Rate: Fixed at 3.5% for 5 years then floats at 6 Month LIBOR + 3.25%
Term: 20 years
Amortization: 30 years
Interest Only: 3 Years
George Smith Partners secured $7,167,000 in non-recourse financing for a mixed use property with 46 residential units and 5,350 sf of ground floor retail space. The financing provides 65% leverage and is fixed at a rate of 3.50% for five years with three years of interest-only payments. Several challenges were encountered when discussing the transaction with capital providers. Since the Property is mixed use, extensive market comparable data was required to prove out the value of both the residential and retail portions. A different cap rate was applied to each component of the Property before summing the individual values. This process demonstrated that the Lender’s underwritten value was well supported. One of the retail spaces is occupied by a nightclub and several lenders declined the deal because of the high turnover rate with this type of tenant. GSP showed that the nightclub was in place for over 10 years and remains very popular to this day. Despite rates rising during the diligence process, the Lender held the rate even without a formal rate lock.
Senior Vice President
Assistant Vice President
January 20, 2021
George Smith Partners was retained to refinance a 2-Property multifamily portfolio. Sensing buying opportunities in the multifamily market, the Sponsor wanted to pull cash out of their existing multifamily portfolio to use as equity to purchase new properties. GSP obtained a fixed rate of 3.15% for the first 5 years of the 30-year term.
With the global pandemic and uncertainty in the market, it was critical to select a capital provider who could successfully close and provide the cash out for the additional purchases. Any delays would have been very costly because of penalties in the purchase contract. In addition, most lenders were overwhelmed with year-end financing requests as several other lenders pulled out of the market and forbearance requests from their current borrowers. There were complex issues around appraisals and inspections that required GSP’s daily oversight.
Because of GSP’s strong relationship with this capital provider, we were confident that the loan officer would stay focused, close on time and keep the agreed rate and proceeds. GSP is in the debt market every day which gave us the ability to ensure that the selected Capital Provider was closing deals and meeting deadlines. GSP’s experience working with appraisers, inspectors and title/escrow during the COVID period was critical to getting this transaction completed in a timely manner. The loan closed on time and the Sponsor was able to utilize the cash-out to purchase another project. As is common during the COVID crisis, the Capital Provider wanted a 12-month payment reserve. GSP was able to convince the Capital Provider to only require 6-months and allow the reserve to be applied to the first 6-months of payments.
December 2, 2020
George Smith Partners successfully arranged $18,880,000 in permanent financing for a 192-unit multifamily community. The loan is fixed for 15 years at 3.03% with interest-only payments for the entire term and significant cash-out proceeds. Despite the severe impacts of the COVID-19 pandemic throughout the spring and summer, the Property was able to remain above 95% occupancy with minimal declines in rent collections. GSP capitalized on the Property’s quality, market resiliency, strength of the Sponsor and low leverage to attract quality offers from several lenders.
$8,600,000 Cash-Out Refinance of a 2-Property Multifamily Portfolio During the COVID Pandemic; Los Angeles, CA
July 8, 2020
George Smith Partners was retained to develop and implement a strategy to refinance a 5-Property $50,000,000 multifamily portfolio. GSP divided the properties between two capital providers in order to provide maximum flexibility to the Sponsor. The second part of the portfolio involved obtaining a 70% LTV permanent loan of $8,600,000 to provide the Sponsor with over $1,500,000 in cash-out capital to purchase additional properties during a changing market and maintain a strong cash position. GSP obtained a fixed interest only rate of 3.95% for the first 5 years.
With the COVID-19 global pandemic and uncertainty in the market, it was critical to select a capital provider who could successfully close. Borrowing costs are on the rise as lenders ratchet up their credit standards. The proceeds for this transaction were targeted for the acquisition of an additional asset which had a firm closing date and a large non-refundable deposit. Any delays would have been very costly. With the current crisis, lenders were 100% focused on rent collections and overwhelmed with new financing requests as several other lenders pulled out of the market as well as forbearance requests from their current borrowers. In addition to the usual due diligence requirements, the Lender required much more information. There were complex issues around appraisals and inspections that required lots of hand-holding.
