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$7,685,000 Senior Construction Financing for a Mid-Developed Construction Building; Los Angeles, CA

Rate: 5.50%
Term: 24 months + two 6-month options to extend
Amortization: Interest Only
LTC: 55%
Guaranty: Full recourse

Transaction Description:

George Smith Partners secured a $7,685,000 construction loan for the completion of a development project in Los Angeles, California. The construction project was being fully paid out of pocket and had just finished two levels of subterranean parking. At this point of completion, the Sponsors decided to finance the remaining project costs instead of coming out of pocket the rest of the way. Many lenders didn’t want to finance the Project due to the mid-construction risk and those that did wanted some sort of banking relationship/deposit to come with the Project. GSP secured a capital source that was comfortable with the mid-construction project and didn’t require the Sponsors to bring in any fresh equity nor did they require any banking deposits.

Advisors

Related Financings

  • Construction Debt – 79% LTC – 81 Multifamily Units, Los Angeles, CA

    January 20, 2021

    Transaction Description:

    George Smith Partners secured senior construction financing for a new multifamily development in the Lincoln Heights neighborhood of Los Angeles, CA. The $10.5M loan will be utilized to complete the 81-unit project. The loan represents approximately 79% of the project cost and was structured with an 18-Month initial term and interest only payments for the duration. The Project will be comprised entirely of studio units configured at 540 square feet; each unit will include one bathroom, a full kitchen, modern appliances, and a washer and dryer. Amenities for the project include a roof top deck, barbeque area, gym & recreational room, bicycle storage, secured parking, and access to a swimming pool.

    GSP secured a Lender that understood the future path of development and was comfortable with the emerging market; the current neighborhood is primarily industrial with limited residential product in proximity. The Lender accepted the Sponsor’s imputed equity from entitling the site; this increased leverage to 79% of cost while keeping pricing at a level accretive to the overall yield. The loan was structured with a shorter initial term to minimize upfront points and interest reserves. GSP worked with the Lender to resolve several budget issues that arose during diligence due to the rising price of lumber and concrete; proceeds were successfully increased by $250,000 to ensure the Project would be fully capitalized without additional equity.

    Rate: 5.00%
    Term: 18-Months; Two 6-Month Extensions
    Amortization: Interest Only
    Max LTC: 79%
    Max “As-Complete” LTV: 60%
    Min Stabilized DSCR: 1.15x
    Loan Fee: 0.75%; 0.25% per each extension
    Guaranty: Recourse

  • $9,400,000 Construction Financing for Luxury Apartment Development; Los Angeles, CA

    February 5, 2020

    Transaction Description:
    George Smith Partners successfully arranged $9,400,000 in non-recourse construction financing for the development of a 15-unit luxury apartment building in West Los Angeles. The Property will be comprised of a mix of 1-bedroom and 2-bedroom units and will include 28 parking spaces. The Class A asset sits in a prime location that adjoins some of Los Angeles most sought-after submarkets. Upon completion tenants will have world class views and easy access to major thoroughfares of the City.

    Problem:
    The Sponsor has owned the site for over twenty years and after relocating existing tenants to make way for the construction of the new luxury building, he raised an existing 16-unit apartment building. Despite the low land basis, at a total cost at over $1 million per door, it was difficult to find comparables to justify the completed value in support of the requested loan amount.

    Solution:
    GSP accessed its extensive lender network to identify a best-in-class construction lender to provide non-recourse construction financing for the Sponsor. GSP’s longstanding history with this lender allowed for a flexible and streamlined closing process that was favorable to the Sponsor’s project timeline. GSP was able to demonstrate to the Lender that as a family owned, multi-generational asset, the tight spread between development cost and value was a less important metric than for a merchant builder-built building, particularly with a significant equity investment.

    Rate: 1-Month LIBOR + 7.50%
    Term:
    28 Months
    Amortization:
    Interest Only
    LTC:
    56%
    Lender Fee: 1% in / 1% out
    Guaranty:
    Non-Recourse