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$7,500,000 Preferred Equity Investment to 83% LTC at a 4.94% blended coupon for the Ground-Up Development of a Class-A Multifamily Project; Saint Louis, MO

Rate: 12.25%
Fee: 1% origination fee
Term: 36 months with two, 12-month extension options
Amortization: I/O
Prepayment: Open in whole or in part at any time with a two-year minimum yield
Guarantee: None

Transaction Description:

George Smith Partners successfully placed $7,500,000 in preferred equity with last dollar exposure of 83% loan-to-cost ($222,000/unit) for the ground-up construction of a 205-unit, class-A apartment project in an irreplaceable location within the Central West End submarket of Saint Louis, Missouri. The preferred equity investment priced at 12.25% was sourced during the COVID-19 pandemic through an east coast real estate investment management company. GSP worked with the Sponsor to tailor a capitalization that increased leverage to a reasonable level above the 70% loan-to-cost senior loan, reduced overall project costs through minimizing the preferred return current pay portion, mitigated sponsorship risk through negotiated performance hurdles, and was highly accretive to common equity returns. Although the preferred equity investment was made during height of COVID-19 safer-at-home orders, the investor’s concerns were mitigated through the institutional sponsor’s local experience, market, and submarket performance during the pandemic, and strong project fundamentals.

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