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$9,800,000 Refinance for Mixed-Use Building and Vacant Retail Building; Echo Park, CA

Term: 12 Months
Rate: 7.75% Fixed
Prepayment: None
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners successfully advised on the refinance of two parcels containing a vacant commercial retail building and 90% leased mixed-use residential/retail building in Los Angeles, CA. The senior loan proceeds totaled $9,800,000 of non-recourse financing, approximately 58% LTV. After the COVID-19 pandemic largely stopped retail leasing, the Sponsor responded to changing market dynamics by altering business plans to re-entitle the vacant retail parcel to multifamily. Negotiating an LOI for the sale of the mixed-use residential building, the Sponsor required a bridge loan to pay off the existing bridge debt and carry both parcels until the completion of entitlements and eventual sale.

GSP had to strategically market the opportunity given a weak, Covid-related retail leasing market and relatively complicated business plan. With deliberate advising of GSP, the Sponsor was able to achieve fixed, non-recourse financing despite a fully vacant building.

Related Financings

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    April 24, 2019

    Transaction Description:
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    The Sponsor did not want to pay prepayment penalties or incur a large refinance expense. The existing Lender did not have a program to allow for recapitalization or additional funding of their current loan.

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    Rate: 5.5% for years 1-10 and 5.85% for years 11-15
    Term: 15 Years
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  • Commercial Real Estate $2,925,000 Cash-Out Refinance for a Mixed Use Property in Palm Desert at 87% Loan to Cost

    May 30, 2018

    George Smith Partners arranged a $2,925,000 cash-out refinance loan for a 20,300 square foot mixed-use office over retail property in Palm Desert, California. The deal presented numerous challenges. First, the sponsor only owned the property for three months. Second, a lease was not available for the anchor restaurant space comprising two thirds of the property’s square footage. Third, the sponsor required extremely high leverage and conventional bank interest rates. Finally, the Sponsor needed to close the refinance transaction in 30 days due to a pending acquisition.

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    Sized to an aggressive 87% of purchase price, the loan included a 6-month interest reserve but did not require a holdback for TIs and LCs. The three year mini permanent loan is interest only for the first 12 months followed by 25 year amortization for the remaining two years. The loan floats at Prime plus 0.5% (5.25% today) with no prepayment penalty, and the lender fee was a minimal 0.5%. The loan closed in exactly 30 calendar days from application, which is an extremely fast closing timeframe for a conventional bank.

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    Term: 3 Years
    Amortization: 12 Months Interest Only; 25 Year Amortization Thereafter
    LTC / LTV: 87% / 65%
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  • $5,750,000 90% LTC Acquisition Bridge Financing for Mixed-Use Development in Burbank, CA

    April 25, 2018

    Transaction Description:
    George Smith Partners arranged $5,750,000 in bridge financing for the acquisition of a retail building and the refinance of five contiguous office and retail buildings. Together these buildings form half a city block in Burbank, CA. The loan not only allowed for the consolidation of properties, but also provided predevelopment and entitlement capital for the future redevelopment of the city block into a large mixed-use development. Because of the future plans, the Sponsor was charging below market rents and a low cash-flow to value. The 10 year 90%/70% LTC/LTV loan has a fixed interest rate of 4.25% for the first 36 months of the term. Subsequently, the loan transitions to a 1-year ARM set at 2.75% over the 3-year treasury benchmark through maturation. The recourse loan has no prepayment penalty.

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    Prepayment Penalty: 2,1
    LTC/LTV: 90% LTC/ 70% LTV
    Origination Fee: Par
    Guarantee: Recourse