Rate: 4.60% Fixed; coupon reflects 10-year Swap index as of December 2018
Term: 10 Years
Amortization: 30 Years
Loan to Value: 75%
Prepayment: Yield Maintenance
Lender Fee: None
George Smith Partners successfully placed $6,750,000 of non-recourse, ten-year fixed-rate first mortgage debt collateralized by a 3.36-acre parcel partially encumbered by a ground lease and improved with a 43,500 square foot retail box formerly occupied by a grocery store. The improvements are newly demised into two spaces 100% leased to a national crafts retailer and regional clothing store, and the collateral also includes two small pads ground leased to a local coffee shop and ice cream parlor. GSP sourced a lender comfortable with providing a 75% leverage permanent loan despite the absence of tenant sales history. Additionally, the Sponsor executed the ice cream parlor ground lease during financing diligence, and GSP worked with the Lender to increase loan proceeds (subject to a lender holdback until tenant opens for business) commensurate with the income attributable to this new lease even though the tenant had not yet built its premises at the time of loan closing.
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Assistant Vice President
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
Origination Fees: Par
$12,790,000 Non-Recourse Acquisition Bridge Financing to Reposition a 120,000 Square Foot Retail Center in Phoenix, Arizona
January 30, 2019
George Smith Partners secured $12,790,000 in non-recourse acquisition bridge financing for the heavy reposition of a 1980s vintage shopping center in the Paradise Valley submarket of Phoenix, Arizona. The value-added property had a vacating grocery anchor tenant, low occupancy rates and below market rents. The Sponsor’s business plan was to acquire the asset with a fitness tenant anchor in tow and then reposition and stabilize the remainder of the center.
Sized to 80% of total project cost, the loan includes a future funding facility to cover tenant improvements, leasing commissions and capital expenditures. The rate floats at 1 Month LIBOR plus 4.25% (approximately 6.75% today) and carries a two year term with two one year extension options. Interest is not charged on the holdback until funds are drawn. The Lender was able to accommodate several changes to the business plan throughout the application process. This included relocating several existing tenants within the center due to a conflict presented in existing tenant leases.
$11,650,000 (72% Loan-to-Value) Non-Recourse, Cash-Out Refinance of a Grocery Shadow-Anchored Salt Lake City Retail Center
January 15, 2019
GSP successfully sourced $11,650,000 of non-recourse, cash-out, permanent first mortgage debt sized to 72% loan-to-value to refinance out a maturing bridge loan on a 62,500 square foot, grocery shadow-anchored Salt Lake City multi-tenant retail property. The borrower recently completed its re-tenanting business plan that upgraded the tenant base and stabilized the 1960s vintage retail property at nearly 100% occupancy. Although many lenders are increasingly becoming more conservative regarding leverage and interest only terms on retail properties, GSP sourced a lender that relied on the borrower’s substantial real estate experience, strong submarket performance, and a diverse tenant mix to provide a full-leverage, non-recourse loan that repatriated substantial equity to the borrower and included three years of interest only payments followed by 30-year amortization.
5-Day Close $6,350,000 Non-Recourse Bridge Refinance of a Multi-Tenant Retail Center in Northern California
November 7, 2018
George Smith Partners successfully arranged a $6,350,000 bridge refinancing for a fully occupied un-anchored, 7-tenant retail center located in downtown San Mateo, California. The Property has a total net rentable area of 13,303 SF. Tenants include a convenience store and local restaurants. The Sponsor will utilize a portion of the loan proceeds to pay off existing lenders, and the rest of the proceeds will be invested into other investments. The Sponsor’s preferred exit is to sell the Subject Property through a 1031 exchange.
All tenants are on short-term or month-to-month leases by the time of funding. Although lacking a strong cash flow, the Sponsor requested maximum cash out. As a result of rising interest rates, several capital providers passed on this opportunity because the Property’s cash flow becomes tighter after applying a higher underwriting rate. The underwritten value was affected by a high debt service coverage ratio as the Property is classified as “un-anchored”. In addition, capital providers challenged the Property’s low capitalization rate given it is located on a busy corner with a signal in a downtown area.
GSP identified an asset based private money lender who offers simple and quick closing without requiring an appraisal or third party reports. GSP worked with the Lender to structure a 24-month loan, fixed at 6.90% (months 1-12) and 7.90% (months 13-24), interest only payments, no upfront TI/LC holdbacks and on-going reserves. There is no prepayment penalty.
$7,490,000 in Full Term 10 Year Interest Only Non-Recourse Permanent Financing for a Neighborhood Retail Center in the Southwestern US
June 13, 2018
GSP successfully placed $7,490,000 of non-recourse, ten-year fixed rate first mortgage debt for the recapitalization of an approximately 80,000 square foot, 95% leased multi-tenant retail property anchored by a regional Hispanic grocer.
The sponsor initially acquired the 1980’s vintage property in 2013 and proceeded to undertake a major renovation and increase leasing from 5% to over 90% with the goal of recapitalizing the ownership structure and placing permanent debt on the asset at stabilization. During the permanent loan diligence process one of the tenants vacated due to a corporate mandate, however GSP and the lender worked with the sponsor to maintain loan proceeds and full term Interest Only payments despite the associated loss of income. The lender was able to partially underwrite income derived from a newly signed lease even though there is a substantial delay between lease execution and rent commencement for the new tenant, and held back tenant improvement funds for the new tenant’s buildout at loan closing.
The 66% leverage non-recourse loan was sized to the greater of a 9.0% debt yield or 1.45x debt service coverage ratio on the 4.61% fixed rate coupon. The 10-year term has Interest Only payments for the entire loan term, maximizing sponsor cash flow.
June 13, 2018
George Smith Partners secured an $18,900,000 non-recourse permanent refinance for an 89,000 square foot fitness-anchored retail center in eastern Los Angeles County. When discussing the transaction with lenders, GSP encountered a 42 basis point range between the highest and lowest spreads over the 10-year Swap Rate. Fixed for 10 years at 4.65%, payments are interest only for the entire 10-year term.
A Phase I environmental report revealed the presence of a former gas station, mandating a Phase II subsurface investigation. The subject property has a vacant freestanding pad comprising 16% of the rentable square footage that has been vacant since the end of 2015. A Tenants-In-Common (TIC) ownership structure added complexity to due diligence and closing documentation involving carve-out guarantors. Post application, market spreads widened considerably and threatened proceeds due to a DCR constraint.
A Phase II subsurface investigation confirmed the soils were void of any environmental contaminants. For the vacant pad, GSP verified the location is the last Class A retail space available in this submarket and provided recently generated LOIs from several prospective tenants. This allowed the underwriter to become comfortable with the in-place vacancy without mandating a newly signed lease for this pad. The TIC ownership is comprised of only four entities and the carve-out guarantor holds management control over of all four entities. This simplified due diligence and provided additional clarity for asset control. While in application, our Sponsor was able to renew a major tenant and replace another tenant with a newly signed lease without any downtime. An up-to-date list of tenant LOIs in the vacant pad allowed GSP to demonstrate a consistency of future cash flow and reinforced the strength of the asset. This allowed the lender to maintain the 1.58% spread and the original applied for loan proceeds.