Rate: 2.9% Fixed
Term: 10 Years, Interest Only
Prepayment: Yield Maintenance
Lender Fee: .5%
George Smith Partners secured a $7,986,000 first mortgage at 65% LTV for a 23-unit multifamily property in West Los Angeles, CA. The loan is non-recourse and supplies significant cash-out proceeds, a low 2.9% 10-year fixed rate, and full-term interest-only payments. The financing replaced a bridge loan that was put in place to acquire the Property and complete significant upgrades including unit renovations, common area and exterior improvements, and conversion to solar power.
GSP started working on the refinancing in the Spring of 2020 at the height of the COVID-19 quarantine, while the property was still being renovated and released. GSP was able to persuade the Lender to underwrite income on a trailing one month basis rather than a trailing six month basis. This allowed the underwriter to include the higher income from the newly leased units. The loan application process began when the property was approximately 75% leased. The lender agreed to a forward rate lock at 85% occupancy and closed when the building reached 95% occupancy.
January 20, 2021
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.
January 20, 2021
George Smith Partners was retained to refinance a 2-Property multifamily portfolio. Sensing buying opportunities in the multifamily market, the Sponsor wanted to pull cash out of their existing multifamily portfolio to use as equity to purchase new properties. GSP obtained a fixed rate of 3.15% for the first 5 years of the 30-year term.
With the global pandemic and uncertainty in the market, it was critical to select a capital provider who could successfully close and provide the cash out for the additional purchases. Any delays would have been very costly because of penalties in the purchase contract. In addition, most lenders were overwhelmed with year-end financing requests as several other lenders pulled out of the market and forbearance requests from their current borrowers. There were complex issues around appraisals and inspections that required GSP’s daily oversight.
Because of GSP’s strong relationship with this capital provider, we were confident that the loan officer would stay focused, close on time and keep the agreed rate and proceeds. GSP is in the debt market every day which gave us the ability to ensure that the selected Capital Provider was closing deals and meeting deadlines. GSP’s experience working with appraisers, inspectors and title/escrow during the COVID period was critical to getting this transaction completed in a timely manner. The loan closed on time and the Sponsor was able to utilize the cash-out to purchase another project. As is common during the COVID crisis, the Capital Provider wanted a 12-month payment reserve. GSP was able to convince the Capital Provider to only require 6-months and allow the reserve to be applied to the first 6-months of payments.
January 13, 2021
George Smith Partners secured $8,750,000 in total financing comprised of a 60% LTV first mortgage and a 10% LTV second mortgage for a 35-unit multifamily property in San Jose, CA. The loans provided significant cash-out proceeds at a blended rate of 7.41%. Both loans have a 12-month term, interest-only payments and are open to prepayment without penalty. Recourse is limited to 50% of the second mortgage only. The Property has maintained full occupancy and rent collections despite the COVID-related impacts in the overall market. The Lender did not require reserves for potential COVID rental interruption. The Sponsor developed the Property in the 1980s and engaged GSP to provide a high leverage, quick-close financing solution. The financings closed within 8-days of the Lender’s issuance of term sheets.
$13,777,000 Portfolio Refinance for 5 Multifamily Properties, Non-Recourse, Cash-Out, Interest Only, No Payment Reserves; Los Angeles, CA
January 13, 2021
George Smith Partners placed 5 non-crossed loans totaling $13,770,000 to complete the refinance of a 67-unit multifamily portfolio in Los Angeles. The financing represents a significant return of equity to the Sponsorship while simultaneously lowering their previous interest rate. The loans all carry a fixed interest rate of 3.35%, a 5-Year term, and include interest only payments ranging between three and five years. In contrast to many lenders that are currently structuring six to twelve months of P&I reserves, GSP successfully negotiated waiving any shortfall structure.
Given the current market challenges (stemming primarily from COVID) even multifamily properties are experiencing additional scrutiny from both underwriters and appraisers. Despite these new hurdles, GSP was successful in maintaining the loan proceeds originally represented in the application. Through a combination of presenting real-time comparable market data to the appraiser and working with the Lender to increase the initial LTV stipulation, GSP overcame the valuation issues that arose as a result of the final appraisal. After presenting market data on a number of similar stabilized asset transactions we demonstrated that LA multifamily properties with consistent occupancy and collections have exhibited minimal value declines, ultimately convincing the Lender to increase the LTV constraint from 60% up to 65% and preserving the full cash-out proceed amounts.
November 18, 2020
George Smith Partners placed a $6,275,000 bridge loan for the refinance of a Class-B 132-unit apartment community in San Antonio, TX. The loan is fixed at 6.45% for three years with full term interest-only payments. The term sheet was signed after the COVID-19 crisis and ensuing economic volatility. GSP identified a balance sheet lender with in-house loan servicing to work with the Sponsor throughout the reposition of the asset. The Property underwent a change in property management in the past few years and required some property maintenance in the reposition. GSP worked with the Client on the original acquisition bridge loan and had to re-evaluate the business plan once the market changed and occupancy dipped due to COVID-19.
Permanent Multifamily Financing Secured During COVID-19 Pandemic, 3.07% Fixed for 5 Years; Los Angeles, CA
July 15, 2020
George Smith Partners arranged $2,600,000 in permanent financing for the refinance of a stabilized 8-unit, multifamily property in Los Angeles, California. The Sponsor acquired the Property a few years ago and was looking to lower their rate as they finished completion of a light renovation. As the environment was changing drastically day to day with the COVID-19 pandemic, GSP identified a Capital Provider offering fantastic terms. There were no holdbacks, no deposits were required to be held at their branch and provided a flexible prepayment penalty structure that allowed the Sponsor plenty of options during these challenging times.
Term: 5 Years Fixed
Amortization: 30 Years
Prepayment Penalty: 2, 1, 0
Lender Fee: None
Reserve Account: None
Deposits Required: None
- Advisors: Reuven Risch