Rate: 1 Month LIBOR + 3.23%
Term: 5 Years
Amort: Interest Only
Prepayment: 0.25% Exit Fee
Lender Fee: 0.5%
Transaction Description: Gary M. Tenzer, Henry Elder and Ryan P. Parker successfully placed the non-recourse acquisition bridge financing for a 78% leased, 385 unit newly developed apartment project located in Montclair, California. Sized to 75% of purchase, the loan is interest only throughout the five year term. With a coupon currently below 3.50%, the loan will float at 3.23% over the 30 day LIBOR.
Challenge: The Sponsor’s objective was to acquire the property with an interim bridge loan so that the property could be fully stabilized prior to securing permanent financing. Initially, close of escrow was structured to occur upon the earlier of the property reaching 90% occupancy or a date certain. The loan was structured and approved to close with the 90% precondition. When the rate of lease-up lagged, the investor still chose to close prior to the deadline. Since the loan was approved to fund at 90% occupancy, closing at a lower occupancy required the loan be restructured, re-approved and closed within a very short period of time.
Solution: GSP worked with the lender to support the property’s economics at a lower occupancy level to fund prior to the termination date specified in the Purchase and Sale Agreement despite its 78% occupancy. The revised structure contained a small hold-back to be funded when the property reached 90% occupancy. No additional guarantees or credit support was required of the borrower to facilitate the earlier closing. This transaction was one of the last loans funded by GE Capital prior to their finance division being sold.
November 17, 2021
George Smith Partners secured $47,000,000 for an acquisition bridge loan for a two multifamily property portfolio in Houston, Texas. To meet the sellers 30-day closing requirement, GSP used its experience and relationships to quickly identify and close this 80% interest- only financing within the required timeline. GSP was able to execute the Sponsors business plan and secure a high leveraged bridge loan at L+ 3.95 (4.05% coupon). The loan was cross collateralized with both properties, which totaled 624 Units. The Properties were operating at a going-in 5% debt yield when we closed. This interest-only loan included 100% of the capital needed for rehab.
There were multiple challenges regarding timing, leverage, sponsorship experience and property specific issues. Some lenders were not able to quote the transaction in the short timeframe we had to market, identify, and close this transaction. GSP aided a local family office, an international fund and a strong local operating partner who teamed up to purchase this asset in their first effort together. In addition, several lenders were over allocated in the Houston market and could not handle the size of this portfolio.
GSP focused on the top three best lenders for this asset type. Due to our great relationships, we were able to quickly pick the best lender and expedite the application process. GSP assisted the Sponsorship team in developing a strong business plan. This included proving the benefits of the multiple sponsorship structure, as well as getting the Lender comfortable with the local partners to operate the properties. GSP understood the dynamics of each sponsorship team and helped the Lender upstand the strategy of operating the Properties as one asset. GSP knew by bundling the two properties together and creating a larger transaction that it would be more appealing to lenders. This would enable lenders to increase proceeds and decrease pricing as compared to financing two separate smaller transactions. GSP ultimately utilized one of our relationship lenders who was willing to invest the upfront time and place aggressive bridge financing, with appealing leverage, proceeds, and terms of 3 years interest-only.
November 3, 2021
George Smith Partners successfully brokered both the sale and acquisition financing for an extended stay hotel conversion located in the Mountain States region. The Seller, initially intending to undertake the Project, engaged GSP to source bridge financing for the 126-apartment conversion. Most of the conversion will be cosmetic changing the feel from hotel to residential. The hotel had been closed due to COVID, but the Sponsor needed to cancel the Management Agreement with the Operator and vacate the hotel. Because the hotel was in foreclosure, the Seller put the asset in bankruptcy before the trustee sale. This complicated the transaction and resulted in closing the deal two weeks from court approval.
