Term: 5 Years
Transaction Description:
George Smith Partners has achieved a successful negotiation of a Programmatic Joint Venture Equity Structure amounting to $5,300,000. This arrangement will fund two affordable multifamily developments in The District of Columbia, involving the renovation of 25 existing units and the construction of 87 new ground-up units.
In a climate of increasing interest rates, and with a considerable number of LP equity groups staying on the sidelines, the team and Sponsor faced challenges in finding an LP partner willing to invest in a single development with a satisfactory rate of return. Despite considering the option of utilizing wealthy family funds for a swift closing, the decision regarding the funding source remained unresolved.
GSP successfully negotiated a programmatic equity arrangement that offers both investors enhanced returns over an extended duration. As a result, the sponsor secured a long-term equity provider for their forthcoming projects, while the equity provider gains the opportunity to access the sponsor’s extensive pipeline, enabling potential future funding returns.
Advisors
Related Financings
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$39,000,000 Construction Debt and Advised on $20,000,000 LP Equity for Seven-Story, 137-Unit Mixed-Use Development; Midtown Sacramento, CA
November 23, 2021
Transaction Description:
George Smith Partners successfully placed $39,000,000 in construction debt and advised on $20,000,000 Limited Partner equity for the ground up construction of 137-unit mixed-use development with ground floor retail in Midtown Sacramento, CA. The Project is the second asset that GSP has structured both debt and equity for a sequence of planned multifamily developments. Pricing for the non-recourse construction loan tightened from the first transaction six months ago.
The site will be developed into a seven-story building consisting of six levels of rental units, parking, and ground floor retail. Situated in Midtown, Sacramento’s trendiest neighborhood, the Property is walking distance to restaurants, shops and is conveniently positioned near the rail station and a local highway. The area has increasingly attracted significant public and private investment due to its proximity to employment hubs and lifestyle amenities.
The capital markets were weary of ongoing supply chain and increasing construction costs. GSP worked with the Lender and equity investor to structure contingency levels that were acceptable to both. The Sponsor was provided with competitive, non-recourse construction loan and an investor that could grow with their future development needs.
Rate: Daily Simple SOFR + 270 (2.79%)
Guaranty: Non-recourse
Amortization: Interest Only
LTV: 65% -
$14,000,000 in JV Opportunity Zone Equity Financing and $23,000,000 in Non-Recourse Construction Financing for the Development of a 127 Unit Multifamily Property; Vancouver, WA
September 25, 2019
Transaction Description:
George Smith Partners advised on $14,000,000 in Joint Venture QOZ (Qualified Opportunity Zone) Equity Financing and $23,000,000 in non-recourse senior construction financing for the ground-up development of a 127 unit multifamily property in Vancouver, Washington, a suburb of Portland, Oregon. The Property sits across the street from the Vancouver Waterfront, which is undergoing a $1.5B dollar public/private master plan redevelopment. The 6-story, 173,000 square foot property will feature a landscaped third floor courtyard, a community room, balconies, two levels of parking, bike storage and excellent views of the Columbia River and Mount Hood.
Challenges:
Due to of the Project’s location in a QOZ, the Sponsor sought a QOZ financing partner who had the ability to place capital for the required 10-year horizon as per the QOZ guidelines. Moreover, many capital sources also expressed reservations related to supply concerns in the greater Portland market.
Solutions:
GSP focused on the Vancouver submarket’s strengths, including very limited new supply in contrast to downtown Portland, no state income tax, the more relaxed lifestyle, the proximity to PDX airport, and the Project’s location in very close proximity to the waterfront. Additionally, GSP highlighted the Sponsor’s ability to execute by showcasing its recent Class A multifamily delivery in Vancouver that fielded a large number of offers and traded at a record low cap rate. Ultimately, an opportunity zone JV Equity financing partner was selected who recognized the strength of the location and Sponsor’s best-in-class development history. These attributes also resulted in GSP securing non-recourse construction financing at 60% loan to cost with an interest rate of 1 Month Libor + 3.65%.
Rate: Floating at 1 Month LIBOR + 3.65%
Term: 3 Years with Two (1) Year Extensions
Construction Loan LTC: 60%
Amortization: Interest Only
Guaranty: Non Recourse- Advisors: Evan Kinne Ed Steffelin
