Financings

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    $11,150,000 Acquisition and Reposition Financing on a Multifamily Property; 4% Debt Yield at Closing; Los Angeles, CA

    April 8, 2020

    Transaction Description:

    George Smith Partners arranged the $11,150,000 first mortgage on a 1980’s vintage, 42-unit multifamily property in Northridge, California adjacent to a major Southern California University. The national balance sheet lender provided non-recourse financing at 63% of total project cost including 100% of future CapEx funds. This equated to $64,200/per unit to complete an extensive interior and exterior renovation. Interest expense is not incurred on CapEx funds until drawn, and Sponsor cash flow is maximized as the loan is interest only during the initial three-year term. The 30-Day LIBOR plus 3.25% coupon requires interest rate risk protection and in order to minimize associated sponsor cost the Capital Provider structured the interest rate cap with a two-year duration at closing plus an obligation to renew for the third year of the initial term. Due to low going in cash flow (4.15% debt yield), the Lender structured an interest reserve to cover debt service during the peak reposition period.

    Rate: 30-Day LIBOR + 3.25%
    Term: Three years plus two 12-month extensions
    Amortization: 36 months interest only
    Max Loan to Cost: 63%
    Prepayment: 15-month minimum interest period
    Guaranty: Non-recourse
    Lender Fee: 1.00%

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    $4,000,000 Non-Recourse Cash-Out Refinance on Two Vacant Creative Office Buildings; Los Angeles, CA

    April 1, 2020

    George Smith Partners placed the non-recourse refinance of two vacant West Los Angeles creative office buildings. The contiguous buildings may be operated independently or as a small single-tenant user campus. The Sponsor was facing loan maturity but is still six months from pulling permits to reposition the assets to maximize their effective utility. These assets have been family held for multiple generations and appreciated significantly due to their ideal in-fill location adjacent to several major transportation corridors and metro line. A return of equity was requested given their low basis. No hold-back or reserve was structured despite the lack of cash flow in place at the time of funding. Fixed for twelve months at 6.90%, the non-recourse loan is interest only and does not carry a prepayment penalty.

    Rate: 6.90%
    Term: 12 Months
    Amortization: Interest Only
    Loan Fee: One Point
    Recourse: Carve-outs Only
    Prepayment Penalty: None

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    $4,517,000 Acquisition of a Multi-Tenant Retail Center, Villa Park, IL; Non-Recourse

    April 1, 2020

    Transaction Description:

    George Smith Partners secured $4,517,000 for the acquisition of a multi-tenant, retail center in Villa Park, Illinois. The non-recourse permanent loan is fixed at 3.75% for ten years with full-term interest only and a defeasance prepayment penalty structure.

    One of the tenants was a newly opened gym franchise with no historical sales information for this center. Also, during the loan process, the Seller was finalizing a subdivision of the parking lot which required multiple levels of municipality approvals.

    GSP identified a capital source who understood the strength of the asset, the experience of the Sponsor and its desirable suburb location, which is 20 miles outside of Downtown Chicago. The Capital Provider worked through the timing of the issuance of the subdivision approval and was able to close as soon as the approval was finalized. The efficiency of our Capital Provider allowed the Sponsor to be able to rate lock and close as soon as the approval was stamped, taking advantage of the low interest rate environment.

    Rate: 3.75% Fixed for 10 years
    Term: 10 years
    Amortization: 30 years
    Prepayment Penalty: Defeasance
    DCR: 1.30x
    Interest Only: 10 years
    Guaranty: Non-Recourse
    Origination Fees: Par

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    5-Day Close for Office Building, Owner-User, Cash-Out Refinancing; Los Angeles, CA

    March 25, 2020

    Transaction Description:
    At the start of the Coronavirus crisis, George Smith Partners secured a $2,000,000 private money bridge loan to enable a business owner liquidity capital needed to grow his business. The loan paid off an existing SBA loan and provided approximately $1,000,000 in cash-out. The monthly payment on the new interest-only loan is lower than the existing financing due to the 20-year amortization. This is true even with the cash-out.

    Challenges:
    At the start of this crisis, we found a lender with liquidity who was able to move quickly and close within 5 days. Even with everyone shifting to working at home because of the crisis, the Lender stayed closed as promised.

    Solution:
    GSP used its experience and relationships to identify a lender who could understand the need to close on time in the middle of a global crisis. The new capital allows the Sponsor to expand their business, as other companies in their field are unable to access capital.

