GSP has successfully sourced and brokered the off-market sale of a Los Angeles Koreatown shovel ready multifamily development site in an Opportunity Zone to a mission based community development lender who has just launched an Opportunity Zone Fund. The new tax law allows companies who develop or improve projects located in Opportunity Zones to defer capital gains from the sale of an asset and to reduce or eliminate the taxable gain on the new property.
Originally engaged to place the construction debt, GSP’s Team Shaffer used our expertise in Opportunity Zones and lender relationship with the newly launched Opportunity Zone Fund to match the buyer and seller together. Our long term client, had purchased the multifamily land with a loan arranged by GSP in 2017. They are a very successful developer/owner in Koreatown and have several larger projects starting construction this year, so the opportunity to flip their project for a large gain and work with a buyer who will focus in making the community better, offered a unique way for both parties to achieve their goals.
April 17, 2019
George Smith Partners arranged $4,000,000 of non-recourse and cash-out on a refinance of an office building in Beverly Hills. The non-recourse loan is fixed for the first 5 years at 4.48%. There is no requirement for a reserve account which is typically required for tenant improvements and leasing commissions when there are rollover leases in place. The Capital Provider was able to give the Sponsor credit for actual expenses, instead of historical P&Ls. The most recent P&Ls included many capital expenditures and non-recurring expenses, as the Sponsor has spent a great deal of funds in renovating and re-leasing a large portion of units
Term: Fixed for 5 years
Prepayment Penalty: 5,4,3,2,1
- Advisors: Reuven Risch
77% of Purchase Price Financing for the Acquisition of a Vacant 75,000 Square Foot Data Center in Northern California
April 17, 2019
GSP arranged $5,475,000 in financing, composed of $4,275,000 non-recourse first mortgage from a REIT and $1,200,000 recourse second mortgage from a private-money lender, to acquire a 1980’s-vintage, 100% vacant data center. The 77% of purchase price financing provides 12 months of term to allow the Sponsor to 1) implement capital improvements, and 2) generate positive cash flow, prior to putting permanent financing on the Property. The Lenders did not require an appraisal or other third-party reports, and required only a four-month interest/carry reserve despite no in-place cash flow. The financing is prepayable without penalty throughout the loan term.
April 17, 2019
George Smith Partners secured $43,500,000 in bridge financing collateralized by a 95% vacant, 2.2MM square foot industrial building in a secondary Midwestern market. The building was constructed through the 1950s and 1960s by a major retailer and used for many years as a major distribution center. As internet retail ate into the tenant’s business, the building slowly lost its business importance to the prior owner. The Borrower, a well known owner and operator in the area bought the Property off market unoccupied approximately one year ago and has been improving the property and been in leasing talks with an array of strong tenants. The lease that occupies 5% of the building is attributed to a third party logistics subsidiary of the Borrower.
Sized to 80% of stabilized value, proceeds from the bridge loan take out the Borrower’s original acquisition loan and bought out an institutional Preferred Equity investor. The Borrower now owns the property free of all third-party equity investors. Additional loan proceeds will also be used to cover closing costs and fund future work, including CapEx and leasing costs associated with repositioning the 60-year-old building. The financing secured by GSP not only allowed the Borrower to recap out their equity partner and claim exclusive ownership rights to the asset, but also gave them the final renovation dollars required to attract new tenants and eventually bring to Property to stabilization.
Rate: One-Month LIBOR + 5.50%
Term: Two years plus two one-year extension options
Loan to Value: 80% (121% of Purchase Price / New Basis is 140% of Purchase Price)
Amortization: Interest only during the loan term
Lender Fee: 1.00%
Prepayment: 1% for first 12 months; Open thereafter. Waived if lender does take-out.
April 17, 2019
GSP secured $6,350,000 in proceeds for the refinance of two properties comprising 28 units in Los Angeles. Since acquisition, the Borrowers made significant upgrades to the Property, including renovating 12 units at a cost of nearly $30,000 per unit. These units were re-leased at market rate, resulting in a considerable increase in income. The selected Lender was able to give the Borrower maximum credit for the higher income without using a loan-to-cost constraint. Additionally, two of the renovated units were leased just a week before close. The Lender was able to use the additional income based on the signed leases, without requiring any seasoning. Fixed at 4.4% for 7 years, the loan provides three years of interest only payments before rolling into a 30 year amortization schedule. Proceeds were maximized by using a 1.15x Debt Coverage Ratio on the actual mortgage constant.
Rate: 4.4% fixed for 7 years, then floating at 6M LIBOR + 2.25%
Term: 30 years
Amortization: 3 years Interest Only followed by 30 year amortization
Prepayment Penalty: 3,2,1,0
$3,120,000 for Purchase of 30,000 SF Office Property in the San Fernando Valley; Non-Recourse Financing at 60% LTV
April 10, 2019
George Smith Partners secured $3,120,000 in proceeds for the purchase of a 30,000 SF office building located in the San Fernando Valley. The Lender provided a Non-Recourse loan that was 60% of the purchase price at a rate of 4.85% fixed for five years.
A number of challenges were encountered while discussing the transaction with lenders. The tenants at the Property consisted of small businesses renting 1,000-2,000 SF suites, many of whom are under month to month (MTM) leases. This caused some concern about the stability of cash flow. The Seller’s historical P&Ls included many corporate and non-recurring expenses. Based on these P&Ls, several lenders quoted proceeds of just 50% of the purchase price. An environmental screen mandated a Phase II subsurface investigation.
GSP demonstrated that although some tenants were under MTM leases, they were long term occupants that had only converted to MTM when their lease expired. Overall, historical occupancy was very high because tenants like the unique features of the building. Additionally, our team demonstrated the Sponsor’s successful track record bringing operating expenses in line with typical office properties. As a result, the selected lender was able to underwrite to a normalized expense ratio. The Phase II report indicated that no remediation is required. The loan closed in about 60 days.
75% Leverage, 4.95% Coupon Non-Recourse Permanent Financing for a Neighborhood Retail Center in a Tertiary Southwest Market
April 10, 2019
George Smith Partners successfully placed $15,000,000 of non-recourse, ten-year fixed rate first mortgage debt for the acquisition of an approximately 90,000 square foot, 1980’s vintage, 99% leased multi-tenant retail property. The anchor, a privately-owned regional grocer, occupies almost 50% of the collateral’s total square footage and has a lease expiration approximately concurrent with loan maturity. GSP sourced a lender able to achieve 75% leverage non-recourse financing plus one year of Interest Only payments despite the tertiary location and lack of access to the grocer financials. The loan was sized to the greater of an 8.65% debt yield or 1.30x debt service coverage ratio on the 4.95% fixed rate coupon.