Financings

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    $9,400,000 Non-Recourse Cash-Out Bridge Financing in Downtown Los Angeles, CA

    May 6, 2019

    Transaction Description:

    George Smith Partners secured a $9,400,000 non-recourse, cash-out, bridge refinance of a 208,000 square foot 9-level 414-parking stall garage located in Downtown Los Angeles. The Building has a historic designation and will be converted to a mixed-use project that will include creative office over parking and ground floor retail. The 12-month bridge loan is interest-only fixed at 7.50% with only four months of required yield maintenance. The debt coverage is less than 1.0 with interim cash flow while the adaptive-reuse business plan is finalized. The loan includes a holdback for interest carry shortfall and provided the Borrower cash-out proceeds of $300,000.

    Challenges/Solution:

    The Property was encumbered by a $12,800,000 loan of which ~$4,000,000 had been force-funded resulting in a heavy carry burden. GSP was able to negotiate a loan exit at a reduced cost (reduced exit fee and waiver of unused fees) while providing for cash out proceeds. GSP identified a capital source that understood the as-is value of the asset, the redevelopment potential, location and strength of the Sponsor (Developer). Based on these strengths, the Lender was able to underwrite in-place income while providing cash-out proceeds and significantly reducing the carrying cost of the Project while providing the necessary term (with extension) needed to complete and finalize an adaptive reuse plan.

    Rate: 7.50% Fixed
    Term: 1+1
    Amortization: Interest-Only
    Payment Penalty: 4 Months Minimum Yield Maintenance
    DSCR: 0.70:1.0
    Guaranty: Non-Recourse

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    $8,740,000 Acquisition Financing at 91% LTC on an SBA 504 Loan in Los Angeles, CA

    May 1, 2019

    Transaction Description:

    George Smith Partners arranged $8,740,000 of acquisition financing for an owner user retail property in Los Angeles. The Sponsor had been introduced to GSP after they received a loan cancellation from their direct bank. GSP jumped into the loan process right away and worked with the Sponsor, their CDC and the new Lender in order to ensure closing in a timely matter.  The selected Lender that GSP brought in was able to give the Sponsor a much more aggressive interest rate than their direct lender had promised in their LOI. This ended up saving the Sponsor 67 bps on the interest rate and over $240,000 in interest during the first 10 years of the loan.

    Rate: 4.57% fixed
    Term: 10 years
    Amortization: 25 years
    Loan to Cost: 91.1%
    Guaranty: Recourse
    Lender Origination Fee: None

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    $6,500,000 Bridge Refinance of Vacant Apartment Building with No Cash-Flow in Los Angeles, CA

    May 1, 2019

    Transaction Description:

    GSP recently arranged a $6,500,000 bridge loan on a vacant 30-unit apartment community near the Los Angeles CBD. The Property had structural issues and was red tagged by the City. The owner took the 1913 building down to the studs and completely rebuilt the Property. In order to reduce cost and finalize construction, the ownership requested bridge financing.

    With no cash flow and no signed leases several lenders were concerned about repayment. Using GSP’s relationships and market expertise we were able to place a Libor floating rate bridge loan. This financing provided the Sponsor the ability to payoff of the current loan. In addition, there was enough capital left over for completion construction and an interest reserve for lease-up.

    This take-out financing replaced more expensive financing and provided the Sponsor with the capital needed to finalize the renovation and move to permanent financing. With no prepayment premium and no interest rate cap, it was a very affordable way to bridge between the loans.

    Rate: 5.05 % – 30 Day Libor+ 255bps – No Rate CAP Required
    Term:
    2 Years
    Prepayment Penalty:
    None
    Lender Origination Fee:
    1%

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    $3,624,000 Multifamily Value-Add Recapitalization for 119 Units in San Antonio, TX

    April 24, 2019

    Transaction Description:
    George Smith Partners successfully arranged $3,624,000 to finance a value-add reposition of a 119-unit apartment in San Antonio, TX. The Lender funded $3,224,000 upon closing and held back $400,000 for capital expenditures to be invested over the next two years.

    Challenge:
    The Property had been purchased less than 1 year earlier with a 1-year seller note. There was substantial deferred maintenance that had not yet been completed, so the business plan was just starting. The client’s “go-to” lender was not interested in the financing due to the size and the still required “heavy lift”. Most lenders in this this size category require full recourse, which the Sponsor would not provide.

    Solution:
    George Smith Partners located a lender who the client didn’t previously know and who is accessed only thru a select group of mortgage brokers who looks for these types of transactions. The Lender agreed to provide an additional $400,000 for the renovations. Some negotiations were required to restructure the recourse provisions to springing recourse in the event of involuntary bankruptcy.

    Rate: L+535
    Term: 36 Months
    LTV: 65%
    Extension Options: Two 6-month options
    Amortization: Interest Only for the initial term, then 20 year amortization during extensions, if exercised
    Prepayment Penalty: None
    Guaranty: Non-Recourse

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    $15,000,000 Recapitalization Financing with $5,000,000 Cash-Out; San Francisco, CA

    April 24, 2019

    Transaction Description:
    In 2015 GSP financed a mixed-use retail/SRO-Hotel project in the “SoMa” (South of Market area) of San Francisco for $10,000,000. The Sponsor has continued to improve the Property and create additional value. Over the last several years the Property has doubled in value. The Sponsor was looking to recapitalize the original loan and take out $5,000,000 of cash equity.

