Rate: Floating at SOFR + 3.20% with a 0.35% SOFR Floor
Term: 3 Years, Two 12-Month Extensions
LTV: 77% Initial / 65% Stabilized
Debt Yield: 4.5% In / 6.0% Out
George Smith Partners secured $65,410,000 in proceeds for the acquisition of a 232-unit multifamily property in San Bernardino County. The bridge loan is structured as $63,020,000 at close and $2,390,000 in future funding. The fully-funded proceeds represent 75% LTC. The loan floats at a rate of 30-Day SOFR + 3.20% with a 0.35% floor on SOFR.
GSP discussed the transaction with over 40 different capital providers and received a wide range of feedback. Many lenders declined due to the Property being constructed in the 1970s. Other lenders provided quotes but were limited to a maximum of 70% LTC ($60,800,000). Several quotes had pricing of SOFR + 4.0%.
GSP was able to source a lender that provided 75% LTC with pricing of SOFR + 3.20%, which is well below market. The Lender underwrote to an exit debt yield of only 6.0%, resulting in maximum proceeds. There was no required interest reserve or any type of cash management during the initial loan term. The spread of 3.20% over SOFR was maintained despite many other lenders widening their spreads while the loan was in app. The loan closed with no changes to the original term sheet.
Another challenge facing floating rate bridge loans is the requirement to purchase a cap. Until several months ago, the cost of a cap was negligible. However, the expense has become exorbitant due to the current volatility in interest rates. GSP was able to lower the up-front cap cost by reducing the period of the cap from 3 years down to 2 and increasing the rate at which the cap is triggered (strike price).
Managing Director & Chief Operating Officer, AXCS Capital
Managing Director & President, AXCS Advisors
Senior Vice President
Director of Research & Marketing
June 29, 2022
George Smith Partners successfully placed a $38,500,000 bridge loan for the acquisition and renovation of two multifamily properties located in Sanford, Florida. The two Properties total 260 units and are located across the street from one another. GSP sourced a lender that was able to maximize proceeds at a low rate by crossing the properties with release provisions. The two properties were allocated at different loan amounts for their release provisions. One property is a 1970’s vintage single-story, 120-unit, apartment complex that had an initial loan of $14,150,000. The other property is a 1990’s vintage, two-story, 140-unit, garden-style apartment complex that was allocated at an initial loan amount of $20,800,000. The loan was sized to 79% LTC and includes the portfolio’s capital improvement and renovation budget. The Sponsor intends on renovating approximately 75% of the units within the 3-year loan term.
Rate: One Month CME Term SOFR + 3.60% (0.25% Floor Rate)
Term: 3 Years, Two 12-Month Extensions
Amortization: Full Term Interest-Only
LTV: 80% (As-Is LTV)
Prepayment: 15 Months Minimum Interest Period
Loan Fee: 1% Origination Fee, 0.25% Exit Fee
May 25, 2022
George Smith Partners secured permanent financing for a 15-unit multifamily property located in Houston, Texas. The financing is fixed at 3.54% for 5 years. The deal went into application right before the Federal Reserve increased rates and before we experienced a run-up in treasuries. GSP’s good standing with the Lender ensured the original terms were honored until closing, notwithstanding the loan extension that took place and the rapid increase in the interest rate environment. The financing does not require any deposit relationship with the bank or any funds to be held back for reserves. The Lender’s processing/application fee was $2,000 and they had no origination fee.
Rate: 3.54%, Fixed for 5 Years
Term: 30 Years
Amortization: 30 Years
Prepayment: 4, 3, 2, 1%
Depository Relationship: None Required
- Advisors: Reuven Risch
May 18, 2022
George Smith Partners secured an acquisition bridge loan for the repositioning of a Class-C apartment community in San Diego. The financing includes a holdback that will be used to renovate both the interior and exterior of the Property over a 12-month period including the addition of a single ADU (garage conversion).
Given the Sponsors’ track record and their successful ability to substantially increase rents in this niche market, GSP was able to secure a Lender that could close quickly (within 25 days), without an appraisal, and allow a $1,000,000 2nd TD up to 98% of the total cost of the Project to accommodate an additional private party investment in the Property.
Rate: 7% Fixed
Term: 18 months + 6-month extension
Min DSCR: 1.15:1.0
Origination Fee: 1.5%
- Advisors: Alina Mardesich
May 4, 2022
George Smith Partners arranged $3,600,000 in acquisition financing for a 16-unit multifamily property in West Hollywood, CA. The Property came with five vacant units that were previously leased at well below market rents. The Sponsor, a repeat client, planned to renovate the vacant unit interiors and increase rents accordingly. GSP leveraged its network of relationships to source short-term, non-recourse, fixed rate financing with interest only payments with an early rate lock. However, the delayed appraisal report uncovered two units that were not legally permitted, which the lender excluded in its underwriting. GSP worked with the Lender, Appraiser and Sponsor on creative solutions to get as close to the original loan terms as possible. These negotiations required several extensions on the closing. Also, the rate lock eventually expired. Ultimately, GSP was able to get a $3,600,000 loan amount thanks in part to additional analysis and data provided to the Lender. GSP also leveraged its relationship with the Lender to secure a 4.25% fixed rate. While this was higher than the original locked rate, it was well below the current market rate.
Highly Leveraged, Quick Close Acquisition of $2,335,000 for 10-Unit Multifamily Property; West Adams – Los Angeles, CA
March 30, 2022
The Sponsor approached George Smith Partners for highly leveraged (80% Loan-to-Purchase), quick purchase financing. GSP secured this financing which allowed the Sponsor to purchase the 10-unit multi-family property well below the market value. Although the Property is currently 100% occupied, rents were below market because the Seller self-managed and the Property needs exterior and interior improvements. GSP arranged a $2,335,000 in non-recourse financing for the acquisition. The loan was structured with a first trust deed from a debt fund as well as a preferred equity B piece. There’s additional flexibility for the Sponsor because there is no prepayment penalty. This loan structure allows the Sponsor to implement their business plan of renovating units, increasing rents, and refinancing into a permanent loan within a few months. The non-recourse facility was priced at an interest-only fixed rate with a blended rate of 8.05% with a 12-month term plus a 6-month extension. Thanks to GSP’s long-standing relationship with this debt fund and preferred equity investor, we were able to close this transaction in less than 10 days from signing the term sheet.
February 23, 2022
George Smith Partners sourced a $3,925,000 loan for the acquisition of a 21-unit property in West Los Angeles. The loan provided 65% leverage and is fixed at a rate of 3.15% for 3 years. The Lender gave the Borrower full credit for newly signed leases and was able to underwrite to the most recent month’s income. Net operating income was underwritten at the actual note rate, which resulted in higher proceeds compared to other lenders. The Property had some deferred maintenance, but the Lender was willing to have the borrowers complete it after closing. The 3-year declining prepay fit with the Borrower’s value-add business plan.