Transaction Overview
George Smith Partners arranged the $32,000,000 (60% of value) floating rate portfolio loan at “best pricing” for a pool of 5 Southern California properties. The portfolio included: (1) 43-live work lofts in Los Angeles Arts District, built in 1937, refurbished 1985, 97% occupied; (2) 10-unit Riverside apartment complex; (3) 272-unit Indio apartment complex, built in 1985, renovated in 2012, 100% occupied; (4) 130-unit Indio apartment complex, built in 1987, 97% occupied; and (5) 34-units of an Indio broken condo complex, 94% occupied as rentals. The floating rate loan is interest only for the first two years of the four-year loan term. Based at 185 over the 30-day LIBOR, the loan does not contain an interest rate floor, ie the “all-in” rate is 2.01% today.
Challenge: Our Sponsor sought to take advantage of today’s low-floater programs and requested the lowest possible floating pricing; agreeing to sign personally in exchange for a lower coupon. The property locations and property sizes do not typically fit a large national bank with this pricing or structure. An earn-out was also needed for an office-to-loft conversion. The Borrower’s Personal Financial Statements were hard to understand with complex investments in non-real estate financial paper.
Solution: GSP used their relationships to find and identify a money center bank willing to invest time to understand the complex financial statements and structure a loan that included smaller properties in secondary and tertiary locations. Future earnouts based on increased income were also included.
