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Entitled Land Acquisition Financing for a Single Family Home Community; San Marcos, TX

Term: 1 Year + One, 12-Month Option
LTPP: 87.5%
As-Is LTV: 65%
Prepayment: None

Transaction Description:

George Smith Partners secured senior and mezzanine financing for the acquisition of 49.3 acres of land in San Marcos, TX. The City is located midway between Austin and San Antonio, the #1 and #7 fastest growing cities in the US. The Property is fully entitled for single-family residential development. The Sponsor, a Texas-based developer, recognized the Property’s underlying value and the unique opportunity to build much-needed housing for the area. GSP sourced a high leverage lender who not only recognized the booming submarket, but also the Sponsor’s ability to execute on the master-planned community. The transaction closed 17 days after signing the term sheet.

Advisors

Related Financings

  • $4,680,000 Paper Lot Land Acquisition Loan in Ten Days; San Diego, CA

    August 18, 2021

    Transaction Description:
    George Smith Partners successfully placed a $4,680,000, 50% LTV loan to fund the acquisition of a 6.9-acre parcel of land located in North County, San Diego, California, and the funds needed to finalize the entitlements for 135 paper lot townhome subdivision.

    When GSP became involved, the Borrower had already invested over $2,300,000 to secure a tentative map and development agreement while the land was under option. However, there were only ten days remaining on the purchase contract when the land lender with whom the Borrower had been dealing with directly, declined to proceed. When the Seller refused to grant the Buyer an extension on the purchase escrow, GSP was engaged to arrange the land acquisition financing to enable a timely closing.

    GSP had several highly reliable alternative land lenders that could close within ten days. Strategically, GSP selected a lender that was not only willing to finance the land acquisition and final entitlements, but also was willing to give the Sponsor a strong indication that they would favorably consider funding the future stages of the project, including the grading, horizontal land, and infrastructure development as well as the vertical construction financing once the final map was achieved in approximately nine months.

    Rate: 10%
    Term: 18 Months
    LTV: 50%
    Guaranty: Non-Recourse with Bad Boy Carveouts
    Fee: 3%

  • 14 Day Quick Close Acquisition Capital for 12 Acre Plot of Land; Western U.S.

    April 21, 2021

    Transaction Description:

    George Smith Partners secured financing for twelve acres of raw land located in the Western U.S. Our Sponsor plans to get a variance for this land to build out five, forty-unit multi-family buildings, with shared open air common areas and a pad for a restaurant. This financing was especially challenging due to the land being unentitled, without water, the location, low loan amount, and lenders being more restricted due to COVID.

    Due to GSP’s vast networks and strong relationships, we were able to secure attractive financing for this Project. GSP arranged a 55% loan to purchase at 9.25% interest only, with a 24-month term and 12-month extension option. GSP’s ability to secure this financing in just 10 business days allowed the Sponsor to renegotiate the purchase price and get a hefty discount.

    Most land lenders are restricted to 40%-50% leverage. This high-leverage financing structure allows our Sponsor to start pre-development, including entitlements and pulling permits. The extension option gives flexibility to the Sponsor should they face delays in getting to entitlement due to COVID effects. There’s additional flexibility because there is no prepayment penalty. Per our long-standing relationship with the capital provider, we were able to close this transaction in 14 days from receiving the request.

    Blended Rate: 8%
    Term: 24-month, plus a one 12-month extension option
    Loan-to-purchase: 55%
    Prepayment Penalty: 6 months minimum interest

  • $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

    Transaction Description:

    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)
    Rate: 8.50%
    Term: 15 Months with One 6-Month Extension
    Amortization: Interest Only
    Guaranty: Recourse

  • $5,400,000 Land Acquisition and Predevelopment Financing Facility for a To-Be-Built, 150 Bed Co-Living Community; Highland Park, CA

    February 19, 2020

    Transaction Description:

    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 financing 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 Highland Park’s 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 approximately the balance of the down payment in addition to sponsor equity at closing, with the remaining proceeds to be reserved in a holdback feature that will 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.

    Rate: 8.50%
    Term: 15 Months with One 6-Month Extension
    Amortization: Interest Only
    LTC: 70% (including predevelopment costs to take the project to RTI)
    Guaranty: Recourse

  • $2,800,000 Land Acquisition Financing for a Self-Storage Project; Santa Clarita Valley, CA

    December 4, 2019

    Transaction Description:

    George Smith Partners successfully arranged a $2,800,000 non-recourse, short term acquisition loan for a 4.21-acre parcel near Stevenson Ranch in the Santa Clarita Valley of California. The Sponsor needed financing in a very short timeframe. GSP was able to source a private lender who closed in three business days. The loan offers 60 days of bridge term while the Borrower seeks a construction-to-permanent solution for a fully entitled, six-building, 966-unit, climate controlled, Class-A self-storage facility expected to complete construction in late 2020. The loan is non-recourse and the Lender did not require an appraisal or other third-party reports, thanks to the low leverage and strength of the Sponsor.

    Rate: 7.90% Fixed
    Term: 60 Days
    Amortization: Interest Only
    Loan To Value: 36%
    Prepayment: None
    Guaranty: Non-Recourse

  • $7,650,000 For Purchase of 12.66 Acre Parcel of Vacant Land; 65% LTV

    January 9, 2019

    Transaction Description:
    George Smith Partners secured $7,650,000 in proceeds for the acquisition of a 12.66 acre parcel of undeveloped and unentitled land in a major city in the Western United States. The proceeds represent 65% of the appraised value of the land. The loan carries a 12 month term with two, 6 month extensions available. The loan is fixed at a rate of 10% annually and is prepayable at any time.

    Challenges:
    GSP surveyed the market and found that many lenders would only finance the acquisition at 50% LTV. Other lenders could meet the Sponsor’s desired leverage but quoted an interest rate in the low teens. Some capital providers were concerned about the Sponsor’s ability to secure a takeout construction loan next year, and would only finance the purchase if pre-leasing was in place. The Sponsor intended to sell a small portion of the land shortly after closing. The parcel is located in a market that is growing rapidly, but experienced a large downturn during the last recession. There is still a lot of undeveloped land in the immediate area.

    Solutions:
    GSP provided extensive comparable data that demonstrated the Sponsor’s acquisition price per acre was well supported by the market. Since national lenders were hesitant to provide sufficient leverage, GSP focused on local lenders that know the market well. Emphasis was placed on the enormous amount of new development currently underway in the same market as the subject, including a new big box retail store slated to open later this year. The Sponsor had already successfully developed a mixed-use project in the same submarket, demonstrating their ability to execute a complete business plan. The Lender provided a release provision that allows part of the parcel to be sold to a third party without the requirement of any additional pay down from the Sponsor. The third party appraisal supported a value higher than the purchase price, validating the Lender’s cost basis and resulting in them increasing the loan amount while we were under application.

    Rate: 10.0%
    Term: 12 months + 6 + 6
    Amortization: 30 years
    LTV: 65%
    Prepayment Penalty: None
    Lender Fee: 2.5%