GSP selected a capital provider that we have a strong relationship with and has closed numerous loans for us. We knew the loan officer would stay focused on the need to close on time and keep the agreed to rate and proceeds throughout the loan process. Because GSP is in the debt market every day, we were able to ensure that the capital provider was truly closing deals and meeting deadlines. Because of the market disruption, borrowing rates jumped by over 100 basis points overnight. We were able to lock the 5-year interest only rate at 3.95%, the following day, rates jumped to 4.75%. It was clear that the Lender was mindful of their reputation with GSP and didn’t want to get a reputation of crazy rate increases or abandoning their customers when they are needed the most. GSP’s experience working with appraisers, inspectors and title/escrow during the COVID period was critical to getting this transaction completed. The loan closed on time and the Sponsor was able to utilize the cash-out to purchase another project. As is now common during the COVID crisis, the Capital Provider required a 12-month interest reserve. We were able to convince the Capital Provider to apply those funds to the first 12 months of the loan payments.
$4,200,000 Cash-Out Refinance for Predevelopment Land Financing on a To-Be-Built 90-Unit Multifamily Project; West Oakland, CA
January 29, 2020
George Smith Partners arranged a $4,200,000 cash-out refinance for predevelopment land financing on a to-be-built 90-unit multifamily property in West Oakland, CA. The Property consists of a 1.5-acre parcel and 35,000 square feet of raw industrial space built in the 1950s that will be demolished at the start of construction. The Property recently obtained entitlements for a 90-unit multifamily development, but the Sponsor required significant capital and about 12 months to complete construction drawings. The Sponsor was seeking a refinance and approached GSP with 30 days of term remaining on their existing land loan. The existing land Lender would not release the good news money earmarked for a successful entitlement that would have been used to fund construction drawings. They were also seeking to charge an extension fee that was significantly above market.
In a very short timeframe, GSP sourced a land lender comfortable with refinancing the existing land loan and providing cash-out to help fund construction drawings. Sized to 65% LTV, including a considerable land step-up for entitlement, the financing is interest only and carries a 12-month term with two 3-month extensions. There is no prepayment penalty, and the Lender origination fee was only 0.5%. The new loan closed in less than 30 days from term sheet execution avoiding a maturity default on the existing loan and enabling the Sponsor to fund construction drawings.
Term: 12 months with two 3-month extensions
Amortization: Interest only
Prepayment Penalty: None
Lender Fee: 0.5% in / 1% out
- Advisors: Zachary Streit
December 4, 2019
George Smith Partners secured a $5,230,000 non-recourse refinance for a 40-unit multifamily property in Los Angeles. The loan is fixed at a rate of 3.85% for five years and provides two years of interest only payments. Over the past three years, the Sponsors renovated 28 of the 40 units at a very high investment of $28,000 per unit. GSP sourced a bank lender that gave the Borrowers maximum credit for the higher income that resulted from leasing the newly renovated units. The Lender did not require seasoning on the new leases. The Lender did not have a floor on the rate at a time when many banks are applying floors to keep their rates above a certain threshold. The rate was competitive with Agency financing during a period when Freddie Mac was temporarily slowing down new loan originations. The Sponsors were operating the Property very efficiently with below-market expenses, and the third-party appraiser marked those expenses up to market. This resulted in a capitalized property value that did not meet the lender’s 65% LTV constraint. The Lender accommodated the Borrower by raising the LTV threshold so that loan proceeds and the rate would not be affected. The Lender was able to rate lock at application and was ready to close in about 50 days.
October 23, 2019
George Smith Partners successfully secured a $4,100,000 non-recourse permanent refinance of a 14-unit, multifamily property in West Los Angeles. Loan proceeds were used to pay off the existing variable, higher interest rate bridge loan into a lower interest, fixed rate loan. There was significant cash-out to the Sponsor, who had recently completed an extensive reposition and upgrade of the Property. Due to the Sponsor’s business plan, flexibility and interest only were paramount. As such, GSP worked with the Lender to structure a 5-year fixed rate term with 3 years interest only and a step-down prepayment structure of 3%, 2%, 1%. This structure allows the Sponsor to maximize current cash flow while providing the flexibility of a step-down structure that burns off when the loan begins to amortize.
Term: 30 years; 5 years fixed then converts to floating rate at Libor + 2.25%
Amortization: 3 Years Interest Only then 30 year amortization
Minimum DSCR: 1.20x
Prepayment: Stepdown, 3%, 2%, 1%, open