Rate: 3.40 Fixed
Term: 5 Years
Amortization: 30 Years
Prepayment: 3%, 2%, 2%, 1%
George Smith Partners successfully arranged the cash-out refinance of a three-property multifamily portfolio in Los Angeles County. GSP worked with the Borrower to rearrange his cash flows and expenses that were spread across a larger 10-property portfolio to break out the true operations of three buildings. GSP identified a fixed rate lender that could provide a non-recourse loan with approximately $1,000,000 return of equity to the Sponsor. The 5-year bank loan is fixed at 3.40% and is 65% of appraised value.
GSP worked with the Lender on the underwriting and maximizing the cash flow of the Property to provide the Sponsor with the additional $1,000,000 used for future real estate acquisitions. GSP helped the Sponsor throughout the entire refinance process including the payoff of the previous loan.
Senior Vice President
David R. Pascale, Jr.
Senior Vice President
January 20, 2021
George Smith Partners was retained to refinance a 2-Property multifamily portfolio. Sensing buying opportunities in the multifamily market, the Sponsor wanted to pull cash out of their existing multifamily portfolio to use as equity to purchase new properties. GSP obtained a fixed rate of 3.15% for the first 5 years of the 30-year term.
With the global pandemic and uncertainty in the market, it was critical to select a capital provider who could successfully close and provide the cash out for the additional purchases. Any delays would have been very costly because of penalties in the purchase contract. In addition, most lenders were overwhelmed with year-end financing requests as several other lenders pulled out of the market and forbearance requests from their current borrowers. There were complex issues around appraisals and inspections that required GSP’s daily oversight.
Because of GSP’s strong relationship with this capital provider, we were confident that the loan officer would stay focused, close on time and keep the agreed rate and proceeds. GSP is in the debt market every day which gave us the ability to ensure that the selected Capital Provider was closing deals and meeting deadlines. GSP’s experience working with appraisers, inspectors and title/escrow during the COVID period was critical to getting this transaction completed in a timely manner. The loan closed on time and the Sponsor was able to utilize the cash-out to purchase another project. As is common during the COVID crisis, the Capital Provider wanted a 12-month payment reserve. GSP was able to convince the Capital Provider to only require 6-months and allow the reserve to be applied to the first 6-months of payments.
December 2, 2020
George Smith Partners successfully arranged $18,880,000 in permanent financing for a 192-unit multifamily community. The loan is fixed for 15 years at 3.03% with interest-only payments for the entire term and significant cash-out proceeds. Despite the severe impacts of the COVID-19 pandemic throughout the spring and summer, the Property was able to remain above 95% occupancy with minimal declines in rent collections. GSP capitalized on the Property’s quality, market resiliency, strength of the Sponsor and low leverage to attract quality offers from several lenders.
$8,600,000 Cash-Out Refinance of a 2-Property Multifamily Portfolio During the COVID Pandemic; Los Angeles, CA
July 8, 2020
George Smith Partners was retained to develop and implement a strategy to refinance a 5-Property $50,000,000 multifamily portfolio. GSP divided the properties between two capital providers in order to provide maximum flexibility to the Sponsor. The second part of the portfolio involved obtaining a 70% LTV permanent loan of $8,600,000 to provide the Sponsor with over $1,500,000 in cash-out capital to purchase additional properties during a changing market and maintain a strong cash position. GSP obtained a fixed interest only rate of 3.95% for the first 5 years.
With the COVID-19 global pandemic and uncertainty in the market, it was critical to select a capital provider who could successfully close. Borrowing costs are on the rise as lenders ratchet up their credit standards. The proceeds for this transaction were targeted for the acquisition of an additional asset which had a firm closing date and a large non-refundable deposit. Any delays would have been very costly. With the current crisis, lenders were 100% focused on rent collections and overwhelmed with new financing requests as several other lenders pulled out of the market as well as forbearance requests from their current borrowers. In addition to the usual due diligence requirements, the Lender required much more information. There were complex issues around appraisals and inspections that required lots of hand-holding.
GSP selected a capital provider that we have a strong relationship with and has closed numerous loans for us. We knew the loan officer would stay focused on the need to close on time and keep the agreed to rate and proceeds throughout the loan process. Because GSP is in the debt market every day, we were able to ensure that the capital provider was truly closing deals and meeting deadlines. Because of the market disruption, borrowing rates jumped by over 100 basis points overnight. We were able to lock the 5-year interest only rate at 3.95%, the following day, rates jumped to 4.75%. It was clear that the Lender was mindful of their reputation with GSP and didn’t want to get a reputation of crazy rate increases or abandoning their customers when they are needed the most. GSP’s experience working with appraisers, inspectors and title/escrow during the COVID period was critical to getting this transaction completed. The loan closed on time and the Sponsor was able to utilize the cash-out to purchase another project. As is now common during the COVID crisis, the Capital Provider required a 12-month interest reserve. We were able to convince the Capital Provider to apply those funds to the first 12 months of the loan payments.
September 26, 2018
George Smith Partners secured $7,125,000 in proceeds for the refinance of a 50-unit multifamily property located in Los Angeles. Fixed at 4.515% for a period of 5 years, the loan self-liquidates at 6 month LIBOR plus 2.25% for the remaining 25 year term; there is no balloon date. Two years of Interest Only payments precede loan amortization. Sized to a 1.15 Debt Coverage Ratio, proceeds were coverage constrained. Prepayment steps down from 3% with no penalty after the third year.
Although the building was previously retrofitted, several capital providers required a new PML earthquake risk assessment study due to the masonry construction. As cap rates continue their compression, cash flows are often the limiting constraint for sizing loan proceeds. Industry standard DCR constraints are limited to 1.20x or 1.25x and often use an inflated rate over the actual indexed note rate.
The selected lender did not require any additional structural reports. Our underwriter allocated credit to our Sponsor for their success in fulfilling their business plan over the past two years; the balance sheet basis was not an underwriting factor. Net cash flow included the Property’s higher rental income as well as previously unreported RUBs income, parking income, and laundry revenue. A quoted competitive spread of 160 basis points over the 5 year swap rate demonstrated the Capital Provider’s belief in this location and sponsorship. Our 1.15 DCR constraint resulted in proceeds above the rest of the market.
$80,228,000 Cash-Out, Fixed-Rate Refinance of a 297-Unit Multifamily Property; 10-Years Interest Only at 4.20%
September 19, 2018
George Smith Partners successfully placed a 10-Year, Cash-Out, Fixed-Rate refinance of a 297-unit multifamily property located in Downtown Los Angeles, California. This loan refinanced a 10-Year floating rate loan with a remaining term of 8 years, also arranged by GSP.
Two years ago the Sponsor decided on a variable rate loan and paid an early prepayment penalty on his prior loan, allowing for a significant cash-out and reduction in interest carry. Our client benefited from lower interest rates for the past two years, however, as the long-term interest rates began to increase they decided to switch to a long-term fixed-rate strategy.
There were two objectives for this transaction: 1) leverage appreciated equity, and 2) replace floating rate risk with a long-term fixed-rate. Recent fluctuations in the 10-year Treasury prompted additional urgency in the transaction and GSP moved quickly to arrange the new loan as soon as the former loan’s two-year lockout period expired. Sized at 55% of value, the non-recourse, interest-only loan is fixed at 4.20% for 10 years.
Rate: 4.20% Fixed
Term: 120 months
Prepayment Penalty: Yield Maintenance
- Advisors: Gary M. Tenzer