$85,800,000 Senior Construction-to-Perm Financing for a 372-Unit Multifamily Project; Sacramento, CA

Transaction Description:

George Smith Partners successfully secured a $4,835,000, 72% LTC, fixed, non-recourse, pre-development bridge loan for a 205-unit multifamily ground-up construction project in Denver, Colorado. The bridge loan will be used to complete all the architecture/engineering milestones required to obtain permits and finalize pre-development work prior to breaking ground in Q3 of 2024.

The Denver metropolitan area is expected to add roughly 216,700 new residents over the next five years, fueled by the expansions of the Denver International Airport and Fitzsimons Medical Campus. The Project is expected to fulfill an underserved workforce demographic by offering an affordable yet high-quality option. The Project will feature a rooftop deck with BBQ grills, outdoor games, picnic areas, a dog run, gym, state-of-the-art security systems, bike parking, package storage, and a mail center with full-time onsite management and maintenance.

Transaction Description:

George Smith Partners has successfully renegotiated the construction debt on a $10,000,000 construction loan on a 15-Unit multifamily property in West Los Angeles.

Challenge:

GSP arranged the original fixed-rate construction loan with a debt fund in 1Q-2020, prior to the Covid moratoria. However, due to the uncertainty of the supply of labor and materials during the pandemic, the Sponsor decided to delay vertical construction for about one year which delayed the lease-up and stabilization thereby reducing the remaining term which reached maturity in May 2023.

Despite the Sponsor’s willingness to pay down the indebtedness, GSP determined that a restructuring of the existing debt would be more cost effective than bringing in additional equity.

Solution:

GSP was able to negotiate with the construction Lender to convert its loan into a one-year bridge facility. The Lender increased the interest rate by 50 bps but did not charge a new origination fee. Hopefully, in one year, the financing markets will improve and an $8,000,000 loan at more conventional pricing will be available.

Transaction Description:

George Smith Partners secured $33,800,000 of senior construction financing for the development of an 83-unit ground-up multifamily building in an infill Los Angeles location. The 83 units will be comprised of 50% conventional units and 50% co-living units. While the property is in an A+ location, many lenders were uncomfortable with co-living in general. GSP was not only able to find a lender that was comfortable with the product type but was also able to get to almost 70% of total project cost. The lender also gave the borrower credit for the entitled value of the land as opposed to their acquisition cost from the year prior. The land equity contributed a significant portion of the total equity required.

The construction loan was priced at Prime + 0.75% and the loan term is 18 months plus one 6-month extension option.

Transaction Description:

George Smith Partners secured $8,500,000 of senior construction financing for the development of a 35-unit ground-up multifamily building in Los Angeles, California. GSP was sourcing financing when banks were getting increasingly conservative in their underwriting, with leverage falling and compensating deposits required. Given the strong track record of the developer, GSP identified a bank that was able to maximize the leverage with no deposits held at the bank. The Sponsor was also able to use land equity in the capital stack.

The construction loan was priced at Prime + 1.25%. The loan term is 18 months plus one 6-month extension option.

Transaction Description:

George Smith Partners arranged permanent financing for the refinance of a stabilized 12-unit multifamily property in Los Angeles, California. The Sponsor finished construction on the Property in the middle of the current rate hike cycle. GSP identified a Capital Provider who allowed an early rate lock before Certificate of Occupancy was issued. The Lender allowed the borrower to go into application with very little lease up, but with the understanding that the property would be stabilized by closing. Although the closing took slightly longer than the 60 day term of the rate lock, the Lender held the rate for no additional charge. The bank did not require deposits to be held at their branch except for the subject property’s operating account.

Transaction Description:

George Smith Partners successfully arranged $57,900,000 in non-recourse, construction financing for a mid-rise, Class A, 187-unit multifamily development in Tempe, AZ. The Project will serve the rapidly developing area of north Tempe. The Property is located immediately adjacent to a Valley Metro light rail stop, offering residents convenient access to Downtown Tempe, Arizona State University, Sky Harbor Airport, and downtown Phoenix.

The Sponsor, headquartered in nearby Scottsdale with a successful track record of multifamily and commercial developments, engaged GSP in 2020 to source high-leverage, non-recourse financing. Despite being relatively early in the Project’s development stage, GSP sourced a Lender offering a 90% LTC loan, which includes a participating feature. This unique structure features the Lender sharing profits with the Sponsor in exchange for the high leverage financing.

The construction budget grew significantly during the longer than expected entitlement and permitting process. Fortunately, thanks to GSP’s close relationship with the Lender, a commensurate increase in market rents, and the strength of the Sponsor, the final loan amount was nearly 40% higher than that of the original loan application in 2021.