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$57,900,000 Participating Construction Financing for 187-Unit Multifamily; Tempe, AZ

Rate: 4.25% Fixed
Term: 5 Years
Amortization: Interest Only
LTC: 90%
Guaranty: Non-Recourse

Transaction Description:

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.

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