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Bozeman, MT Land Development Loan for 400 Unit Project

Rate: 5.5%
LTV: 60%
LTC: 65%
Term: 12 months
Recourse: Full Recourse

Transaction Description: George Smith Partners secured an $8,150,000 pre-entitlement land development loan for a proposed 400-unit project in Montana. The 65% loan to cost financing is priced at 5.00% over LIBOR (with a 50-bps floor) interest only. The loan will allow the Sponsorship to build out the necessary infrastructure to obtain the plat map and secure full entitlements in 2021. The Project will be one of the largest in the state of Montana and this crucial financing is essential to meet the growing housing shortage in these markets which have accelerated during the COVID-19 pandemic.

Challenge: The large, pre-entitlement project is situated on the outskirts of a tertiary market that was officially classified as a Micropolitan Statistical Area (according to the 2010 Census). Moreover, despite the Institutional Sponsorship, the small market is not a target focus for many regional or national lending institutions traditionally capable of handling loans of this nature. The size of the loan also precluded many local/state banks from obtaining the necessary leverage for the Project.

Solution: GSP secured a regional bank with headquarters near the Project which could understand the growth metrics of the projected Metropolitan Statistical Area (based on the 2020 Census) and how the Project will be vital to the long-term development of the City. The bank relied on the financial strength of the Sponsorship to advance 65% LTC and become comfortable with the pre-entitlement status of the Project. The loan which closed in 45 days from application also included a necessary bank provided, letter of credit to the City which guarantees the necessary capital to be invested into the Project to obtain entitlements.


Related Financings

  • $12,500,000 Non-Recourse Acquisition Financing for Unentitled Land; Van Nuys, CA

    December 16, 2020

    Transaction Description:

    George Smith Partners arranged $12,500,000 in non-recourse financing for the acquisition of land which the Sponsor will entitle for 333 apartment units. GSP was able to locate a lender able to provide 85% of the purchase price. Not only was the loan high-leverage, it had no holdbacks for pre-development costs, making servicing very simple for the Borrower. The Sponsor intends to complete the entitlements and refinance into a construction loan in 6-12 months.

    Rate: 9.75%
    Term: 12 Months
    Amortization: Full Term Interest Only
    LTV: 85%
    LTC: 65% of predevelopment expenses
    Prepayment: 6-months
    Guaranty: Non-Recourse

  • $4,200,000 Loan for Unentitled Land, 5.9% Interest Rate; Pasadena, CA

    October 21, 2020

    Transaction Description:
    GSP secured a $4,200,000 bridge loan for unentitled land in Pasadena, CA. The site is proposed to be developed into 59 luxury townhomes. The loan is fixed at 5.9% for a 12-month term with two 6-month extensions. The proceeds represent 45% of the total cost to purchase the land and entitle it.

    The Sponsor acquired the Property in 2015 and has been working with the City to receive entitlements to develop the townhome plot since property acquisition. The land remains unentitled; however, the Sponsor expects to receive Ready-to-Issue (RTI) in 6 months which would provide significant value appreciation. The Sponsor had a loan coming due on the Property and needed to refinance. Given the economic situation due to the COVID-19 pandemic, many lenders were hesitant on providing financing.

    GSP demonstrated that the location of the Property and market are very strong, and the specific neighborhood is undergoing a revamp. The Sponsor is an experienced Los Angeles developer who is familiar with the entitlement process and the Property is less than six months away from receiving RTI.

    Rate: Fixed at 5.90%
    Term: 12 months, 2,6 month extension options
    Amortization: Full Term Interest Only
    LTC: 45%
    Guaranty: Non-Recourse