$4,700,000 Non-Recourse, Bridge Financing for Mid-Construction Apartment Project; Pico-Robertson Area of Los Angeles, CA
November 18, 2020
George Smith Partners arranged $4,700,000 in non-recourse, bridge financing for an 85% complete, 13-unit apartment project in the Pico-Robertson area of Los Angeles, CA. Despite marketing this deal as a construction take-out loan for an 85% complete project during the global pandemic, GSP successfully engaged a debt fund to take out the existing construction loan with additional funds to complete construction. The non-recourse bridge facility was priced at an interest-only rate of 5.90% with a 12-month term plus a 12-month extension option. Thanks to GSP’s long-standing relationship with this debt fund, we were able to close this transaction in just 8 business days.
November 18, 2020
George Smith Partners placed a $6,275,000 bridge loan for the refinance of a Class-B 132-unit apartment community in San Antonio, TX. The loan is fixed at 6.45% for three years with full term interest-only payments. The term sheet was signed after the COVID-19 crisis and ensuing economic volatility. GSP identified a balance sheet lender with in-house loan servicing to work with the Sponsor throughout the reposition of the asset. The Property underwent a change in property management in the past few years and required some property maintenance in the reposition. GSP worked with the Client on the original acquisition bridge loan and had to re-evaluate the business plan once the market changed and occupancy dipped due to COVID-19.
November 11, 2020
George Smith Partners placed the $8,152,500 bridge-to-mini perm loan for the conversion of an existing 12-unit multi-family community into a 17-unit 44-bed co-living community. The 68% LTC bridge loan converts to a 5-year mini-perm loan fixed at CMT + 2.5% with a 3.75% floor.
The Project came to GSP half-way through construction and was being funded by a lender that had filed bankruptcy with proceeds that were insufficient to complete the new business plan. GSP put the loan under application pre-COVID with a new business plan that included (as a condition in closing) approvals for a 4th floor penthouse/useable roof top level. While in application, the construction and the penthouse level approval process came to a halt due to COVID causing stress on both the existing loan (nearing maturity) as well as the new loan underwriting. The challenges associated with co-living as a new asset class resulted in additional scrutinization from the new lender as well as the appraisal which had a negative impact on value. GSP was able to resolve the valuation issues by successfully arguing the merits of the Project as well as successfully negotiating a waiver of the exit fee on the previous loan which resulted in zero impact to the loan proceeds and the Borrower’s out of pocket cash required at closing.
Rate: Prime plus 1% with 5% floor
Term: 18 Months
Rate: CMT + 2.25% with 3.75% floor
Term: 5 Years
Amortization: 30 years
Prepayment: 5, 4, 3, 2, 1 open
- Advisors: Alina Mardesich
November 4, 2020
George Smith Partners placed a $4,700,000 refinance loan with cash-out for a single-tenant industrial property in El Cajon, San Diego County. This highly specialized facility is one of only two locations in the US that is approved to manufacture key components and assemblies for military and commercial aircraft currently in service.
The Sponsor acquired the Property in 2018 with a bridge acquisition loan. In March 2020, GSP was engaged to refinance the maturing bridge loan with permanent financing including cash-out proceeds. However, the California “stay-at-home” order was issued soon thereafter resulting in a challenging lending market for the Property.
GSP helped the lenders become comfortable by focusing on the low leverage, the strength of the Sponsor and the Tenant, and the fact that the Property continued to operate at full capacity without interruption due to be a critical Department of Defense supplier. In addition, the Tenant recently exercised its third extension option to the existing lease with an increased cash flow closer to market rents, thereby continuing its long-term commitment to the Facility.
While holdback reserves are increasingly common in the current environment, GSP negotiated to have reserve payments deferred until the fourth year of the loan and on a monthly schedule instead of the typical lump sum holdback at closing.
October 21, 2020
GSP secured a $4,200,000 bridge loan for unentitled land in Pasadena, CA. The site is proposed to be developed into 59 luxury townhomes. The loan is fixed at 5.9% for a 12-month term with two 6-month extensions. The proceeds represent 45% of the total cost to purchase the land and entitle it.
The Sponsor acquired the Property in 2015 and has been working with the City to receive entitlements to develop the townhome plot since property acquisition. The land remains unentitled; however, the Sponsor expects to receive Ready-to-Issue (RTI) in 6 months which would provide significant value appreciation. The Sponsor had a loan coming due on the Property and needed to refinance. Given the economic situation due to the COVID-19 pandemic, many lenders were hesitant on providing financing.
GSP demonstrated that the location of the Property and market are very strong, and the specific neighborhood is undergoing a revamp. The Sponsor is an experienced Los Angeles developer who is familiar with the entitlement process and the Property is less than six months away from receiving RTI.
October 14, 2020
George Smith Partners placed a $3,000,000 line of credit collateralized by two parcels of land totaling 10 gross acres out of a three-phase, mixed-use, master planned community in Moreno Valley, California. The master development is on 19 gross acres and consists of 237 apartments and duplexes and a 22,000 square-foot office and retail center. The funds will go towards phase two horizontal work as well as utilities work for the shared road between phases one and two. This was a City mandate in order to issue a certificate of occupancy for phase one, comprised of 125 units and expected delivery by end of the year.
