$67,250,000 of Non-Recourse High-Leverage Senior Construction Financing for the Ground Up Development of a 254-unit Multifamily Tower in Phoenix, AZ

Terms Confidential

Transaction Description:

George Smith Partners arranged $67,250,000 in non-recourse senior construction financing for the ground-up development of a market rate 254-unit, 17 story, multifamily tower in Phoenix, Arizona. The Property is in the Roosevelt arts district of downtown Phoenix near the Valley Metro Rail, Arizona State University graduate schools of journalism and law, as well as the University of Arizona Cancer Center. The Property will feature amenities such as a roof top pool overlooking the downtown skyline and beyond. Sized to 80% of total project cost, the interest only loan will strike a desired balance of debt to equity for the local developer. The Borrower was sensitive to standard bank underwriting decision making and asset management structures. GSP sourced non-recourse construction financing from a non-bank lender with a streamlined and flexible decision-making structure. The capital provider and their asset management team will act more like a partner than a lender from closing through development and payoff.

Advisors

Related Financings

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    $19,100,000 Construction Financing to 92.5% LTC on a 111-Unit, Class-A Apartment Community; St. Louis City, Missouri

    April 8, 2020

    Transaction Description:

    George Smith Partners successfully placed $19,100,000 in construction financing, which funded 92.5% of the total project cost for the construction of a 111-unit second phase of a larger mixed-use multifamily and retail project located in the trendy St. Louis City neighborhood of The Grove. The financing structure included a senior loan to 85% LTC and a preferred equity investment with last-dollar exposure to 92.5% of total project cost. The preferred equity investment is non-recourse and the senior loan provides for only a 50% repayment guarantee that burns down to 25% upon certificate of occupancy. Additionally, the Lender and preferred equity investor gave credit for a lift in land value above the Borrower’s actual cost due to the Sponsor having owned the land since 2016 and it being the second phase of a larger project. GSP leveraged its expertise of the St. Louis market, long-standing lender relationships, and capital markets creativity to achieve the Sponsors goals of minimizing cash equity invested into the project due to how much value is being created in this phase of the project.

    Rate: Confidential
    Term: Twenty-four-month initial term with one, 12-month extension option
    Amortization: Interest only
    LTC: 92.5%
    Prepayment: Nine-months minimum interest
    Guaranty: 50% repayment guarantee that burns down to 25% repayment guarantee upon certificate of occupancy (on senior loan only; does not apply to the non-recourse preferred equity investment)

  • Expand

    $12,375,000 Construction Loan for the Development of a 34-Unit Multifamily Property; 75% LTC; LIBOR+2.45%; Los Angeles, CA

    March 25, 2020

    Transaction Description:

    George Smith Partners secured $12,375,000 in proceeds for the development of a 34-unit multifamily property located in the Greater Wilshire/Hancock Park area of Los Angeles. The proposed development will consist of 31 market rate units and 3 affordable units for very low-income households that are to remain affordable for a period of 55 years. Building plans were approved prior to loan funding; construction is scheduled to commence in March 2020 with an estimated completion date of approximately August 2021, resulting in an 18-month construction period.

    The loan has a term of 24 months from closing with two 6-month extension options. The recourse loan will be secured by the land and the to-be constructed building. The fully funded loan represents 75% of the total project capitalization. The loan will be interest only for the 24-month term floating at 30-Day LIBOR + 2.45%. Upon completion the development will represent excellent quality multifamily units in an in-fill Los Angeles neighborhood. There are several projects currently under-construction in immediate proximity that will be competitive with the Subject Property. GSP selected a capital provider that was knowledgeable about the project’s location and the Sponsor’s experience to mitigate the new supply concerns.

    Rate: Floating; 30-Day LIBOR + 2.45%
    Term: 24 months plus two 6-month extension options
    Amortization: Interest only
    LTC: 75.0%
    Fees: .75%
    Guaranty: Recourse

  • Expand

    $9,400,000 Construction Financing for Luxury Apartment Development; Los Angeles, CA

    February 5, 2020

    Transaction Description:
    George Smith Partners successfully arranged $9,400,000 in non-recourse construction financing for the development of a 15-unit luxury apartment building in West Los Angeles. The Property will be comprised of a mix of 1-bedroom and 2-bedroom units and will include 28 parking spaces. The Class A asset sits in a prime location that adjoins some of Los Angeles most sought-after submarkets. Upon completion tenants will have world class views and easy access to major thoroughfares of the City.

    Problem:
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    Solution:
    GSP accessed its extensive lender network to identify a best-in-class construction lender to provide non-recourse construction financing for the Sponsor. GSP’s longstanding history with this lender allowed for a flexible and streamlined closing process that was favorable to the Sponsor’s project timeline. GSP was able to demonstrate to the Lender that as a family owned, multi-generational asset, the tight spread between development cost and value was a less important metric than for a merchant builder-built building, particularly with a significant equity investment.

