75% Leverage, 4.95% Coupon Non-Recourse Permanent Financing for a Neighborhood Retail Center in a Tertiary Southwest Market

Rate: 4.95%, Fixed
Term: 10 years
Amortization: 1 Year Interest Only; 30 Year Amortization thereafter
Loan to Value: 75%
Prepayment: Yield Maintenance
Lender Fee: None

Transaction Description:

George Smith Partners successfully placed $15,000,000 of non-recourse, ten-year fixed rate first mortgage debt for the acquisition of an approximately 90,000 square foot, 1980’s vintage, 99% leased multi-tenant retail property. The anchor, a privately-owned regional grocer, occupies almost 50% of the collateral’s total square footage and has a lease expiration approximately concurrent with loan maturity. GSP sourced a lender able to achieve 75% leverage non-recourse financing plus one year of Interest Only payments despite the tertiary location and lack of access to the grocer financials. The loan was sized to the greater of an 8.65% debt yield or 1.30x debt service coverage ratio on the 4.95% fixed rate coupon.

Advisors

Related Financings

  • Expand

    $13,944,000 ($1,180/SF) Non-Recourse Construction Financing for the Redevelopment of a Former Single-Tenant Office Property in Santa Monica, CA

    June 12, 2019

    Transaction Description:

    George Smith Partners placed $13,944,000 in non-recourse construction debt for the conversion of a former single-tenant office property into an 11,800 square foot, luxury, multi-tenant retail property in a prime submarket of Santa Monica, California. GSP diligently worked to source a lender comfortable with funding a loan at a high basis of $1,180/SF for a “first-mover” redevelopment that was 64% pre-leased (on an economic basis) at record-setting rents to a mix of local and regional food and fitness users. Further complicating the loan request was the need to allocate separate components of the “bad boy” non-recourse carve-outs among two unrelated guarantor entities. Approximately 55% of the loan proceeds were future funded with no interest paid on unfunded loan proceeds until drawn.

    Rate: One-Month LIBOR + 4.25% (6.75%) at closing burning down to One-Month LIBOR + 3.75% (6.25%) upon stabilization
    Term: Three-year initial term plus two one-year extension options
    Amortization: Interest only
    Debt Yield: 8.5% stable debt yield
    LTV: 70% as-complete value, 60% as-stable value
    Prepayment: Open prepayment with 24-month spread maintenance
    Guaranty: Non-Recourse
    Lender Fee: 1%

  • Expand

    $14,950,000 Non-Recourse Financing for the Acquisition of a 17-Property Single Tenant Dollar General Portfolio

    June 5, 2019

    Transaction Description:

    GSP successfully placed $14,950,000 of non-recourse, 14-year (with an anticipated repayment date ten years from the initial closing) fixed-rate debt for the acquisition of 17 newly-constructed freestanding retail buildings 100% leased to Dollar General. The individual assets have 15-year lease terms and are located primarily in tertiary Upper Midwest states. GSP executed the financing concurrent with construction completion and sourced a lender able to provide 75% leverage financing at a 4.52% blended fixed coupon with five years of Interest Only payments, despite an absence of sales history and concurrent tenant lease terms expiring one year after loan maturity. The loan structure also provides the Sponsor flexibility to release properties from the loan collateral in the event of sale after year three of the loan term and allows the Sponsor to release up to 30% of the individual assets from the mortgage collateral and substitute like kind properties through year nine of the term.

     

    Rate: 4.52%, Fixed
    Term: 14 years
    Amortization: 5 Years Interest Only; 30 Year Amortization thereafter
    Loan to Value: 75%
    Prepayment: Defeasance
    Lender Fee: None

  • Expand

    10 Day Close on Retail Bridge Recapitalization Loan to prevent Bankruptcy

    May 22, 2019

    Transaction Description:

    GSP sourced a two year bridge loan on a small 50% occupied shopping center in Los Angeles for a family trust embattled in disputes for control of the asset. The loan was closed in 10 days, to prevent the sponsorship from filing for bankruptcy and provided capital needed to pay off creditors, buyout family members and allow one of the family members to hold the asset long term.

    Challenges:

    The estate heirs of the estate were involved in a two year lawsuit over control and over the same time period some of the major tenants moved out with occupancy dropping below 50%. The lawsuit created a need for cash and impacted the heirs’ credit. Between the credit and occupancy issues, it was impossible to find conventual financing. In addition, the lack of cashflow lowered the capitalized value of the property and the lawsuits were pushing the sponsorship into Bankruptcy.

