$81,500,000 Non-Recourse Bridge Loan for a 19-Story Multifamily Tower; Phoenix, AZ

All terms confidential

Transaction Description:

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.


Related Financings

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    $15,250,000 Non-Recourse, Cash-Out Bridge Financing for a 200-Unit Multifamily Property in a Tertiary Market; 80% LTC at 375 over 1-Month Libor; Rexburg, ID

    February 26, 2020

    Transaction Description:

    George Smith Partners arranged $15,250,000 in non-recourse, cash-out bridge financing for a 200-unit multifamily property in Rexburg, Idaho. While home to BYU-Idaho (with a student population of 25,000), Rexburg is a small town with a non-student, resident population of only 20,000. The Sponsor approached GSP looking to refinance out a recourse construction loan from a local bank and also return capital to investors, while providing the Property time to season prior to selling or refinancing.

    By emphasizing the demand driven by BYU-Idaho’s presence, the strong sponsorship with a long history of development and investment in the local market, and the Property’s robust in-place cash flow, GSP ultimately sourced a prominent debt fund capital provider that was comfortable assuming tertiary market risk. The 80% loan to cost, non-recourse execution included a sizeable cash-out, given that the in-place construction loan was sized to 65% loan to cost. The loan floats at a spread of 375 over the 1 Month Libor (5.4% all-in today) and is interest only.

    Rate: 1 Month LIBOR + 375
    Term: 2 Years + 1 Year Extension
    LTC: 80%
    Amortization: Interest Only
    Guaranty: Non-Recourse

  • Expand

    $5,700,000 Non-Recourse Acquisition Bridge Financing for a 2-Property Multifamily Portfolio; 80% LTC and 7.5% Debt Yield; Gardena, CA

    February 5, 2020

    Transaction Description:

    George Smith Partners arranged $5,700,000 in non-recourse acquisition bridge financing for a two-property value-added multifamily portfolio in Gardena, CA. The two 1960’s vintage properties had significant deferred maintenance and below market rents. The Sponsor’s business plan was to reposition the Property and release the units at market rents. Maximum proceeds, despite a tight debt yield, and non-recourse were priorities.

    George Smith Partners sourced a lender familiar with the market and willing to size the loan to a 7.5% debt yield, which resulted in 80%LTC. The loan, which offers an attractive parri-passu funding structure, includes future funding for a full gut renovation of unit interiors and an exterior upgrade. The three-year bridge loan is interest only and carries a fixed interest rate of 6.90%. Interest is not charged on the holdback until funds are drawn. The lender fee was limited to a 1.00% origination fee with no exit fee. The Lender did not charge a legal fee and closed the transaction in 30 days from term sheet execution.

    Rate: 6.90%
    Term: 3 Years
    Amortization: Interest only
    LTC: 80%, including future funding
    Guarantee: Non-Recourse
    Lender Fee: 1% in / no exit fee
    Prepayment Penalty: 12-month interest guarantee

  • Expand

    $28,700,000 Boise Bridge Non-Recourse Acquisition Loan to 73% of Cost @ LIBOR+300

    October 10, 2018

    Transaction Description:

    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.

    Rate: LIBOR +300
    Term: 24 months
    Amortization: Interest Only
    LTC: 73%
    Debt Yield at Close: 6.3%
    Origination Fees: 1.0%

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