    Rate: 7.9%
    Term: One Year Term With 1 Year Option
    Amortization: Interest Only

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    $4,500,000 Non-Recourse Self Storage Adaptive Reuse Construction Financing Fixed at 4.75%; Orlando, FL

    March 25, 2020

    George Smith Partners placed $4,500,000 in non-recourse construction financing for the adaptive reuse of a big box retail furniture store to convert to a 1,250-unit state of the art self-storage facility. The Property is located in Orlando, Florida, within a Qualified Opportunity Zone (QOZ) and was capitalized with a QOZ equity partner. Deal requirements included a non-recourse bank execution and best possible rate given the low leverage ask resulting from the QOZ equity partner’s significant investment in the Project.

    GSP identified a bank lender that understood self-storage construction and found the institutional sponsorship attractive. The Capital Provider was willing to offer a simple, non-recourse execution and a swap product that resulted in a 4.75% fixed rate for the duration of the loan. A four-year initial term was offered to accommodate for the longer lease-up velocity common among self-storage properties.

    Rate: 4.75% fixed (Swapped out 1 Month Libor + 315 at closing)
    Term: 4 years with a 2-year extension
    Amortization: Interest only for the initial term; 25-year amortization thereafter
    Prepayment Penalty: None (apart from Swap breakage)
    LTC: 45%
    Guaranty: Non-Recourse

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    $3,200,000 Cash-Out Refinance for a Multifamily Property Still Under Renovation; Larchmont, CA

    March 18, 2020

    George Smith Partners placed a $3,200,000 cash-out refinance on a multifamily property in the trendy Larchmont submarket of Los Angeles, CA. The Property was a recent acquisition and still undergoing renovations as part of a value-added strategy. Despite this, GSP was able to source a bank lender offering a mini-permanent loan structure that met the Sponsor’s request for cash-out proceeds to re-invest in new development deals. Although the loan included a 12-month interest reserve a holdback for the remaining construction budget was not required. The financing was sized to 70% LTV and carries a rate of Prime + 0.5% (5.25% today). The loan carries a 5-year term and is interest only the first 18 months followed by a 30-year amortization.

    Rate: Prime + 0.5% (5.25% today)
    Term: 5 Years
    Amortization: 18 months interest only followed by 30-year amortization
    LTV: 70%
    Prepayment Penalty: None
    Guaranty: Recourse

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    $7,000,000 Cash-Out, Non-Recourse, Refinance on a Single-Tenant Property; Venice Beach, California

    March 18, 2020

    George Smith Partners arranged a $7,000,000 ($901/sf) cash-out, non-recourse, first mortgage from a REIT to refinance a single-tenant, owner-user office property in Venice Beach, California. The Lender was comfortable with providing the cash-out financing, although the single tenant was in bankruptcy protection due to the property’s irreplaceable location which is blocks from the ocean in Venice Beach. The financing provides 12 months of bridge term while the Tenant works through bankruptcy proceedings. Although the loan is non-recourse, the Lender did not require an appraisal or other third-party reports. Sized to 60% of the Lender’s underwritten value, the loan priced at 6.90% fixed for the 12-month loan duration.

    Rate: 6.90% Fixed
    Term: 12 Months
    Amortization: Interest Only
    Loan to Value: 60%
    Lender Fee: 1.00%
    Prepayment: Open Full Term
    Guaranty: Non-Recourse

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    $4,300,000 Non-Recourse Permanent Financing for a Trophy Property in West Hollywood, CA

    March 11, 2020

    Transaction Description:

    George Smith Partners placed $4,300,000 in non-recourse permanent financing for a trophy property in West Hollywood, CA. Bank execution, a non-recourse structure and a sub 4% all-in coupon were all requirements, which eliminated most lenders. However, GSP sourced a bank lender willing to offer a non-recourse structure and a 3.92% fixed interest rate. The 5 year loan carries a step-down prepayment penalty and amortizes over 30 years.

    Rate: 3.92% Fixed
    Term: 5 Years
    Amortization: 30 Years
    LTV: 50%
    Prepayment Penalty: Stepdown
    Guaranty: Non Recourse

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    $5,400,000 Land Acquisition and Predevelopment Financing Facility for a To-Be-Built, 150 Bed Co-Living Community; Highland Park, CA

    March 11, 2020

    Transaction Description:

    George Smith Partners arranged a $5,400,000 financing facility for the acquisition of a 29,930 square foot vacant parking lot in the trendy Highland Park submarket of Los Angeles, CA. In addition to purchase financing, the facility offers good news money for predevelopment costs related to the Sponsors planned 150-unit co-living community on the site, which will be a by-right development and will take advantage of TOC Tier 1 incentives.

    Co-living has emerged as a remedy to address the acute shortage of affordable housing across the country by offering tenants fully furnished, highly amenitized units with the cost of utilities, common area maintenance, and other traditional living spaces bundled into the rent. The Property is within a 5-minute walk from both York Boulevard and Figueroa Street, Highland Park’s two main amenity-rich thoroughfares lined with shopping and dining destinations.