    Rate: 1-Month LIBOR + 7.50%
    Term:
    28 Months
    Amortization:
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    LTC:
    56%
    Lender Fee: 1% in / 1% out
    Guaranty:
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  • Expand

    $14,000,000 in JV Opportunity Zone Equity Financing and $23,000,000 in Non-Recourse Construction Financing for the Development of a 127 Unit Multifamily Property; Vancouver, WA

    September 25, 2019

    Transaction Description:

    George Smith Partners advised on $14,000,000 in Joint Venture QOZ (Qualified Opportunity Zone) Equity Financing and $23,000,000 in non-recourse senior construction financing for the ground-up development of a 127 unit multifamily property in Vancouver, Washington, a suburb of Portland, Oregon. The Property sits across the street from the Vancouver Waterfront, which is undergoing a $1.5B dollar public/private master plan redevelopment. The 6-story, 173,000 square foot property will feature a landscaped third floor courtyard, a community room, balconies, two levels of parking, bike storage and excellent views of the Columbia River and Mount Hood.

    Challenges:

    Due to of the Project’s location in a QOZ, the Sponsor sought a QOZ financing partner who had the ability to place capital for the required 10-year horizon as per the QOZ guidelines. Moreover, many capital sources also expressed reservations related to supply concerns in the greater Portland market.

    Solutions:

    GSP focused on the Vancouver submarket’s strengths, including very limited new supply in contrast to downtown Portland, no state income tax, the more relaxed lifestyle, the proximity to PDX airport, and the Project’s location in very close proximity to the waterfront. Additionally, GSP highlighted the Sponsor’s ability to execute by showcasing its recent Class A multifamily delivery in Vancouver that fielded a large number of offers and traded at a record low cap rate. Ultimately, an opportunity zone JV Equity financing partner was selected who recognized the strength of the location and Sponsor’s best-in-class development history. These attributes also resulted in GSP securing non-recourse construction financing at 60% loan to cost with an interest rate of 1 Month Libor + 3.65%.

    Rate: Floating at 1 Month LIBOR + 3.65%
    Term: 3 Years with Two (1) Year Extensions
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    Guaranty: Non Recourse

  • Expand

    $25,500,000 Bridge Loan for VACANT Newly Constructed 65 Unit Multifamily Property; 100% LTC; Fixed at 4.95%; Los Angeles, CA

    September 11, 2019

    Transaction Description:

    George Smith Partners secured $25,500,000 in proceeds for the refinance of a construction loan on a newly constructed 65-unit multifamily property located in Los Angeles. The loan represents 100% of project capitalization and is fixed at 4.95%. The Property had recently received Certificate of Occupancy, but was still completely vacant at close. The bridge loan is intended to give the Sponsor time to lease up the property to stabilization. The fixed rate is unusual for a bridge loan; most capital providers offered floating rate financing and required the purchase of a cap.

    Because the Property was still vacant, the Sponsor’s proforma rents were not yet proven out by signed leases. This was a challenge because the rents are several hundred dollars higher than those of typical multifamily properties in the submarket. GSP was able to overcome this challenge by pointing out that the brand new units at the Subject Property were considerably larger than those in the comp set. This provided support for the premium rents. Another hurdle was the 90% loan-to-cost constraint imposed by most capital providers. The selected lender allowed for 100% of cost, subject to a 7.0% debt yield on the stabilized cash flow.

    Rate: Fixed at 4.95%
    Term: 12 months with one 6 month extension option
    Amortization: Interest Only
    Prepayment Penalty: None (no required minimum interest)
    LTC: 100%
    LTV: 73%
    Stabilized DY: 7.0%
    Fees: 1% in/0% out
    Guaranty: Non-Recourse: None (no required minimum interest)

  • Expand

    $42,700,000 Construction Financing for 286-Unit Garden-Style Multifamily Project; Portland, OR

    September 3, 2019

    Transaction Description:

    George Smith Partners secured $42,700,000 in non-recourse construction financing for the development of a ten-building residential community in the Clackamas County submarket of Portland, OR. The nearly 13-acre site, which is a 20-minute drive from the city, offers an affordable alternative to Portland’s ever-increasing rental rates, as well as an exemption for inclusionary zoning, requiring no affordable units.

    By leveraging the strength of the Sponsor’s local experience, coupled with the city’s need for housing alternatives to the urban infill product, GSP was able to find a non-recourse lender who was comfortable with the fact that the area had seen little development in recent years and offered no comparable product. The loan was priced at 30-Day LIBOR + 3.55% and was sized to 65% LTC, which is aggressive leverage considering the pricing and the non-recourse structure. As costs rose approaching the final budget, the Lender ratably increased the proceeds of their loan to minimize additional Sponsor dollars in, which ultimately showed a commitment to a long-term relationship; this was their second time working together, the first being another Portland development GSP sourced in 2017.

    Rate: Floating at 30 Day LIBOR + 3.55%
    Term: 3 Years with Two (12) Month Extensions
    Amortization: Interest Only
    LTC: 65%
    Guaranty: Non-Recourse

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