Rate: Terms are confidential
Term: 3 Years Plus 1 Year Extension
Amortization: Interest Only
Transaction Description: George Smith Partners successfully arranged the combined $63,400,000, 83% of total cost, non-recourse, construction financing for a 312 unit, 19 story high-rise, Class-A Multifamily over retail project in the downtown area of a major Southwestern MSA. The subject property will be located near major universities, offices, restaurants, and a growing arts district. This project represents one of the highest quality, most amenitized, and dynamic rental projects in this region.
Challenge: The Sponsor requested high leverage, non-recourse, construction financing on an asset class that at the time, and in this market, was a non-starter for most capital providers. The Sponsor had limited experience in the development of this specific asset class and was seeking leverage at a level that was a challenge for a single lender to get comfortable with.
Solution: GSP was able to demonstrate the compelling economics at the project level by showing the pent-up demand for this project type in this specific market, highlighting the barriers to entry with limited available land, and the singular quality of the location with proximity to places of employment, graduate level education, and a light rail line. The capital providers who stepped up, understood the value of this location, the cost basis and the Sponsor’s ability to deliver a product that is superior to competing properties in the market. The senior lender and third party mezzanine lender did not have an existing inter-creditor agreement in place prior to this transaction, but successfully structured an agreement. The final borrowing structure involved multiple entity-level-only guarantors for the limited guaranties that were required. GSP also assisted with two separate interest rate caps provided by a third party rate cap provider and placed with two separate institutions to protect from anticipated floating rates.
$27,020,000 Construction Financing for a 95% Preleased, Grocery-Anchored Retail Center; Inland Empire, CA
November 30, 2022
George Smith Partners successfully placed $27,020,000 (83.5% LTC) of construction financing for the development of a 95%-preleased, grocery-anchored retail center in the Inland Empire. Pre-leased with credit tenants like Sprouts, Burlington, and Five Below, the remaining tenant mix included a diverse assortment of community-oriented tenants with strong overall synergy. With loan proceeds funding the acquisition of the 15-acre site, the Sponsor planned to develop ¾ of the site as the aforementioned retail development, holding on to 4-acres as a second phase. Furthermore, the Sponsor planned to sell a pad site to a future tenant at close of the land.
Although capital providers continued to be hesitant in financing retail construction, GSP was able to source competitive financing through the development’s strong sponsorship and significant preleasing. Most importantly, GSP found a lender comfortable with the sponsor’s proposed equity structure, which involved a minimal initial cash contribution followed by additional equity contributions from pad and land sales.
Loan Term: 36 Months
Interest Rate: SOFR + 3.45%
February 16, 2022
George Smith Partners placed a $29,250,000 senior construction loan for a ground-up development of a mixed-use project in Bellflower, CA. When complete, the 5-story Project will consist of 91 apartment units and approximately 14,550 SF of 1st-floor commercial/retail/restaurant space. The Subject is located at the northern boundary of the Downtown Bellflower District and is an integral component of the city’s TOD Specific Plan. When complete, residents will be able to access LAX, the South Bay, and DTLA via the Blue and Green Metro lines.
As the marquee development for the Bellflower TOD Specific Plan, few comparable projects were available in proximity to the Project site. GSP focused interested lenders on the supporting employment centers within a twenty-minute driving distance, including seven medical centers inside of a 5-mile radius. Additionally, while few Class-A style multifamily properties currently exist near the site, GSP used submarket data to show that demographic trends within the immediate area support the need for new product. GSP executed a broad and in-depth marketing campaign to help capital markets understand the opportunity.
May 19, 2021
George Smith Partners arranged $56,500,000 in construction financing for the development of a mixed-use coastal infill project in Solana Beach, CA. The mixed-use development features 55,000 square feet of office space, 9,000 square feet of retail and 25 apartment units.
Located just one block from the beach and the Cedros Avenue Design District, the two-story development focused on sustainability will be the largest mixed-use project along Highway 101 in the past three decades. The dearth of comparable projects, especially ones with large office floorplates, presented a unique opportunity.
Amidst a time of market volatility and economic uncertainty, GSP was able to identify capital who not only understood the value of all three components and the subsequent demand but also the ability of the Sponsor to execute on the intended business plan.