    By focusing attention on land lenders who are active in the local area, GSP identified a capital provider who is familiar with the local market and also understands the importance that the co-living space will serve in the greater rental market going forward. The loan was uniquely structured to disburse the balance of the down payment in addition to sponsor equity at closing. The remaining proceeds will be reserved in a holdback feature to cover the predevelopment soft costs in order to bring the project to permit-ready status. The interest-only predevelopment land loan was priced at 8.50%, with a 15-month term and one 6-month extension option. The loan closed in less than 30 days from application.

    LTC: 70% (including predevelopment costs to take the project to RTI)
    Rate: 8.50%
    Term: 15 Months with One 6-Month Extension
    Amortization: Interest Only
    Guaranty: Recourse

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    $38,585,000 Non-Recourse Cash-Out Refinance for a 260 Unit Multifamily Community; Coachella Valley, CA

    March 11, 2020

    Transaction Description:

    George Smith Partners successfully arranged the cash-out, full-term interest only refinance of a 260-unit multifamily community in the Coachella Valley. The 10-year fixed rate loan priced at 3.75% with 65% of the appraised property value. The Property is a Class-A, apartment community built in 2010 located on 20 acres and consists of 32 buildings. The units are spacious and contemporary and contain a mix of 1,2 and 3-bedroom units. Most of the units include attached garages with direct access. Amenities include three resort style pools, spas, a tennis court and a putting green. The clubhouse features a full chef’s kitchen available for residents, large dining and gathering area and fitness studio. GSP worked with the Capital Provider on the underwriting in order to push maximum loan proceeds and assisted with the defeasance process on the Sponsor’s existing loan which was arranged by GSP in 2013.

    Rate: 3.75%
    Term: 10 Years
    Amortization: Full Term Interest Only
    LTV: 65%
    Prepayment: Defeasance
    Non-Recourse

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    $2,400,000 Refinance of Unanchored Strip Retail Shopping Center with Special-Use Tenant; Murrieta, CA

    March 4, 2020

    Transaction Description:
    George Smith Partners secured a $2,400,000 recourse loan for the refinancing of a multi-tenant retail center, “The Olivewood Shopping Center” in Murrieta, CA. The Sponsor purchased six parcels totaling four acres in 2010. The construction of five retail buildings was completed in 2013 and the Sponsor sold three buildings prior to the financing. One remaining building is 100% leased to four retail tenants; the other building and adjacent lot have been ground leased to a carwash tenant. There was no debt on the Property and loan proceeds were used to buy out the ownership interest of the other partners.

    Challenges:
    Over half of the income for the Property was attributed to a carwash ground lease which is a special purpose use that some lenders are uncomfortable financing. While the ground lease was signed at loan closing, the rent would not commence until mid-2020. Also, in place rents did not support the full loan request.

    Solution:
    A portion of the loan was funded at closing and sized to in-place rents with a future funding occurring when the carwash takes occupancy and begins paying rent. The Sponsor will not pay interest on the future funded portion of the loan until it is disbursed.

    Rate: 4.16% Fixed
    Term: 7/25; 9 months IO
    LTV: 46.3%

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    $10,800,000 Refinance of 4-Property Portfolio; Fixed For 7 Years Between 3.2 – 3.4%; Full-Term Interest Only; All Third-Party Costs Waived; Los Angeles, CA

    March 4, 2020

    Transaction Description:

    George Smith Partners placed the $10,800,000 refinance of four stabilized Los Angeles multifamily properties totaling 86 units. The interest rates varied between 3.21% and 3.40%, depending on the affordability of the units at each property. The loans have full-term interest only payments.

    The Sponsor completed renovation budgets which were used to separate out capital expenditures from recurring R&M expenses. This adjustment helped to provide support for the Lender’s underwritten cash flow and property values. Two of the Properties moved into a lower LTV tier which resulted in an interest rate reduction post-application. One of the four Properties recently achieved stabilization, which meant the Property only had one month of operating history. GSP emphasized the strength of the Sponsor and the LA market and the Lender was able to use a “T-1” income statement. The Lender waived all charges for closing costs and third-party reports, which typically cost more than $5,000 per transaction. This resulted in savings of more than $20,000 across the whole portfolio. The Property Condition Reports showed some minor deferred maintenance items, but the Lender allowed most of them to be resolved post-closing.

    Rate: 4 loans with rates between 3.21% and 3.40%
    Term: 7 years fixed
    Amortization: Full-Term Interest Only
    LTV: 55%
    DCR: 1.40x
    Prepayment Penalty: Yield Maintenance
    Lender fee: 0% origination fee and all third-party costs waived
    Guaranty: Non-Recourse

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