Term: 3 Years + Two, 1-Year Extensions
Amortization: Interest Only
LTC: 75% LTC
Prepayment: 18 Months Yield Maintenance
Lender Origination Fee: 1.0%
George Smith Partners secured $8,400,000 of bridge financing for the lease-up of a two-tenant retail center located in Greeley, CO. The Sponsor recently leased a 50,000 square foot space to a national fitness center. The new 10-year lease, which has a corporate guaranty, required a large tenant improvement package. Loan proceeds will be used to refinance the existing loan and fund leasing costs without requiring the Sponsor to bring in any additional equity. The other tenant at the center, a national specialty retailer, agreed to extend their lease term to 10 years concurrently, eliminating any rollover risk. GSP found a capital source that understood that the tenants are uniquely positioned to serve the market, allowing the Lender to get comfortable with the completed value of the center. The non-recourse financing was sized to 75% LTC and priced at One Month LIBOR + 4.25%.
October 23, 2019
George Smith Partners successfully arranged $13,155,000 in non-recourse bridge financing for a 20,000 sf shopping center in Orange County, CA. The Sponsor has invested over $10,000,000 in renovating the Property and it now it is currently 91% occupied.
The Subject Shopping Center has undergone significant reposition in tenant makeup and revenue. As of the date of funding the Center was 91% leased, but several of the tenants were in the process of building out their TIs and had not moved into the Property. Banks, insurance companies, CMBS lenders and credit unions requested more seasoning from our Sponsor. Debt funds and hard money lenders did not want to provide enough proceeds. The financing was too early for a perm lender who would want to see the seasoned cash-flow, and too late for most bridge lenders who would want to fund the actual construction and renovation without releasing cash out to the Sponsor.
The Sponsor had many goals which included the reposition of the center, the sale of the center, and financing that allowed the Sponsor to pull cash out to sustain him during the sale process allowing him to receive back some of the value added to the Property. GSP was able to provide a solution for the Sponsor with a Midwest-based debt fund that allowed cash out for working capital of over $3,000,000 in less than 15 days. With GSP’s help, the Lender understood the ultimate value of the Property, was able to get comfortable with the large cash-out and give the Sponsor what they needed to complete the final stages of their plan and sell the Property.
$12,790,000 Non-Recourse Acquisition Bridge Financing to Reposition a 120,000 Square Foot Retail Center in Phoenix, Arizona
January 30, 2019
George Smith Partners secured $12,790,000 in non-recourse acquisition bridge financing for the heavy reposition of a 1980s vintage shopping center in the Paradise Valley submarket of Phoenix, Arizona. The value-added property had a vacating grocery anchor tenant, low occupancy rates and below market rents. The Sponsor’s business plan was to acquire the asset with a fitness tenant anchor in tow and then reposition and stabilize the remainder of the center.
Sized to 80% of total project cost, the loan includes a future funding facility to cover tenant improvements, leasing commissions and capital expenditures. The rate floats at 1 Month LIBOR plus 4.25% (approximately 6.75% today) and carries a two year term with two one year extension options. Interest is not charged on the holdback until funds are drawn. The Lender was able to accommodate several changes to the business plan throughout the application process. This included relocating several existing tenants within the center due to a conflict presented in existing tenant leases.
5-Day Close $6,350,000 Non-Recourse Bridge Refinance of a Multi-Tenant Retail Center in Northern California
November 7, 2018
George Smith Partners successfully arranged a $6,350,000 bridge refinancing for a fully occupied un-anchored, 7-tenant retail center located in downtown San Mateo, California. The Property has a total net rentable area of 13,303 SF. Tenants include a convenience store and local restaurants. The Sponsor will utilize a portion of the loan proceeds to pay off existing lenders, and the rest of the proceeds will be invested into other investments. The Sponsor’s preferred exit is to sell the Subject Property through a 1031 exchange.
All tenants are on short-term or month-to-month leases by the time of funding. Although lacking a strong cash flow, the Sponsor requested maximum cash out. As a result of rising interest rates, several capital providers passed on this opportunity because the Property’s cash flow becomes tighter after applying a higher underwriting rate. The underwritten value was affected by a high debt service coverage ratio as the Property is classified as “un-anchored”. In addition, capital providers challenged the Property’s low capitalization rate given it is located on a busy corner with a signal in a downtown area.
GSP identified an asset based private money lender who offers simple and quick closing without requiring an appraisal or third party reports. GSP worked with the Lender to structure a 24-month loan, fixed at 6.90% (months 1-12) and 7.90% (months 13-24), interest only payments, no upfront TI/LC holdbacks and on-going reserves. There is no prepayment penalty.
Multi-State Bridge Loans: $172,300,000 National Portfolio Non-Recourse Bridge Financing; 36 Properties in 17 States
November 6, 2014
Transaction Description: JJay Brooks successfully arranged $172,300,000 of bridge financing for a portfolio of 36 properties spanning 17 states (from Louisiana to Alaska) that had been mired in complex litigation for several years. Assets included regional malls, office buildings, industrial properties and mobile home parks located in secondary and tertiary markets. Although the initial debt was being serviced, the litigation resulted by a loan maturity default during the recession when the capital markets where devastated and the existing lender would not negotiate an extension. Settlement of the litigation required certainty of close with a “drop-dead date” that would have resulted in significant borrower losses had the financing not closed. The final debt structure involved two unrelated lenders with multiple layers of senior and mezzanine debt, structured over five loans. Prepayment and yield maintenance flexibility was a critical component of the structure that allows the borrower to extract properties from the financing in the coming years. Generally speaking, the loans were priced with either a floating (with an interest rate cap) or fixed interest rate with six months to 24-months of yield maintenance. Leverage varied depending on the stability of the asset and the term was structured to provide adequate time to liquidate several assets and identify permanent debt for others. Challenge: Numerous property specific complexities such as ground leases, environmental issues and major capital and tenant improvement projects required underwriting and loan structuring. The stigma associated with properties (and borrowers) involved with litigation associated with a default disqualifies many lenders from considering the financing described. The portfolio size, location and varied property types also create additional complexity and challenges. Certainty of close was mandatory. Solution: GSP identified the lending platforms and professionals that could underwrite, appropriately price and structure the cash flows. The solutions required to solve all the challenges are too long to list although the financing required the cooperation and collaboration of an incredibly talented group of professionals on both the lender side and the borrower side of the financing. All parties came together to solve problems and pull from a depth of knowledge. Rate: Various Non-recourse Advisor: JJay Brooks