Transaction Overview
George Smith Partners secured $25,000,000 in proceeds for the perm refinance of a 47-unit mixed use property in the Santa Clarita Valley, CA. The Lender provided proceeds of 65% of appraised value and underwrote to a 7.0% stabilized debt yield. The new first trust deed will refinance a high-interest bridge loan into a 10 year, 3.80% fixed, full term interest-only loan.
Several challenges were encountered when discussing the transaction with capital providers. The mixed-use property derives over 30% of its income from retail tenants which reduced the number of potential capital sources. The Property received Certificate of Occupancy during the COVID-19 pandemic in 2020. The multifamily units leased up quickly, but the retail units took longer as retail tenants navigated delays in the supply chain and permitting. Although the Sponsor was able to sign leases for all the retail spaces, they required extensive buildouts that took longer than anticipated to complete. Finally, most lenders required a stabilized debt yield of 7.5% – 8.0%, which would not provide sufficient proceeds to refinance the existing loan.
GSP was able to source a lender that was able to close the loan on its balance sheet, with the intent of securitizing it in 6 months. The balance sheet execution allowed the Lender flexibility to close the loan while the retail buildouts were still underway. The Lender was also able to underwrite to 7.0% debt yield, which resulted in higher proceeds than the rest of the market.
