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George Smith Partners successfully arranged $81,500,000 in non-recourse bridge financing for a 312-unit, 19-story luxury high-rise apartment tower in Phoenix, AZ. The Property is in the heart of Phoenix’s historic Roosevelt Row Arts District and features restaurants and retail on the ground floor, 7 levels of parking, a state-of-the-art fitness center and a rooftop pool overlooking the Phoenix skyline.
The financing was closed prior to the City issuing a final Certificate of Occupancy on the Property. Proceeds from the initial funding will be used to replace the senior construction debt and to finance the remaining construction. A future funding will retire the existing mezzanine construction debt as well as return cash equity to the Developer’s investor group.
GSP sourced and negotiated with a capital provider who became comfortable with the market, lack of project completion, and lease up risk at a high leverage point. Furthermore, the new Lender was very agreeable to the existing mezzanine lender’s requested intercreditor terms. By retiring the higher priced construction debt, the new bridge loan provides the Developer with additional term, substantial savings on interest, and exit flexibility during project lease-up.
October 10, 2018
George Smith Partners secured $28,700,000 in proceeds for the acquisition of a 254-unit multifamily property in Boise, Idaho. While near full occupancy at close, the Property has dated interiors and common areas, as well as some deferred maintenance. A capital budget was drafted by our Sponsor for unit upgrades at lease-turn as well as common area improvements. Proceeds are structured with $25,500,000 for the initial funding plus an additional $3,200,000 for capital improvements. Floating at 30 day LIBOR plus 3.0%, the two-year term will be paid current, monthly out of cash flow and does not carry a pre-payment penalty. An earn-out for an additional $2,300,000 was structured once the Subject Property achieves an 8.5% debt yield.
Challenges and Solutions:
The Sponsor was in a 1031 exchange and needed to close quickly as their exchange provided a narrow window to close. While the going in cap rate provided meaningful yield Day 1, GSP focused their marketing efforts on the Sponsor’s proven track record to execute on their previous deals.
Several capital providers passed on the deal due to the fact Boise is not a top MSA by population, even though it was recently named as America’s fastest growing city by Forbes Magazine. Certainty of execution was required for this short acquisition escrow, and the need to identify a capital provider knowledgeable with the Boise market was paramount in avoiding educational “ramp-up” delays so that escrow would fund timely.
GSP vetted this location and confirmed market knowledge with loan decision makers prior to the issuance of an application. The loan closed within 40 days of GSP’s engagement on the deal.