$5,127,000 Bridge Financing for On-Campus, 79% occupied Medical Office Building in Gardena, CA

Transaction Description: George Smith Partners successfully sourced the senior debt for the acquisition of a 39,000 square foot, 79% occupied on-campus Medical Office Building in Gardena.  Sized to 70% loan to value, the loan is fixed for 5 years at 4.25%, amortizing over 25 years, with 1 year of interest only.  Mr. Yazdi was able to negotiate a four year prepayment structure as well as the ability for our sponsors to pay down up to 20% of the loan every year without incurring a penalty.  The loan also includes a one-time future earn-out once our sponsors obtain 90% occupancy and a Trailing 3 month P&L at a 1.35x DCR within the first year.

Challenges:  The property’s master lease to a Hospital had expired a year before our clients purchased the building, and many of the tenants were on MTM leases or had no lease at all.  The property was 79% occupied when we got into application and there was also a significant amount of tenant turnover throughout the loan term.  Lastly, our borrower did not have any experience owning and operating medical office.

Solution: Mr. Yazdi worked diligently with the current management company in obtaining Estoppels/SNDAs and negotiating a few lease extensions with current tenants.  Mr. Yazdi also focused on the strength of the market and location of the property to get lenders comfortable with the remaining month to month tenants and the current vacancy/low income.  By sourcing a lender whose DCR requirement was based on Interest Only payments, we were able to maximize loan dollars while meeting their underwriting guidelines in spite of the property’s low, in-place NOI.  He also displayed his client’s financial strength and his willingness to hire a management company in order to make up for his lack of experience.