Development around Moreno Valley has been slow until recently and while COVID-19 did not materially impact the multifamily market in the area, many lenders were hesitant to lend there. The Sponsor is a major developer and real estate owner throughout Riverside County. GSP recently sourced refinance proceeds on other assets for the Sponsor and was able to utilize this relationship to get the same lender comfortable in providing the line of credit. GSP focused on the market demand, Sponsor’s credentials and potential repeat business for the Lender. The Sponsor was pleased with the line of credit facility as it will incur interest only when funds are drawn. The alternative land loan options would have been significantly more expensive and very difficult to achieve.
September 30, 2020
George Smith Partners secured a $4,690,000 construction loan with a 2-year term that converts to a 5-year permanent loan upon completion of construction for a total term of 7 years. The loan is for a medical office building in Oxnard, CA. The construction loan floats at Prime plus .5% with a floor rate of 3.75% and the mini perm is expected to have a fixed interest rate of 3.65%. The mini-perm carries a step down prepayment, but there is no prepay during the construction term, allowing the borrowers to secure more advantageous capital depending on the capital markets.
The Sponsorship sought long term construction-to-fixed capital shortly after the government-mandated shelter in place which caused significant disruption to the CRE capital markets. GSP needed to secure a high leverage loan to complete the ongoing construction of the Project which had commenced in 2019. With active construction on the Project, GSP needed to secure a lender capable of understanding various lien priorities, a historic building designation that changed construction plans and timelines, vandalism, and a change of general contractors all during the COVID-19 pandemic.
GSP was able to demonstrate the necessity of new medical offices during the height of the shutdown to generate a competitive lending environment, and to secure the 70% LTV construction loan. To reduce valuation risk, GSP negotiated that the existing appraisal performed pre-COVID would be utilized by the selected lender. To obtain maximum proceeds, GSP also worked with the Lender to collateralize adjacent unentitled land owned by the Sponsorship. The vandalism and the historic designation caused delay. However, GSP showed that the change in the GC was a strategic move that would allow for the completion of the construction and the ability of the sponsorship to obtain C of O in early 2021. This will allow the Sponsorship to hold the completely modernized Medical Office building with a fixed low rate through 2027.
September 16, 2020
George Smith Partners placed the non-recourse refinance of a Southern California single-tenant office and instruction center owned and operated by a 501c3 approved charity. This office is configured for classroom training, instruction and traditional administrative office use. Deemed an essential business, operations were never delayed as a result of the COVID-19 pandemic. Due to the ownership structure, there is no recourse or carve-out guarantees beyond the charity entity. The cash neutral loan financed all closing costs and reduced the Borrowers’ mortgage constant by 190 basis points for significantly improved cash flow.
September 16, 2020
George Smith Partners placed a $11,700,000 construction loan to build a logistics yard that includes trailer parking, auto parking and a maintenance facility. The fenced and secured facility is being built on a speculative basis although there is unmet demand.
The marketing of the asset during the COVID-19 pandemic was difficult given bank resources first went to asset management and then PPP. The lenders in the market wanted “easy” deals such as low leverage multifamily, build to suits and infill industrial. The Sponsor’s expertise, market knowledge and demand for the product created a competitive lending environment. After talking to over 50 capital providers we had three compete for the loan. Structure, pricing, certainty of execution and speed to close narrowed the lender choice. The chosen Capital Provider went to full credit committee before issuing the application given the specialty nature of the asset. The credit committee also approved all terms negotiated/changed in the application before the process began. This gave us confidence that the chosen Capital Provider would execute on the original terms in the application while other Capital Providers have altered terms during the COVID-19 pandemic.
August 19, 2020
George Smith Partners placed a $20,000,000 refinance for a 30-year-old specialty storage facility in California. The high security, temperature and humidity-controlled facility is used for specialty uses, and other high value items. The COVID-19 pandemic made the Sponsor’s request more challenging as it consisted of non-recourse financing for a specialty asset. George Smith Partners reached out to several dozen Capital Providers to find a relationship lender that would meet the Sponsor’s needs. The Property has performed well historically and continues to perform very well during the COVID-19 pandemic.
August 12, 2020
George Smith Partners arranged $4,850,000 in non-recourse bridge debt to refinance the existing loan on a 27,343-square-foot development lot in the Chinatown district of Los Angeles, CA. The Sponsor acquired the site two years ago and has since secured entitlements for its proposed mixed-use development. Demolition of a vacant retail center is needed to conduct ground testing and ready the Project for vertical construction. The current Lender, however, would not allow the demolition.
GSP targeted a capital provider that was comfortable with the proposed project, foreign sponsorship, and current land value. The existing loan, which had also been sourced by GSP, was facing near-term maturity when GSP successfully engaged a lender that could execute within a tight timeframe. The non-recourse facility is sized to 24.5% LTV and fixed at 5.9% on an interest-only basis with an initial term of 12 months.
June 17, 2020
George Smith Partners demonstrated our ability to provide full-service financing for a repeat client who is a prolific developer in the Los Angeles area. The quick close $2,800,000 financing was a bridge loan which took out a senior construction loan that was placed by GSP in 2018. The 12-month loan will allow for the Developer to execute on their business plan to market and sell the remaining homes in the Small Lot SFR development. The Project is in the heart of Los Angeles minutes from major job centers and consists of 11 high end fully constructed homes. The development opportunity was purchased in 2015 and the construction was completed in middle of 2019. GSP provided our expertise throughout the entire process, working with our client throughout the acquisition, entitlement, construction, and the for-sale process.
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