Transaction Overview
George Smith Partners was engaged by the Sponsor to secure financing for six acres of raw land located in the Western States. The Sponsor plans on entitling the land to build out five, forty-unit multi-family buildings, with shared common areas in open air. The Sponsor also plans on building out a pad for a restaurant. Securing financing for unentitled raw land provided an exceptional challenge. Additionally, location, low loan amount, and lenders being more restricted due to COVID made it increasingly difficult to secure financing.
Thanks to GSP’s vast lender network and strong relationships, GSP was able to secure attractive financing for this Project. Despite the hurdles, GSP secured 55% LTC financing at 9.25% interest-only, with a 24-month term and a 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.
Today, most land lenders in the space are restricted to 40%-50% leverage. This high-leverage loan structure allows the 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. Thanks to our long-standing relationship with this debt fund, GSP was able to close this transaction in 14 days from receiving the request.
