contract and an onsite manager that received an above-market salary in addition to free rent. The seller had also not taken advantage of income opportunities such as utility reimbursements. Underwriters were cash flow constrained, limiting proceeds needed for the acquisition.

    Solution:
    GSP emphasized the Sponsor’s strong track record of acquiring and improving multifamily properties in this market. In discussions with capital providers, GSP provided supporting comparable data to demonstrate above market operating expenses and specific non-recurring expenses that would not be incurred on a go-forward basis. GSP identified a regional bank that agreed to underwrite to a 1.15 debt coverage ratio based on our Sponsors’ operating budget. The loan closed in 60 days with no change to the original terms.

    Rate: 4.02% Fixed for 7 years; 6 Month LIBOR + 2.35% thereafter
    Term: 30 years
    Amortization: 30 Years thereafter
    Prepayment Penalty: 5, 4, 3, 2, 1
    LTV: 65%
    DCR: 1.15
    Origination Fees: Par

  • Expand

    $6,625,000 Multifamily Cash-Out Refinance with Two Years Interest Only

    May 17, 2017

    Transaction Description:
    George Smith Partners secured $6,625,000 for the refinance of a stabilized 40 unit Los Angeles apartment building.  This execution offered a return of equity to our Sponsor.  Fixed at 4.34% for seven years; the loan will self-liquidate and will float at 2.25% over the six-month LIBOR for the remaining 27 year term. There are two years of interest only payments and no prepayment penalty after the 5th year.

    Challenges:
    Our subject property has a cell tower lease that had provided consistent income for many years, but a 30-day cancellation clause precluded many underwriters from counting this revenue.  Debt coverage constraints that would minimize proceeds were of concern in this rising interest rate environment.  The bank ordered appraisal did not reflect recent market trades.

    Solution:
    GSP identified a regional capital source that would underwrite down to a 1.20 debt coverage ratio based on going-in cash flow.  The long history of stable collections from the cell tower confirmed this as a viable reoccurring revenue stream. Our ability to lock rate during a market adjustment removed the need for lower DCR constraint.  GSP also provided additional recent neighborhood sale comparables which helped prove up the market value of the property.

    Rate: 4.34% Fixed for 7 years; 6 Month LIBOR + 2.25% thereafter
    Term: 30 years
    Amortization: 2 years IO; 30 Years thereafter
    Prepayment Penalty: 5, 4, 3, 2, 1
    LTV: 67%
    DCR: 1.20
    Origination Fees: Par

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