$7,500,000 Cash-Out Refinance of Two Industrial Properties

Transaction Description:

George Smith Partners secured $5,376,000 of bridge financing for the refinance of a two-tenant industrial building in Fairfield, CA. The Property is favorably located within a mile of three major freeways and is only a 45-minute drive to both San Francisco and Sacramento. The building is currently 100% occupied, but there were cash-out proceeds required to reposition the Property to make it more attractive to potential buyers. The 26,000 SF building also has 95,000 SF of improved yard space adjacent, which is a major draw for the current tenants. GSP was able to secure a lender that could get comfortable with a majority of the income being derived from the yard space. The financing was comprised of a senior and a mezzanine loan. The blended terms provided a 60% LTC priced at 7.43% with a 1.20% origination fee. The 12-month terms provide the Sponsor the ability to execute his business plan.

Transaction Description:

George Smith Partners placed a structured senior and collateralized line of credit revolver in a cash-out execution for a business in Los Angeles. The first loan was structured to be self-liquidating over 15 years with a fixed rate of 3.90%. The $1,000,000 second trust deed is a true revolver that can be used as a check-book and has no limitations on uses. The second loan is priced at 3.75% (Prime minus 1%). Funds may be drawn down, re-paid and re-drawn without additional bank approval. There is no non-utilization fee. As the credit line is collateralized, there is no mandatory “clean-up” for funds outstanding over 12 months.

Transaction Description:
George Smith Partners secured $15,000,000 of cash out refinancing of a single-tenant distribution warehouse in West Rancho Dominguez, an unincorporated portion of Los Angeles County. This was a permanent, non-recourse loan at 4.78% fixed for 5 years with 25 years amortization. The flexible prepay, which is non-typical of Life Co’s yield maintenance, was very appealing to the Borrower (locked for 12 months, 3-2-1, then open at par for the last 12 months).

Challenges:
Full cash out with $15,000,000 in proceeds for a foreign borrower who built this property in 2008 for less than $9,000,000. The existing single-tenant is a privately-owned entity that is “non-credit” with its lease rolling in less than 4 years without extensions. The in-place rent is currently 30% below market which limited other loan proposals between $9,000,000 and $11,500,000 in max proceeds.

Solutions:
George Smith Partners worked with an existing life insurance company lender relationship that was able to provide a structured permanent loan solution by underwriting to market rental rate rather than the in-place income. This made the loan metrics work for the Lender (8.6 Debt Yield & 1.26 DCR). These assumptions were in turn verified and confirmed by a national appraisal firm.
The Asset is relatively new construction and considered a class-A property. Furthermore, the Los Angeles County industrial market is supply constrained which makes this asset category one of the most appealing in CRE today.