Rate: 10.25% Interest Only
Term: 24 Month Construction Loan
Transaction Description: GSP arranged ground-up construction financing for a 29-unit for-sale condominium development in the Koreatown sub-market of Los Angeles. The client was a local general contractor who partnered with an owner who contributed the land. The goal was to obtain highly leveraged, non-recourse construction financing and provide no additional equity. The Sponsor tried to access bank financing on their own before coming to GSP.
Challenge: Non-recourse construction financing is very difficult, especially for first time developers. Lenders view ground-up condo construction as one of the most risky types of financing. In addition, the Koreatown market has seen lots of multifamily developments, but there has been little recent condo construction in this market since the last real estate cycle. Also, the insurance and other last minute expenses increased the overall project cost by $500,000.
Solution: Using it relationships, GSP was able to identify a non-recourse construction lender who would provide highly leveraged construction financing. Because the ownership did not want to bring in new capital, it was also critical for the project to be correctly underwritten and achieve certain loan to cost and loan to value targets. When it was discovered that additional insurance would be needed to protect the contractor and the long-term welfare of the project, the lender agreed to increase the loan by $500,000 a few days before closing to provide capital for unexpected costs. This allowed us to close the loan and start construction.
August 30, 2023
George Smith Partners successfully secured a $4,835,000, 72% LTC, fixed, non-recourse, pre-development bridge loan for a 205-unit multifamily ground-up construction project in Denver, Colorado. The bridge loan will be used to complete all the architecture/engineering milestones required to obtain permits and finalize pre-development work prior to breaking ground in Q3 of 2024.
The Denver metropolitan area is expected to add roughly 216,700 new residents over the next five years, fueled by the expansions of the Denver International Airport and Fitzsimons Medical Campus. The Project is expected to fulfill an underserved workforce demographic by offering an affordable yet high-quality option. The Project will feature a rooftop deck with BBQ grills, outdoor games, picnic areas, a dog run, gym, state-of-the-art security systems, bike parking, package storage, and a mail center with full-time onsite management and maintenance.
Term: 14 Months
Extensions: Two 3 Month Extensions
- Advisors: Robert Horton
August 10, 2023
George Smith Partners successfully arranged $42,200,000 in financing to recapitalize the construction of a 133-key extended-stay hotel on Music Row in Nashville, TN. The Lender disbursed 71% LTC, accompanied by a 12-Month interest reserve.
Multiple challenges were encountered when discussing the transaction with capital providers. The first being that the hotel is unflagged- many hospitality lenders focus primarily on popular hotelier affiliations during this risk-constrained lending environment. The team encountered a second hurdle related to mid-construction refinancing, which presented a challenging proposition from the outset of our campaign due to the hotel’s planned grand opening before November of 2023.
The GSP team was determined to leverage the deal with support from the local Nashville sponsor that owns and manages over 600 keys in the Nashville market and over 2,000 keys in the southeast, property location on Music Row in Nashville, and construction completion.
GSP successfully identified a hospitality Lender that exhibited confidence in the construction recapitalization process. This Lender was equipped to furnish the necessary funds to facilitate a smooth transition into TCO. Additionally, displaying confidence in the projected Average Daily Rate (ADR) assumptions. Notably, the Lender displayed comfort in financing the unflagged and extended-stay hotel, due to the Sponsor’s reputable track record in the market.
July 5, 2023
George Smith Partners successfully arranged $69,000,000 in financing for the ground-up construction of an over 1,000,000 SF industrial build-to-suit development in Virginia. The loan has a term of two years with one, 12-month extension option and is 62% of cost.
Located near the Port of Virginia, the project involves the construction of two industrial facilities, one in Suffolk, VA, and another in Portsmouth, VA. The Sponsor has undertaken this Class A build-to-suit development project in response to the pressing need for high-quality industrial space in a market with extremely limited supply and minimal vacancy.
Term: 2 Years + One 12 Month Extension
June 14, 2023
George Smith Partners has successfully renegotiated the construction debt on a $10,000,000 construction loan on a 15-Unit multifamily property in West Los Angeles.
GSP arranged the original fixed-rate construction loan with a debt fund in 1Q-2020, prior to the Covid moratoria. However, due to the uncertainty of the supply of labor and materials during the pandemic, the Sponsor decided to delay vertical construction for about one year which delayed the lease-up and stabilization thereby reducing the remaining term which reached maturity in May 2023.
Despite the Sponsor’s willingness to pay down the indebtedness, GSP determined that a restructuring of the existing debt would be more cost effective than bringing in additional equity.
GSP was able to negotiate with the construction Lender to convert its loan into a one-year bridge facility. The Lender increased the interest rate by 50 bps but did not charge a new origination fee. Hopefully, in one year, the financing markets will improve and an $8,000,000 loan at more conventional pricing will be available.
Term: 1 Year
Min Interest: 6 Months
- Advisors: Gary M. Tenzer
June 7, 2023
George Smith Partners arranged a $47,000,000 fixed-rate, non-recourse, construction loan for the development of a four-star boutique hotel in a coastal community of California. When completed, the property will include 102 rooms and a fine dining restaurant.
The project experienced significant public resistance and ultimately, entitlements took 20 years to obtain. GSP was originally engaged to arrange institutional equity and fixed-rate construction to perm debt in the spring of 2022. GSP was successful in doing so, however, market volatility caused the deal to stall and ultimately the developer elected to dispose of the project to another developer. The new developer engaged with GSP to obtain new financing terms.
GSP focused on the strength of the sponsorship team, high barriers to entry, supportive hotel flag, positive historical occupancy, ADR-both before and after Covid, popularity of the local demand drivers, as well as the lack of competing quality hospitality properties in the immediate vicinity. Ultimately, GSP arranged a solution that met the needs of the sponsor.
Rate: Fixed at 8.60%
Term: 2 Years + 1 Year Extension Option
Fees: 0.50% Lender Fee
Guaranty: Non-Recourse except for Standard Carveouts
- Advisors: Scott Meredith
$85,800,000 Senior Construction-to-Perm Financing for a 372-Unit Multifamily Project; Sacramento, CA
May 16, 2023
George Smith Partners successfully arranged $85,800,000 in construction financing for a 10-building, 372-unit multifamily development in Sacramento, CA. The project is located in an opportunity zone of Sacramento and is phase A of a 2,200-unit, transit-oriented development. Breaking ground in Q2 2023, this phase of the development will consist of studios, one, two, and three-bedroom apartments with best-in-class amenities, including a pool, fitness center, playground, and clubhouse.
The Sponsor engaged GSP pre-pandemic. A previous developer had acquired the land in the early 2000s and after completing 95% of the site’s infrastructure, subsequently filed for bankruptcy protection in 2017. The site was given back to the lender in early 2019 and was awarded to the Sponsor by the urging of the City of Sacramento because of their local reputation related to successful projects in the downtown sub-market. Our Sponsor originally intended to begin construction in early 2020 but decided to pivot layout designs to match the new needs of its renters due to the pandemic.
After an extensive capital marketing process, GSP was able to secure financing to the Sponsor’s parameters with the upside of not having a rate cap requirement. The financing structure is also unique in that it transitions from an interest-only period to a traditional permanent fully amortizing financing automatically after month 48. Early prepayment is available even during the construction period and then steps down until a fully open prepay year 4 after CofO.
Rate: 1-Month SOFR + 3.50%
Term: 15 Years
Amortization: Interest Only for First 4 Years, then 30 Year Amortization
Guaranty: Full Recourse with Burn-Off to 20% at CofO