Transaction Overview
George Smith Partners arranged portfolio financing to assist in a $17,000,000 1031 exchange. Given the size of the required down-leg, a portfolio of several unrelated net-leased assets was identified that covered multiple states from unrelated sellers. The capital provider closed in two separate escrows to accommodate the various sellers. This segment includes a Walgreens and two Arby’s; all as stand-alone assets. Fixed at 4.70% for 10 years and amortized over 30 years, the non-recourse loan was sized to 75% of the purchase price.
Challenge: Our Sponsor required non-recourse debt to facilitate his partnership exchange requirements. Non-credit single tenant assets with moderate term leases are difficult to obtain significant leverage. This 1031 mandated higher leverage, north of 71% LTV to avoid “boot” paid to the IRS. Time was of the essence and certainty of execution was required to comply with IRS timelines.
Solution: GSP structured the underwriting of the portfolio as a single transaction with multiple tenants to mitigate the single-tenant concerns, utilizing the stronger tenant to off-set weaker tenant credit and shorter lease terms in order to reach the necessary leverage. The two-loan, two-phase close from an institutional capital provider helped managed timing constraints placed on the multiple escrows as dictated by the numerous sellers. Mr. Shaffer targeted a long-time GSP capital source who has consistently executed “as applied for” professionally and in a timely manner.
