Term: 5 Years Fixed, 12 Year Term
Amortization: 30 Years
Prepayment Penalty: 5,4,3,2,1
Lender Fees: None
George Smith Partners placed acquisition perm financing for the purchase of a single tenant, NNN-lease Jack in the Box in Texas. The Sponsor is a single asset entity, whose goal is to self-manage the NNN retail property. This Property was identified in a 1031 exchange. Jack in the Box has 12 years remaining on the lease, therefore George Smith Partners worked with the Lender on structuring a 12-year coterminous term. Due to the low leverage and other mitigating factors, GSP was successful in acquiring a 30-year amortization for the Sponsor along with a stepdown prepayment penalty. GSP also negotiated with the Lender to waive all fees.
$13,000,000 Acquisition and Reposition Financing on a 47-Unit Student Housing Property; Adjacent to a Major Southern California University
May 27, 2020
George Smith Partners arranged the $13,000,000 first mortgage on a 1960’s vintage, 102-bed student housing property in Los Angeles. The national balance sheet lender provided the Sponsor non-recourse financing at 70% of total project cost including 100% of future CapEx funds totaling $42,500/per unit to complete extensive interior and exterior renovations. Interest expense is not incurred on CapEx funds until drawn. The Sponsor’s cash flow was maximized as the loan is interest only during the initial three-year term. The 30-Day LIBOR plus 3.35% coupon required interest rate risk protection and in order to minimize associated sponsor cost the Capital Provider structured the interest rate cap with a two-year duration at closing plus an obligation to renew for the third year of the initial term. Due to a lack of cash flow for 12 months, the Capital Provider structured an interest reserve to cover debt service during the peak reposition period.
May 20, 2020
George Smith Partners secured $1,690,000 in Freddie Mac permanent financing for the acquisition of a stabilized 72-unit multifamily property located in Killeen, Texas. The Property is located four miles southeast of Fort Hood, the largest active-duty armored post in the U.S. military, occupying more than 218,000 acres of land in Bell and Coryell Counties.
As GSP went into application, the world was entering into the COVID-19 pandemic. Most lenders had either stopped lending or become much more cautious. Most agency lenders require Borrowers to have a track record with multiple projects before they will be considered for a Freddie Mac or Fannie Mae loan. In this case, the Sponosr was a first-time agency borrower. To make it even more challenging, the Property was in a small market with a high concentration of military personnel and the Sponsor required the ability to have prepayment flexibility.
GSP used its relationship with a capital provider who closed multiple loans with our firm. GSP recently closed a loan in a similar small market and we were confident that they would understand the demographics and market characteristics. For this type of financing, the Lender’s typical structure is to offer a 10-year term with Yield Maintenance. Thanks to GSP’s long-standing relationship with this Lender, we were able to secure an attractive rate, high leverage, and a step-down prepayment of 3,1,0,0,0 on a 5-year term. The new capital allows the Sponsor to expand their Texas Multi-Family portfolio.
May 6, 2020
George Smith Partners placed a $5,575,000 acquisition loan for the purchase of a 38-unit multifamily unit located in the Los Angeles MSA. The loan has a rate of 3.6% for a 7-year term and includes three years of Interest Only payments. The term sheet was signed shortly before the COVID-19 crisis and ensuing economic volatility. Despite these conditions, the original rate and leverage was kept intact.
The Property has several vacant units which represented an opportunity for our Sponsor to add value. The Capital Provider was able to underwrite the income on these units to post-renovation market rents. Market comparable data was used to support the buyer’s conservative rent assumptions. Additionally, the Capital Provider used a market vacancy factor and proposed to withhold 12 months of Principal and Interest reserves at loan closing. GSP pointed out that the loan had IO payments during the first 3 years. After discussion, the reserve was changed to 12 months of interest payments only. The loan closed in less than 60 days.
May 6, 2020
George Smith Partners, on behalf of Stos Partners , arranged $19,775,000 in bridge financing for the acquisition of a specialty flex industrial asset located in Temecula, CA. The Sponsor was able to negotiate a long-term lease renewal for the primary credit tenant, whose term was nearly expired, creating significant value in the process.
The recently purchased industrial building maintains a mix of specialized uses, as well as an additional near-term vacancy for a smaller flex space, posing both an opportunity and a challenge within the markets. The specialized and varied uses of the building, including laboratory rooms, light manufacturing areas and office/distribution space, required costly buildouts with tenant improvement dollars as the primary tenant expanded into additional space, requiring additional structure. Despite strong market fundamentals, the disruption with the COVID-19 pandemic changed the economy overnight. However, the financials and credit profile of this project only grew stronger and more viable with time.
George Smith Partners was able to identify a capital source that understood both the quality of the asset and the ability of the Sponsor to execute on the intended business plan. Amidst a time of great market volatility and economic uncertainty, the Capital Provider held their original pre-COVID structure and terms.
April 1, 2020
George Smith Partners secured $4,517,000 for the acquisition of a multi-tenant, retail center in Villa Park, Illinois. The non-recourse permanent loan is fixed at 3.75% for ten years with full-term interest only and a defeasance prepayment penalty structure.
One of the tenants was a newly opened gym franchise with no historical sales information for this center. Also, during the loan process, the Seller was finalizing a subdivision of the parking lot which required multiple levels of municipality approvals.
GSP identified a capital source who understood the strength of the asset, the experience of the Sponsor and its desirable suburb location, which is 20 miles outside of Downtown Chicago. The Capital Provider worked through the timing of the issuance of the subdivision approval and was able to close as soon as the approval was finalized. The efficiency of our Capital Provider allowed the Sponsor to be able to rate lock and close as soon as the approval was stamped, taking advantage of the low interest rate environment.
$5,400,000 Land Acquisition and Predevelopment Financing Facility for a To-Be-Built, 150 Bed Co-Living Community; Highland Park, CA
March 11, 2020
George Smith Partners arranged a $5,400,000 financing facility for the acquisition of a 29,930 square foot vacant parking lot in the trendy Highland Park submarket of Los Angeles, CA. In addition to purchase financing, the facility offers good news money for predevelopment costs related to the Sponsors planned 150-unit co-living community on the site, which will be a by-right development and will take advantage of TOC Tier 1 incentives.
Co-living has emerged as a remedy to address the acute shortage of affordable housing across the country by offering tenants fully furnished, highly amenitized units with the cost of utilities, common area maintenance, and other traditional living spaces bundled into the rent. The Property is within a 5-minute walk from both York Boulevard and Figueroa Street, Highland Park’s two main amenity-rich thoroughfares lined with shopping and dining destinations.
By focusing attention on land lenders who are active in the local area, GSP identified a capital provider who is familiar with the local market and also understands the importance that the co-living space will serve in the greater rental market going forward. The loan was uniquely structured to disburse the balance of the down payment in addition to sponsor equity at closing. The remaining proceeds will be reserved in a holdback feature to cover the predevelopment soft costs in order to bring the project to permit-ready status. The interest-only predevelopment land loan was priced at 8.50%, with a 15-month term and one 6-month extension option. The loan closed in less than 30 days from application.
LTC: 70% (including predevelopment costs to take the project to RTI)
Term: 15 Months with One 6-Month Extension
Amortization: Interest Only