Term: 7 years
Rate: Fixed at 3.8%
Amortization: 25 years
LTC: 80%
DCR: 1.20;1.00
Prepayment Penalty: 3,2,1, open
Lender fee: 0.25%
Recourse
Advisors: Shahin Yazdi
George Smith Partners secured the $1,440,000 acquisition loan for two non-contiguous commercial properties for the same Sponsors. Our Sponsors, two physicians that will relocate their practice into the first space, did not qualify for an SBA execution as they will occupy less than 50% of net rentable. Traditional institutional capital providers pushed back on the non-contiguous collateral and not currently zoned for medical office occupancy, adding entitlement risk to the structure. George Smith Partners identified a lender that exclusively underwrites medical professionals. Their expertise allowed for a 20% increase the Sponsors’ underwritten global income and provided an increase in net loan proceeds to the funded 80% of cost. Fixed for 7 years at 3.8%, a 25 year amortization was negotiated (versus the traditional 20 year amortization usually offered), with a three year step-down prepayment.
Related Financings
-
$5,127,000 Bridge Financing for On-Campus, 79% occupied Medical Office Building in Gardena, CA
March 4, 2016
Transaction Description: George Smith Partners successfully sourced the senior debt for the acquisition of a 39,000 square foot, 79% occupied on-campus Medical Office Building in Gardena. Sized to 70% loan to value, the loan is fixed for 5 years at 4.25%, amortizing over 25 years, with 1 year of interest only. Mr. Yazdi was able to negotiate a four year prepayment structure as well as the ability for our sponsors to pay down up to 20% of the loan every year without incurring a penalty. The loan also includes a one-time future earn-out once our sponsors obtain 90% occupancy and a Trailing 3 month P&L at a 1.35x DCR within the first year.
Challenges: The property’s master lease to a Hospital had expired a year before our clients purchased the building, and many of the tenants were on MTM leases or had no lease at all. The property was 79% occupied when we got into application and there was also a significant amount of tenant turnover throughout the loan term. Lastly, our borrower did not have any experience owning and operating medical office.
Solution: Mr. Yazdi worked diligently with the current management company in obtaining Estoppels/SNDAs and negotiating a few lease extensions with current tenants. Mr. Yazdi also focused on the strength of the market and location of the property to get lenders comfortable with the remaining month to month tenants and the current vacancy/low income. By sourcing a lender whose DCR requirement was based on Interest Only payments, we were able to maximize loan dollars while meeting their underwriting guidelines in spite of the property’s low, in-place NOI. He also displayed his client’s financial strength and his willingness to hire a management company in order to make up for his lack of experience.
Rate: 4.25% Fixed
Term: 5 Years
Amortization: Interest Only Year 1 and then Amortized over 25 Years
LTC: 70%
PPP: 4,3,2,1 with the ability to pay down the Principal by 20% per year without incurring any penalties
DCR: 1.20 Based on Current NOI and Interest Only Payment -
$1,650,000 Non-Recourse Rate and Term Refinance for an Owner/User
January 9, 2014
1 – 8 – 2014 Transaction Description: David Stepanchak placed the no-cash-out pay-off of a construction loan for the build-to-suit office building of a charitable organization. The loan to the 501c3 borrower is 100% non-recourse and does not require a carve-out guarantor. A pocket-to-pocket lease was not underwritten and therefore there was no additional credit support to the loan beyond the value of the collateral. The ten year loan is fixed for 7 years at 4.7% before rolling to a floater over 6-month LIBOR for the remaining 3 years. Prepayment penalty steps-down from 5% to open the final two years of the fixed term. Rate: 4.7% Fixed for 7 Years Term: 10 Years Amort: 30 Years LTV: 70% Prepayment: 5-4-3-2-1 Open Non-recourse Advisor: David Stepanchak -
$4,000,000 Permanent Recapitalization Financing For 76,175 SF Single-Tenant Indiana Office Building
July 19, 2012
7 – 18 – 12 Transaction Description: George Smith Partners arranged cash-out permanent financing for a fully occupied single-tenant office building in a tertiary market of Indiana. The cash-out is a partial recapitalization of a recently acquired property on an all-cash basis. The asset is leased to a “For-Profit” college with 3.5 years remaining on the initial lease term before options. The institutional quality of the borrower and the tenants’ long-term historical occupancy at this location proved instrumental to securing the loan. GSP obtained two key loan provisions that will serve the borrowers’ interest in both up-side and down-side scenarios – a loan term in excess of the lease term, and the ability to pre-pay without penalty. The borrower required full proceeds up-front without holdbacks. GSP structured a Letter of Credit that burns off upon lease extension/renewal. This debt structure mitigates borrower risks while providing for a 25% cash on cash return. Rate: 5.375% Term: 5 Years Amort: 25 Years LTV: 75% Prepayment: None Non-recourse Credit Enhancement: Letter of Credit Brokers: Steven Orchard, Loren Bedolla -
$38,000,000 12-Month Forward Take-Out Commitment for a 50,000 sf Santa Monica Medical Facility
April 13, 2011
4 – 6 – 2011 Transaction Description: GSP obtained a 12-month forward commitment to provide a take-out for the construction debt on a partially-constructed three-story 50,000 sf outpatient surgery facility. The center is pre-leased to an investment-grade tenant. The facility, to be complete in December 2011, features special improvements for imaging and radiation services, a robotic six-floor subterranean parking garage, and LEED Gold certification. Challenge: Due to inflation concerns, the borrower wanted to lock-in today’s long-term rates – 12 months prior to completing construction. Until recently, forward take-out commitments were constrained to six-months and rate-lock premiums were prohibitive. The building is valued at more than $1,200/sf. Solution: GSP solicited conduits, bond issuers, and portfolio lenders (life companies & pension funds) to identify a lender willing to lock rate today for a 12 month forward funding. GSP highlighted the quality of the real estate & borrower, and built a strong case to support the property’s high valuation. The Sponsor selected a life company loan at a competitive rate, locked at application in February 2011, with a forward premium of 4 bps per month. The lender was distinguished by their understanding of the location & tenant, their willingness to commit 12 months before funding, and the trusted relationship they developed with GSP and the client. Rate: 5.67% fixed Term: 12 Month Forward + 10 Years Amort: 30 Years Prepayment: Modified Yield Maintenance Non-recourse Lender Fee: Par Brokers: Steve Orchard, Gary E. Mozer, J. Jay Brooks
