Non-Recourse $73,000,000 Bridge Loan above 80% of Cost for Creative Office Building in Seattle

Rate: LIBOR + 6.75%
LTC: 80%+
Term: 2 Years + 1 Year
Amortization: Interest Only
Non-Recourse
Prepayment Penalty: 18 months spread maintenance

Transaction Description:
George Smith Partners successfully arranged $73,000,000 in non-recourse, bridge financing for the conversion, renovation, and stabilization of the Seattle Design Center. The design center, comprised of two buildings in the Georgetown submarket of Seattle, Washington, historically served as a well-known destination for high-end home furnishings and design services. After acquiring the property in 2014, the Sponsor renovated the first 157,000 square-foot building. Upon completion, the Sponsor continued to operate the asset as the Seattle Design Center and consolidated the showroom/design tenants from the second building into the newly renovated building. Once the second building was vacated, the Sponsor began repositioning the 280,000 square-foot building from showroom space into creative office space. Upon completion, the building will have expansive 60,000 square-foot floorplates, exposed ceilings and concrete floors, glass walls for natural light, unobstructed views of downtown Seattle and Mt. Rainier, and full-service amenities, including an upscale fitness center and conference center. Pre-leased to 45% occupancy, Sponsor needed additional proceeds to complete the project. GSP identified a Lender who recognized the value of the project, supported by low supply and increasing market demand for creative office from tenants in the technology sector. Sized to 80%+ of total project costs, the $73,000,000 non-recourse loan was priced at LIBOR + 6.75% for a 24-month term with one, 12-month extension option. $49,000,000 of total proceeds was funded at closing with an additional $24,000,000 future funding allocated toward completion of the renovation, construction, tenant improvements and leasing commissions.

Advisors

Related Financings

  • Expand

    $25,500,000 Non-Recourse Bridge Financing for an Acquisition of an Office Building; Phoenix, AZ

    December 18, 2019

    Transaction Description:

    George Smith Partners arranged $25,500,000 in non-recourse bridge financing for the acquisition of a 230,000 square foot Class A office building located in the heart of Phoenix, Arizona’s Midtown District. Positioned on a heavily trafficked thoroughfare of a major professional corridor, the site benefits from its central location, proximity to Downtown Phoenix and abundance of local economic drivers. The Project, built in 1982, had been well-maintained but was running a below-market occupancy rate of 82% due to the recent expiration of a large tenant lease. This bridge facility allowed the Canadian-based Sponsor to purchase the asset and undergo a proposed renovation, bringing the design up to competitive market standards in order to successfully lease-up and stabilize the asset.

    By focusing attention on sophisticated bridge lenders active in the local area, GSP identified a capital provider who understood the growth of the market. The selected Capital Provider structured around the Project’s current vacancy, recognizing the strength of the Sponsor and their ability to successfully execute on the intended business plan of value creation. The loan was structured with minimal cash management language and featured pari passu funding throughout the term. The interest only non-recourse bridge loan was priced at a spread of 350 basis points over the 30-Day LIBOR, with a three-year term and two 12-month extension options.

    Rate: 30 Day LIBOR + 3.50%
    Term: 36 Months with Two 12-Month Extensions (3+1+1)
    LTC: 65%
    Amortization: Interest Only
    Guaranty: Non-Recourse

  • Expand

    Multi-State Bridge Loans: $172,300,000 National Portfolio Non-Recourse Bridge Financing; 36 Properties in 17 States

    November 6, 2014

    Transaction Description:  JJay Brooks successfully arranged $172,300,000 of bridge financing for a portfolio of 36 properties spanning 17 states (from Louisiana to Alaska) that had been mired in complex litigation for several years. Assets included regional malls, office buildings, industrial properties and mobile home parks located in secondary and tertiary markets. Although the initial debt was being serviced, the litigation resulted by a loan maturity default during the recession when the capital markets where devastated and the existing lender would not negotiate an extension. Settlement of the litigation required certainty of close with a “drop-dead date” that would have resulted in significant borrower losses had the financing not closed. The final debt structure involved two unrelated lenders with multiple layers of senior and mezzanine debt, structured over five loans. Prepayment and yield maintenance flexibility was a critical component of the structure that allows the borrower to extract properties from the financing in the coming years. Generally speaking, the loans were priced with either a floating (with an interest rate cap) or fixed interest rate with six months to 24-months of yield maintenance. Leverage varied depending on the stability of the asset and the term was structured to provide adequate time to liquidate several assets and identify permanent debt for others.
    Challenge: Numerous property specific complexities such as ground leases, environmental issues and major capital and tenant improvement projects required underwriting and loan structuring. The stigma associated with properties (and borrowers) involved with litigation associated with a default disqualifies many lenders from considering the financing described. The portfolio size, location and varied property types also create additional complexity and challenges. Certainty of close was mandatory.
    Solution: GSP identified the lending platforms and professionals that could underwrite, appropriately price and structure the cash flows. The solutions required to solve all the challenges are too long to list although the financing required the cooperation and collaboration of an incredibly talented group of professionals on both the lender side and the borrower side of the financing. All parties came together to solve problems and pull from a depth of knowledge.
    Rate: Various
    Non-recourse
    Advisor: JJay Brooks

Don't Miss a Fact,
Sign Up for FINfacts!

FINfacts is a weekly newsletter highlighting recent financings and economic insights.

Subscribe Here