All Terms Confidential
$58,000,000 Life Co. & Preferred Equity Non-Recourse Construction Financing; Culver City Adjacent, CA
April 28, 2021
George Smith Partners successfully closed $58,000,000 in non-recourse construction financing for a seven-story, mixed use development across from Sony Pictures Studios and adjacent to Culver City, CA. The Project features 139 apartment units over 1,969 SF of ground floor retail. The Sponsor received a density bonus thanks to TOC incentives, in exchange for allocating 14 affordable units.
While this is the second U.S. project – the first was also financed by GSP – for a successful international developer, the pool of capital providers was significantly reduced due to the borrowing entity being headquartered in a foreign country. Presenting this deal during the height of the COVID-19 pandemic also presented significant challenges. GSP leveraged its structured financing expertise, lender relationships, strength of the Project and the Culver City market to negotiate the most desirable terms for the Sponsor.
The financings are comprised of $42,000,000 in senior construction debt from a Life Co. lender and $16,000,000 in preferred equity and includes a substantial amount in recap funds to the Sponsor at closing. The term is five years, with interest only payments and no prepayment penalty upon Certificate of Occupancy. The senior note is LIBOR + 390 and the preferred equity investment’s interest will be fully accrued during the entire term, thereby reducing the amount of interest reserve and the Sponsor’s initial cash equity contribution.
Rate: L + 390 (senior)
Term: 5 Years
Amortization: Interest Only
Prepayment: None upon Certificate of Occupancy
Guaranty: Non-Recourse; Completion Guarantee with Standard Carveouts to an Entity
$60,200,000 Ground-Up Construction Financing, 85% LTC, 6.65% Blended Coupon on a 307-Unit, Class-A Apartment Community; St. Louis City, MO
February 17, 2021
George Smith Partners successfully placed $60,200,000 in high-leverage construction financing, which funded 85% of total project cost for the construction of a 307-unit mixed-use multifamily and retail project located in the trendy St. Louis City neighborhood of The Grove. GSP leveraged its lender relationships, capitalization structuring acumen, local market expertise, and strong project fundamentals to arrange the most accretive financing structure available in the market during the peak of the COVID-19 pandemic. The capitalization included a senior loan to 60% loan-to-cost and a preferred equity investment with last-dollar exposure to 85% of total project cost. The preferred equity investment is non-recourse and the senior loan required only a top-end 25% repayment guarantee. Additionally, the Lender and preferred equity investor gave credit for a lift in land value above the Borrower’s actual cost due to the Borrower having created substantial value through entitlements and development incentives.
Rate: 6.65% (blended coupon)
Term: Three-year initial term plus two, 12-month extension options
Amortization: Interest only
Prepayment: 2%, 1%, open
Guaranty: 25% repayment guarantee on senior loan only; does not apply to the non-recourse preferred equity investment
Lender Fee: 0.82% blended
$14,050,000 Acquisition and Reposition Financing, 89% LTC (4.90% blended coupon) on a 79-Unit, Mixed-Use Apartment and Retail Project; St. Louis City, Missouri
December 2, 2020
George Smith Partners successfully placed $14,050,000 in construction financing, which funded 89% of total project cost, for the acquisition and reposition of a 79-unit, mixed-use property in a desirable and historic St. Louis City neighborhood. GSP was engaged by the Borrower when its original lender, a national REIT, was forced to re-trade the Borrower on loan terms due to the COVID-19 pandemic. Upon being engaged, GSP was able to source the replacement debt and equity in time to close the transaction without a material delay. The financing structure included a senior loan to 81% loan-to-cost and a preferred equity investment with last-dollar exposure to 89% of total project cost with a 4.90% blended cost of capital. GSP leveraged its expertise of the St. Louis market, long-standing lender relationships, and capital markets creativity to achieve the Borrower’s goals of minimizing cash equity invested into the Project so that it can keep a substantial cash reserve to pursue additional projects which are expected to present themselves during the COVID-19 pandemic.
Term: 36-months with one, 12-month extension option
Amortization: 24-months interest only, 25-year amortization thereafter
Guaranty: Full repayment guarantee (on senior loan only; does not apply to the non-recourse preferred equity investment)
Lender Fee: 50bps