    Solution:

    The Shaffer team at GSP understood the diverse family dynamics, the overall value of asset and developed the strategy to quickly payoff the current debt and provide cash out to pay all the debts and buyout family members. Using GSPs expertise in equity recapitalizations, we were able to work out the disputes between the partners/family members and arraigned a quick five day bridge refinancing. We demonstrated to the capital provider that the long term value of the asset was only 65% of value even though the loan was 90% of the property’s capitalized value. In the end, the loan provided capital to buyout the family members, settle all legal claims and allow one of the heirs to hold the shopping center long term.

    Rate: Interest only 7.9%
    Term: 2 years
    LTV: 65% of Sale Value/90% Capitalized Value
    Amortization: Interest Only
    No Prepay

  • Expand

    Non-Recourse Cash Out Refinance of Retail Strip Center in Los Angeles

    May 15, 2019

    George Smith Partners secured a non-recourse cash out refinance loan for a 12,695 SF retail strip center located in Los Angeles. The loan is fixed at a rate of 4.85% for 10 years and is sized to 65% LTV. The majority of the lenders that were surveyed used a 25 year amortization, but the selected lender was able to use a 30 year amortization. This resulted in a lower monthly payment and greater loan proceeds. The property has one vacancy comprising 11% of the space, which resulted in several lenders limiting their proceeds to the in-place loan amount. GSP pointed out that the space has only been vacant for a few months, and provided historical data showing that the center has consistent high occupancy and long-term tenants. As a result, the selected lender was comfortable providing a non-recourse, cash out refinance loan.

    Rate: Fixed for 10 years at 4.85%, followed by floating at 6 month LIBOR plus 2.5%
    Term: 30 years
    Amortization: 30 years
    Prepayment Penalty: 3,3,2,2,1,1,1
    LTV: 65% maximum
    DCR: 1.35x
    Origination Fees: Par
    Guaranty: Non-Recourse

  • Expand

    $8,740,000 Acquisition Financing at 91% LTC on an SBA 504 Loan in Los Angeles, CA

    May 1, 2019

    Transaction Description:

    George Smith Partners arranged $8,740,000 of acquisition financing for an owner user retail property in Los Angeles. The Sponsor had been introduced to GSP after they received a loan cancellation from their direct bank. GSP jumped into the loan process right away and worked with the Sponsor, their CDC and the new Lender in order to ensure closing in a timely matter.  The selected Lender that GSP brought in was able to give the Sponsor a much more aggressive interest rate than their direct lender had promised in their LOI. This ended up saving the Sponsor 67 bps on the interest rate and over $240,000 in interest during the first 10 years of the loan.

    Rate: 4.57% fixed
    Term: 10 years
    Amortization: 25 years
    Loan to Cost: 91.1%
    Guaranty: Recourse
    Lender Origination Fee: None

  • Expand

    $15,000,000 Recapitalization Financing with $5,000,000 Cash-Out; San Francisco, CA

    April 24, 2019

    Transaction Description:
    In 2015 GSP financed a mixed-use retail/SRO-Hotel project in the “SoMa” (South of Market area) of San Francisco for $10,000,000. The Sponsor has continued to improve the Property and create additional value. Over the last several years the Property has doubled in value. The Sponsor was looking to recapitalize the original loan and take out $5,000,000 of cash equity.

    Challenges:
    The Sponsor did not want to pay prepayment penalties or incur a large refinance expense. The existing Lender did not have a program to allow for recapitalization or additional funding of their current loan.

    Solution:
    GSP underwrote and proposed a recapitalization program that would allow the Lender, with only a 25 bps increase, to provide a new $15,000,000 loan that provided the Borrower with $5,000,0000 cash-out. This allowed the Borrower to get the proceeds needed without refinancing expenses or prepayment penalties.

    Rate: 5.5% for years 1-10 and 5.85% for years 11-15
    Term: 15 Years
    Amortization: 30 Years
    Guaranty: Non-Recourse
    Prepayment: 5,4,3,2,1

Don't Miss a Fact,
Sign Up for FINfacts!

FINfacts is a weekly newsletter highlighting recent financings and economic insights.

Subscribe Here