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$5,550,000 Non-Recourse Acquisition Loan at 5.15% Fixed for Ten Years, 3 Years Interest Only

Rate: 5.15% Fixed
Term: 10 Years
Amortization: 30 Years
Interest Only: 3 Years
Prepayment Penalty: Defeasance
LTV: 55%
DCR: 1.30x
Origination Fees: Par

Transaction Description:
George Smith Partners secured $5,550,000 for the acquisition of a 129,861 square foot multi-tenant industrial/office building located in a suburb of Atlanta. Constructed in 1998, the building was completely renovated in 2017. The space was divided into three and re-tenanted with local companies. Fixed at 5.15% for ten years, the non-recourse loan has 3 years of interest only payments, followed by a 30-year amortization.

Prior to the renovation, the building was occupied by a single tenant. The tenant vacated while the Property was under renovation, resulting in a gap in the historical P&Ls. The newly renovated property had less than one year of cash flow seasoning and three recently signed leases. Although the new NNN leases are for 10 year terms, they contain termination options. The Buyer requested to have only the borrowing entity sign as the carve out guarantor on the non-recourse Guaranty.

GSP worked with a Lender that understood the strength of the asset and the submarket. The limited occupancy history was addressed by emphasizing the strength of the newly signed Tenants and the appraisal provided further support for the stability of future cash flow. As a result, the Lender was able to utilize the short operating history and approve an entity to sign on the carve out, without the requirement for a warm body guarantee.


Related Financings

  • $25,500,000 Non-Recourse Bridge Financing for an Acquisition of an Office Building; Phoenix, AZ

    December 18, 2019

    Transaction Description:

    George Smith Partners arranged $25,500,000 in non-recourse bridge financing for the acquisition of a 230,000 square foot Class A office building located in the heart of Phoenix, Arizona’s Midtown District. Positioned on a heavily trafficked thoroughfare of a major professional corridor, the site benefits from its central location, proximity to Downtown Phoenix and abundance of local economic drivers. The Project, built in 1982, had been well-maintained but was running a below-market occupancy rate of 82% due to the recent expiration of a large tenant lease. This bridge facility allowed the Canadian-based Sponsor to purchase the asset and undergo a proposed renovation, bringing the design up to competitive market standards in order to successfully lease-up and stabilize the asset.

    By focusing attention on sophisticated bridge lenders active in the local area, GSP identified a capital provider who understood the growth of the market. The selected Capital Provider structured around the Project’s current vacancy, recognizing the strength of the Sponsor and their ability to successfully execute on the intended business plan of value creation. The loan was structured with minimal cash management language and featured pari passu funding throughout the term. The interest only non-recourse bridge loan was priced at a spread of 350 basis points over the 30-Day LIBOR, with a three-year term and two 12-month extension options.

    Rate: 30 Day LIBOR + 3.50%
    Term: 36 Months with Two 12-Month Extensions (3+1+1)
    LTC: 65%
    Amortization: Interest Only
    Guaranty: Non-Recourse

  • $15,400,000 Non-Recourse Acquisition Financing for Office Tower; 3.68%; 70% LTV; 10 Year Interest Only; San Fernando Valley, CA

    August 14, 2019

    Transaction Description:
    George Smith Partners secured $15,400,000 in non-recourse acquisition financing for an office tower located in the San Fernando Valley. The loan is fixed at 3.68% for 10 years with full term interest only payments. The proceeds represent 70% of the acquisition price.

    The Property has over 40 tenants and many leases will roll within the next 2-3 years. Shortly before the PSA was signed, a major tenant moved out resulting in vacancy of 10%. The Property receives income both from cell tower leases and excess parking capacity, but many lenders do not give credit for these types of revenue. The seller included both regular operating expenses and capital expenditures in the historical P&Ls.

    GSP demonstrated that the Property had historically high occupancy above 95% and provided data that demonstrated the strength of the local office market. This made the Lender comfortable with the short term leases and the temporary increase in vacancy. Additionally, while the loan was in application, the Sponsors signed a new lease to bring occupancy back up. The Lender did not require seasoning on this new lease. The Lender was able to include cell tower and parking income based on the historical P&Ls. Finally, GSP obtained the Seller’s general ledgers and was able to separate out major capital expenditures from the P&Ls. The Lender was ready to move quickly and close in about 30 days, but the Seller requested an extension and the loan closed about 50 days from application.

    Rate: Fixed at 3.68%
    Term: 10 years
    Amortization: Full Term Interest Only
    LTV: 70%
    DCR: 1.4
    Guaranty: Non-Recourse: Fixed at 3.68%

  • $31,380,000 High-Leverage Bridge Loan to Acquire & Renovate 89,000 SF Office Building in South Pasadena, CA

    June 6, 2018

    George Smith Partners secured $31,380,000 of non-recourse bridge debt to purchase and renovate a multi-tenant Class A office property in South Pasadena. The Sponsor purchased the property with the intent to add significant value through increasing rents and occupancy. The Sponsor purchased the property because of the very strong demographics in South Pasadena and intends to lease to tenants that will pay a premium to be near their clientele. The challenge was convincing the appraiser to use Downtown Pasadena rents since there are no comparable properties in the immediate area. George Smith Partners successfully arranged financing at 85% of cost given the expected increase in value over the next three years.

    Rate: L+565
    Term: 2 years + Two 12 Month Extensions
    LTC: 85%
    Amortization: Interest Only
    Prepayment: 18 Months Minimum Interest
    Guarantee: Non-Recourse