GSP found a buyer with experience in hotel conversions who understood the Property’s value proposition and the bankruptcy process. With limited time, GSP represented the Sponsor in sourcing $10,000,000 of 3-month Gap financing for the purchase while concurrently working on inexpensive bridge financing. No appraisal was required for the Gap loan. This was an extremely complicated financing with exceptionally short time constraints. GSP was able to serve the needs of both Buyer and Seller and successfully secure financing.
October 13, 2021
George Smith Partners successfully placed $22,070,000 in bridge financing for a vacant, 34,000 SF office building in West Los Angeles. Considering the negative effects of COVID on the office leasing market, capital providers were hesitant in financing a vacant building. The Sponsor envisioned two potential business plans: leasing the building to a single user or a mixed-use scenario where the ground floor would be converted to restaurant/retail. Supported by a strong Sponsor and backed by collateral with a high parking ratio centrally located in Los Angeles’s premier office market, GSP found a lender willing to finance both scenarios. The loan held back funds for tenant improvements, leasing commissions and capital expenditures. This provided flexibility to cope with the uncertainties of the COVID-era office leasing market. With optionality and competitive pricing, GSP negotiated a flexible loan agreement at the desired level of proceeds. Although COVID has turned office into a difficult asset class to finance, GSP guided the deal to a successful closing.
October 6, 2021
George Smith Partners successfully arranged a $35,200,000 construction financing for the first phase of a hotel-to-multifamily repositioning and transformation in downtown Salt Lake City’s trendy Granary District. The financing capitalized renovation costs related to the adaptive reuse of the iconic property’s south tower with plans to transform it into a 184-micro unit multifamily asset with boutique-quality amenities. The Project’s north tower is planned to be renovated as part of a future phase.
Located on a coveted 5-acre site, the Project offers approximately 2.7 acres of excess development land, allowing for the future mixed-use infill opportunities onsite.
The Sponsorship team acquired the former hotel with visions of redevelopment in December 2019, creating a unique opportunity for a transformative mixed-use asset in Salt Lake City’s employment and social epicenter. GSP was able to identify a top-tier lender who not only understood the current demand for multifamily housing in Salt Lake City’s urban core, but also understood the significant value and future opportunity afforded by the excess developable land.
September 29, 2021
George Smith Partners secured $4,030,000 of bridge financing for the acquisition of retail shop space in Tempe, AZ. The collateral encompassed approximately 30,000 sf of in-line retail space and an outparcel pad within a larger anchored retail center. At purchase, the collateral was only 44% occupied. The Sponsors believe that a new leasing strategy will be able to drive tenants to the Center. The Property is located on one of the corners of a major intersection that sees over 65,000 cars per day and is less than two miles from Arizona State University, one of the largest universities in the country. The capital provider structured the financing to have a holdback for future property improvements, leasing costs, and interest payments. Priced at 30-Day LIBOR + 7.00%, the non-recourse loan was sized to 68% of total cost and carries a two-year term with extensions. The Lender was also able to include partial releases if only a portion of the collateral is sold.
Rate: L + 7.00% (0.25% LIBOR Floor)
Term: 2 Years with Two 6-Month Extensions
Loan-to-Cost: 68% LTC
Amortization: Interest Only During Initial Term
Guaranty: Non-Recourse with Standard Carveouts
- Advisors: Patrick O’Donnell
August 4, 2021
George Smith Partners successfully secured $25,500,000 in non-recourse bridge financing for a destination dining and retail center nestled in the heart of Los Angeles’ Koreatown. The 42,000 square foot property is one of Koreatown’s most trafficked retail centers and maintained stable collections throughout 2020. The recapitalization retired the existing debt and provided future funding for capital expenditures, tenant improvements and leasing expenses with no new equity required from the Sponsor.
The Los Angeles-based sponsorship team acquired the Property in 2016, identifying the asset as a generational heirloom and a unique opportunity to create substantial value. Despite market volatility and COVID-19 related challenges in the retail sector, GSP was able to identify a lender with local knowledge and expertise that understood the importance of this asset within the context of the neighborhood, and the long-term viability of the business model.