George Smith Partners arranged cash-out permanent financing for a fully occupied single-tenant office building in a tertiary market of Indiana. The cash-out is a partial recapitalization of a recently acquired property on an all-cash basis. The asset is leased to a “For-Profit” college with 3.5 years remaining on the initial lease term before options. The institutional quality of the borrower and the tenants’ long-term historical occupancy at this location proved instrumental to securing the loan. GSP obtained two key loan provisions that will serve the borrowers’ interest in both up-side and down-side scenarios – a loan term in excess of the lease term, and the ability to pre-pay without penalty. The borrower required full proceeds up-front without holdbacks. GSP structured a Letter of Credit that burns off upon lease extension/renewal. This debt structure mitigates borrower risks while providing for a 25% cash on cash return.
