Rate: 4.25% Fixed
Term: 5 Years
Amortization: Interest Only
George Smith Partners successfully arranged $57,900,000 in non-recourse, construction financing for a mid-rise, Class A, 187-unit multifamily development in Tempe, AZ. The Project will serve the rapidly developing area of north Tempe. The Property is located immediately adjacent to a Valley Metro light rail stop, offering residents convenient access to Downtown Tempe, Arizona State University, Sky Harbor Airport, and downtown Phoenix.
The Sponsor, headquartered in nearby Scottsdale with a successful track record of multifamily and commercial developments, engaged GSP in 2020 to source high-leverage, non-recourse financing. Despite being relatively early in the Project’s development stage, GSP sourced a Lender offering a 90% LTC loan, which includes a participating feature. This unique structure features the Lender sharing profits with the Sponsor in exchange for the high leverage financing.
The construction budget grew significantly during the longer than expected entitlement and permitting process. Fortunately, thanks to GSP’s close relationship with the Lender, a commensurate increase in market rents, and the strength of the Sponsor, the final loan amount was nearly 40% higher than that of the original loan application in 2021.
$85,800,000 Senior Construction-to-Perm Financing for a 372-Unit Multifamily Project; Sacramento, CA
May 16, 2023
George Smith Partners successfully arranged $85,800,000 in construction financing for a 10-building, 372-unit multifamily development in Sacramento, CA. The project is located in an opportunity zone of Sacramento and is phase A of a 2,200-unit, transit-oriented development. Breaking ground in Q2 2023, this phase of the development will consist of studios, one, two, and three-bedroom apartments with best-in-class amenities, including a pool, fitness center, playground, and clubhouse.
The Sponsor engaged GSP pre-pandemic. A previous developer had acquired the land in the early 2000s and after completing 95% of the site’s infrastructure, subsequently filed for bankruptcy protection in 2017. The site was given back to the lender in early 2019 and was awarded to the Sponsor by the urging of the City of Sacramento because of their local reputation related to successful projects in the downtown sub-market. Our Sponsor originally intended to begin construction in early 2020 but decided to pivot layout designs to match the new needs of its renters due to the pandemic.
After an extensive capital marketing process, GSP was able to secure financing to the Sponsor’s parameters with the upside of not having a rate cap requirement. The financing structure is also unique in that it transitions from an interest-only period to a traditional permanent fully amortizing financing automatically after month 48. Early prepayment is available even during the construction period and then steps down until a fully open prepay year 4 after CofO.
Rate: 1-Month SOFR + 3.50%
Term: 15 Years
Amortization: Interest Only for First 4 Years, then 30 Year Amortization
Guaranty: Full Recourse with Burn-Off to 20% at CofO
$33,800,000 Construction Loan for 83-Unit Multifamily Property with 50% Co-living Units; Los Angeles, CA
May 3, 2023
George Smith Partners secured $33,800,000 of senior construction financing for the development of an 83-unit ground-up multifamily building in an infill Los Angeles location. The 83 units will be comprised of 50% conventional units and 50% co-living units. While the property is in an A+ location, many lenders were uncomfortable with co-living in general. GSP was not only able to find a lender that was comfortable with the product type but was also able to get to almost 70% of total project cost. The lender also gave the borrower credit for the entitled value of the land as opposed to their acquisition cost from the year prior. The land equity contributed a significant portion of the total equity required.
The construction loan was priced at Prime + 0.75% and the loan term is 18 months plus one 6-month extension option.
Rate: Prime + 0.75%
Term: 24 Months with Two 6-Month Options to Extend
Stabilized LTV: 55%
$8,500,000 Construction Financing for 35-Unit Apartment Building; Los Angeles, CA
April 26, 2023
George Smith Partners secured $8,500,000 of senior construction financing for the development of a 35-unit ground-up multifamily building in Los Angeles, California. GSP was sourcing financing when banks were getting increasingly conservative in their underwriting, with leverage falling and compensating deposits required. Given the strong track record of the developer, GSP identified a bank that was able to maximize the leverage with no deposits held at the bank. The Sponsor was also able to use land equity in the capital stack.
The construction loan was priced at Prime + 1.25%. The loan term is 18 months plus one 6-month extension option.
Rate: Prime +1.25%, with a Floor of 6.50%
Term: 18 Months with One 6-month Option to Extend
Stabilized LTV: 60%
Construction Multifamily Takeout Financing; Los Angeles, CA
December 15, 2022
George Smith Partners arranged permanent financing for the refinance of a stabilized 12-unit multifamily property in Los Angeles, California. The Sponsor finished construction on the Property in the middle of the current rate hike cycle. GSP identified a Capital Provider who allowed an early rate lock before Certificate of Occupancy was issued. The Lender allowed the borrower to go into application with very little lease up, but with the understanding that the property would be stabilized by closing. Although the closing took slightly longer than the 60 day term of the rate lock, the Lender held the rate for no additional charge. The bank did not require deposits to be held at their branch except for the subject property’s operating account.
Term: 5 Years Fixed
Amortization: N/A, Interest Only for all 5 Years
Prepayment Penalty: Stepdown; 3/3/2/1/1
Deposits Required: None
- Advisors: Matthew Kirisits
$9,000,000 Construction Financing for 28-Unit Apartment Building; Los Angeles, CA
August 17, 2022
George Smith Partners secured $9,000,000 of senior construction financing for the development of a 28-unit ground-up multifamily Building in Los Angeles, California. The Project will be a conventional 28-unit property with 4 stories, including 12 one-bedroom units and 16 two-bedroom units. The construction loan floats at a rate of Prime + 1%. The 75% loan-to-cost construction loan also comes with the option to convert to a 5-year mini-perm loan upon completion; based on the 5-Year Treasury plus a margin of 2.75%, with a 3.95% floor, eliminating any future financial risks. GSP sourced a Lender that was able to move efficiently and most importantly accommodate the Borrower’s development timeline and experience.
Rate: Prime +1%, with a Floor Rate of 5.00%
Term: 18 Months with Two 6-Month Options to Extend
Stabilized LTV: 65%
Mini-perm Option: 5-Year Treasury + 2.75% with a 3.95% Floor
$47,000,000 Senior Construction Loan for a Mixed-Use Development; Azusa, CA
April 11, 2022
George Smith Partners placed a $47,000,000 senior construction loan for the ground-up development of a mixed-use project in Azusa, CA. When complete, the 5-story project will consist of 127 apartment units and approximately 10,000 SF of 1st-floor commercial/retail/restaurant space. The Project is an integral component in the ongoing expansion of the City of Azusa’s Downtown district and is immediately adjacent to the Gold Line Station, which runs from Azusa Pacific University & Citrus College west to Downtown Los Angeles. This is the Sponsor’s second project in Azusa.
A lack of comparable projects within the submarket posed a challenge. GSP emphasized the supporting employment centers inside a ten-mile radius, including the two colleges and eighteen medical facilities. In addition, a detailed breakdown of the San Gabriel Valley (SGV) submarket helped showcase the presence of a proportionally higher share of younger households than statewide. Data depicting home values that had grown out of reach for those living in a three-mile radius helped the case for a rental project. Further support was provided by the SGV submarket experiencing minor economic impact during the last two years and during Covid.
GSP executed a full-time marketing campaign and identified the most economically beneficial capital stack scenario for the sponsorship with a stepdown in rate at Temporary Certificate of Occupancy (TCO).
Rate: Floating rate (SOFR-based) with rate stepdown at TCO
Term: 36 Months + Two, 12-month Extensions
Stabilized Loan-To-Value: 70%