Rate: 3.54%, Fixed for 5 Years
Term: 30 Years
Amortization: 30 Years
Prepayment: 4, 3, 2, 1%
Depository Relationship: None Required
George Smith Partners secured permanent financing for a 15-unit multifamily property located in Houston, Texas. The financing is fixed at 3.54% for 5 years. The deal went into application right before the Federal Reserve increased rates and before we experienced a run-up in treasuries. GSP’s good standing with the Lender ensured the original terms were honored until closing, notwithstanding the loan extension that took place and the rapid increase in the interest rate environment. The financing does not require any deposit relationship with the bank or any funds to be held back for reserves. The Lender’s processing/application fee was $2,000 and they had no origination fee.
December 7, 2022
George Smith Partners successfully placed a $25,000,000 bridge loan for the acquisition and renovation of a 200-unit, 1970 vintage apartment community in Irving, Texas. GSP sourced a Lender that was able to maximize proceeds while providing future capital expenditure funding for the sponsor. The loan was sized to 74.1% of As-Is Value and includes future fundings for 100% of the capital improvements and unit renovations. The Sponsor plans on renovating approximately 75% of the units within the initial 3-year loan term.
The lender prices over 30-Day Average SOFR, as opposed to the more common 30-Day Term SOFR. The average SOFR is based on the preceding 30 days rather than the upcoming 30 days and is 60 bps lower in today’s rising rate environment.
Rate: 4.10% + 30-Day Average SOFR (4.88% floor rate)
Term: 3 Years, Two 12-Month Extensions
Amortization: Interest-Only (30 Year amortization during the extensions)
LTV: 74.1% As-Is
Prepayment: 18 Months Minimum Interest Period
Loan Fee: 1% Origination Fee, 0.50% Exit Fee
October 26, 2022
George Smith Partners arranged $2,250,000 in permanent financing for the acquisition of a stabilized 12-unit multifamily property in Los Angeles, California. The Sponsor acquired the Property as interest rates were soaring and as the environment was changing drastically with the Fed raising rates. GSP identified a Capital Provider who allowed an early rate lock, required no holdbacks of any kind, no deposits to be held at their branch, and provided an extremely flexible prepayment penalty structure. This allows the Sponsor plenty of options during the next 5 years at an aggressive rate.
Term: 5 Years Fixed
Amortization: 30 Years
Prepayment Penalty: None
Reserve Account: None
Deposits Required: None
- Advisors: Reuven Risch
July 6, 2022
George Smith Partners secured $65,410,000 in proceeds for the acquisition of a 232-unit multifamily property in San Bernardino County. The bridge loan is structured as $63,020,000 at close and $2,390,000 in future funding. The fully-funded proceeds represent 75% LTC. The loan floats at a rate of 30-Day SOFR + 3.20% with a 0.35% floor on SOFR.
GSP discussed the transaction with over 40 different capital providers and received a wide range of feedback. Many lenders declined due to the Property being constructed in the 1970s. Other lenders provided quotes but were limited to a maximum of 70% LTC ($60,800,000). Several quotes had pricing of SOFR + 4.0%.
GSP was able to source a lender that provided 75% LTC with pricing of SOFR + 3.20%, which is well below market. The Lender underwrote to an exit debt yield of only 6.0%, resulting in maximum proceeds. There was no required interest reserve or any type of cash management during the initial loan term. The spread of 3.20% over SOFR was maintained despite many other lenders widening their spreads while the loan was in app. The loan closed with no changes to the original term sheet.
Another challenge facing floating rate bridge loans is the requirement to purchase a cap. Until several months ago, the cost of a cap was negligible. However, the expense has become exorbitant due to the current volatility in interest rates. GSP was able to lower the up-front cap cost by reducing the period of the cap from 3 years down to 2 and increasing the rate at which the cap is triggered (strike price).
June 29, 2022
George Smith Partners successfully placed a $38,500,000 bridge loan for the acquisition and renovation of two multifamily properties located in Sanford, Florida. The two Properties total 260 units and are located across the street from one another. GSP sourced a lender that was able to maximize proceeds at a low rate by crossing the properties with release provisions. The two properties were allocated at different loan amounts for their release provisions. One property is a 1970’s vintage single-story, 120-unit, apartment complex that had an initial loan of $14,150,000. The other property is a 1990’s vintage, two-story, 140-unit, garden-style apartment complex that was allocated at an initial loan amount of $20,800,000. The loan was sized to 79% LTC and includes the portfolio’s capital improvement and renovation budget. The Sponsor intends on renovating approximately 75% of the units within the 3-year loan term.
Rate: One Month CME Term SOFR + 3.60% (0.25% Floor Rate)
Term: 3 Years, Two 12-Month Extensions
Amortization: Full Term Interest-Only
LTV: 80% (As-Is LTV)
Prepayment: 15 Months Minimum Interest Period
Loan Fee: 1% Origination Fee, 0.25% Exit Fee
May 18, 2022
George Smith Partners secured an acquisition bridge loan for the repositioning of a Class-C apartment community in San Diego. The financing includes a holdback that will be used to renovate both the interior and exterior of the Property over a 12-month period including the addition of a single ADU (garage conversion).
Given the Sponsors’ track record and their successful ability to substantially increase rents in this niche market, GSP was able to secure a Lender that could close quickly (within 25 days), without an appraisal, and allow a $1,000,000 2nd TD up to 98% of the total cost of the Project to accommodate an additional private party investment in the Property.
Rate: 7% Fixed
Term: 18 months + 6-month extension
Min DSCR: 1.15:1.0
Origination Fee: 1.5%
- Advisors: Alina Mardesich
May 4, 2022
George Smith Partners arranged $3,600,000 in acquisition financing for a 16-unit multifamily property in West Hollywood, CA. The Property came with five vacant units that were previously leased at well below market rents. The Sponsor, a repeat client, planned to renovate the vacant unit interiors and increase rents accordingly. GSP leveraged its network of relationships to source short-term, non-recourse, fixed rate financing with interest only payments with an early rate lock. However, the delayed appraisal report uncovered two units that were not legally permitted, which the lender excluded in its underwriting. GSP worked with the Lender, Appraiser and Sponsor on creative solutions to get as close to the original loan terms as possible. These negotiations required several extensions on the closing. Also, the rate lock eventually expired. Ultimately, GSP was able to get a $3,600,000 loan amount thanks in part to additional analysis and data provided to the Lender. GSP also leveraged its relationship with the Lender to secure a 4.25% fixed rate. While this was higher than the original locked rate, it was well below the current market rate.
Rate: 4.25% Fixed
Term: 2 Years, with 1-Year Extension Option
Prepayment: 1%, 0%
- Advisors: John Choi