    Challenges:
    The Sponsor did not want to pay prepayment penalties or incur a large refinance expense. The existing Lender did not have a program to allow for recapitalization or additional funding of their current loan.

    Solution:
    GSP underwrote and proposed a recapitalization program that would allow the Lender, with only a 25 bps increase, to provide a new $15,000,000 loan that provided the Borrower with $5,000,0000 cash-out. This allowed the Borrower to get the proceeds needed without refinancing expenses or prepayment penalties.

    Rate: 5.5% for years 1-10 and 5.85% for years 11-15
    Term: 15 Years
    Amortization: 30 Years
    Guaranty: Non-Recourse
    Prepayment: 5,4,3,2,1

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    $4,000,000 Non-Recourse and Cash Out of an Office Building in Beverly Hills, CA

    April 17, 2019

    Transaction Description:

    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

    Rate: 4.48%
    Term: Fixed for 5 years
    Prepayment Penalty: 5,4,3,2,1
    Guaranty: Non-Recourse

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    77% of Purchase Price Financing for the Acquisition of a Vacant 75,000 Square Foot Data Center in Northern California

    April 17, 2019

    Transaction Description:

    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.

    Rate: 8.80% Fixed (Blended)
    Term: 12 Months
    Amortization: Interest Only
    Lender Fee: 1.33% (Blended)
    Prepayment: Open Full Term
    Guarantee: Non-Recourse (First), Recourse (Second)

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    $6,350,000 Cash Out Refinance of 28 Units in Los Angeles; Maximum Credit for Unit Renovations

    April 17, 2019

    Transaction Description:

    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
    LTV: 65%
    DCR: 1.15x
    Guaranty: Non-Recourse

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    $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

    Transaction Description:

    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.

    Rate: 4.85% fixed for 5 years
    Term: 5 years
    Amortization: 25 years
    Prepayment Penalty: 3,2,1,0 with 5% principal annual repayment allowed
    LTV: 60%
    DCR: 1.30x
    Guaranty: Non-Recourse

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    75% Leverage, 4.95% Coupon Non-Recourse Permanent Financing for a Neighborhood Retail Center in a Tertiary Southwest Market

    April 10, 2019

    Transaction Description:

    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.

    Rate: 4.95%, Fixed
    Term: 10 years
    Amortization: 1 Year Interest Only; 30 Year Amortization thereafter
    Loan to Value: 75%
    Prepayment: Yield Maintenance
    Lender Fee: None

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    $15,880,000, 70% Loan-to-Cost Financing at LIBOR + 1.95% on an 82% Occupied Suburban Office Building with Near-Term Tenant Roll

    April 3, 2019

    Transaction Description:

    GSP arranged the $15,880,000 partial-recourse first mortgage from a national commercial bank on a 1980’s-vintage multitenant office building in the Dallas/Fort Worth market. The Property was 82% occupied at loan closing, with an additional 10% of space likely to be vacated by a major tenant approximately six months after closing and an additional 35% of the leased square footage rolling within the three year loan term. The loan is structured as an initial $11,860,000 advance, with a further $4,020,000 to be funded for tenant improvements and leasing commissions tied to future leases. The loan requires no additional leasing reserves, and interest is not paid on the $4,020,000 until drawn.

    The 70% of cost first mortgage priced at one-month LIBOR plus 1.95% and required interest rate protection to hedge no less than 75% of the loan amount for the first two years of the term, to be renewed for 100% of the loan amount prior to year three.

    Rate: 30-Day LIBOR + 1.95%
    Term: Three years plus two 12-month extensions
    Amortization: Interest Only (initial term)
    Prepayment: 0.5% months 1-6; open thereafter
    Lender Fee: 0.5%

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    $28,000,000 Paper Lot Inventory – Land Loan, CA

    April 3, 2019

    Transaction Description:
    George Smith Partners successfully financed a 50% LTV, $28,000,000 “paper lot inventory” land loan on a 59.5 acre property with 334 fully entitled lots in the city of Ventura, California. The financing was designed to provide the Sponsor flexibility in structuring the sales of phases of raw land to public homebuilders. Proceeds from the loan were also used to refinance the maturing entitlement loan and to receive a partial refund of predevelopment expenses.

    Challenges:
    Lenders have a long memory of huge losses taken on loans made on residential land prior to the Financial Crisis. Many have decided not to make new land loans, particularly for residential development, in this economic cycle; those that are lending are doing so very conservatively. With mortgage rate increases and property tax non-deductibility affecting home-ownership affordability, absorption rates and the rate of price increases have slowed, as well, in some markets which also feed lenders’ concerns.

    Solution:
    GSP approached many traditional and non-traditional sources for financing on residential land. Terms that were proposed by commercial banks and others either supplied insufficient proceeds or had troublesome covenants. GSP arranged the financing with a lending group which included a family office and a debt fund.

    Terms: Confidential

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