Transaction Overview
George Smith Partners placed $13,600,000 in bridge financing on a newly constructed 75 unit multifamily property in Ontario, CA, shortly after the Property obtained it’s certificate of occupancy. Due to construction cost escalation, which has been a pervasive industry challenge, the Sponsor incurred significant cost overruns during the course of construction. This resulted in a large number of mechanics liens filed on the Property as well as open trade payables and a lender that was threatening to file a notice of default. To further complicate matters the construction lender was an esoteric form of bond financing with a very narrow payoff window. Failure to repay within the window would result in significant penalties. Property occupancy was less than 10% at the time of engagement.
By emphasizing the Property’s excellent location in West Ontario in close proximity to the airport and convention center as well as the submarkets strong fundamentals and low vacancy rate, GSP was able to source a lender who provided a fully funded loan representing 75% of total cost. The loan carries an interest rate of 1Month Libor + 2.50%, which is near institutional level pricing for a middle market sponsor and has no going in debt yield or DCSR requirements. The loan has a holdback for interest reserve so no additional out of pocket costs will be incurred for debt service. The loan term is 24 months and there is no prepayment penalty or exit fee, allowing the Sponsor to sell or refinance at stabilization at no additional cost. The loan closed in just 60 days from the signed application.
