Financings

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    $25,000,000 Condo Construction Financing; Los Angeles, CA

    October 30, 2019

    Transaction Description:

    George Smith Partners successfully arranged $25,000,000 in construction financing for a condominium project in an affluent area in Los Angeles County. The Project commenced construction in 2017, however due to construction delays and cost overruns, the Sponsor needed additional money to complete the Project. The existing Lender did not want to upsize their loan. GSP was able to identify two distinct lenders to structure a 1st and 2nd Trust Deed to complete and sell-out the building. The total loan was sized to 75% of the net sell-out value of the Property. The Sponsor has owned the Property for over 10 years so the majority of equity was imputed land equity allowing for loan proceeds of 100% of hard costs.

    TERMS CONFIDENTIAL

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    $3,300,000 Owner/User Warehouse Acquisition Financing; 75% LTV; Fixed at 3.36% for 10 Years; San Fernando Valley, CA

    October 23, 2019

    Transaction Description:

    George Smith Partners secured $3,300,000 in proceeds for the purchase of a 19,680 sf warehouse located in the San Fernando Valley. The loan is fixed at 3.36% for 10 years. The Sponsor owns the adjacent property and intends to expand their business into additional warehouse space. Before discussing the deal with lenders, GSP fully underwrote the underlying business and demonstrated its substantial and recurring cash flow. As a result, many lenders were interested in the transaction at 75% LTV, which was above-market leverage for a non-SBA execution. The Borrower was able to select the loan with the best rate and structure. Additionally, the Lender provided an option to pre-pay 20% of the principal balance each year with no penalty.

    Rate: Fixed at 3.36%
    Term: 10 years
    Amortization: 30 years
    Fees: Par
    Prepayment Penalty: Swap breakage
    LTV: 75%

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    $4,100,000 Non-Recourse Cash-Out Refinance, 14-Unit Multifamily Property; West Los Angeles, CA

    October 23, 2019

    Transaction Description:

    George Smith Partners successfully secured a $4,100,000 non-recourse permanent refinance of a 14-unit, multifamily property in West Los Angeles. Loan proceeds were used to pay off the existing variable, higher interest rate bridge loan into a lower interest, fixed rate loan. There was significant cash-out to the Sponsor, who had recently completed an extensive reposition and upgrade of the Property. Due to the Sponsor’s business plan, flexibility and interest only were paramount. As such, GSP worked with the Lender to structure a 5-year fixed rate term with 3 years interest only and a step-down prepayment structure of 3%, 2%, 1%. This structure allows the Sponsor to maximize current cash flow while providing the flexibility of a step-down structure that burns off when the loan begins to amortize.

    Rate: 4.20%
    Term: 30 years; 5 years fixed then converts to floating rate at Libor + 2.25%
    Amortization: 3 Years Interest Only then 30 year amortization
    LTV: 65%
    Minimum DSCR: 1.20x
    Guaranty: Non-Recourse
    Prepayment: Stepdown, 3%, 2%, 1%, open

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    Acquisition Bridge Loan for an 11-Unit Multifamily Property; 72.5% Loan to Cost; Arlington Heights Area of Los Angeles, CA

    October 16, 2019

    Transaction Description:

    George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in the Arlington Heights Neighborhood of Los Angeles, California. The 11-unit, 1960’s vintage property had significant deferred maintenance and below market rents. The Sponsor’s business plan was to reposition the Property, buyout tenants and release the units at market rents. Sized to 72.5% of total project cost, the loan includes 100% of future funding for tenant buyouts, a full gut renovation of unit interiors and an exterior upgrade.

    The two-year bridge loan is interest only and floats at a rate of Prime plus 0.50% (5.75% today) with no floor rate, which is important in a declining interest rate environment. The loan carries no prepayment penalty, and interest is not charged on the holdback until funds are drawn. The lender fee was negotiated down to 0.5%.

    Rate: Prime + 0.5%
    Term: 2 Years
    Amortization: Interest Only
    LTC: 72.5%, including 100% of future funding
    Prepayment Penalty: None
    Recourse: Full Recourse
    Lender Fee: 0.5%

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    $3,350,000 Bridge Loan for Purchase of 13-Unit Multifamily Property; 70% LTC; LIBOR+3.65%; Los Angeles, CA

    October 16, 2019

    Transaction Description:

    George Smith Partners secured $3,350,000 in proceeds for the purchase of a 13-unit multifamily property located in an infill area of Los Angeles. The loan is structured as $1,963,000 at closing and $1,387,000 in holdbacks for capital expenditures and interest reserves. Six of the thirteen units were vacant at close. The fully funded loan represents 70% of the project capitalization.

    The Sponsor requested a loan with both low pricing and non-recourse execution. Several challenges were encountered in meeting both goals. The small size of the loan ruled out almost all debt fund lenders, who typically seek financings larger than $10,000,000. While banks offered rates in the 5% range, they required the Sponsor to sign full recourse. Private money lenders quoted the deal with prohibitive interest rates above 8.0%.

    The selected Capital Provider was the only one to provide non-recourse execution with a rate in the 5’s. The loan did not stipulate a required debt yield based on the stabilized cash flow. Additionally, the Lender released additional money at closing for expenses the Buyer incurred while in escrow. This amount totaled $260,000 in reimbursements for soft costs. The loan closed about 45 days from the signed application.

    Rate: Floating at 1 Month LIBOR + 3.65%
    Term: 2+1+1
    Amortization: Interest Only
    Fees: 1.0% in/0.5% out
    Prepayment Penalty: None
    LTC: 70%
    LTV: 75%
    DY: None
    Guaranty: Non-Recourse

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    $6,870,000 Cash Out Refinance of Medical/Office Building; Los Angeles, CA

    October 8, 2019

    Transaction Description:

    George Smith Partners secured a $6,870,000 cash-out refinance loan for a 43,435 square foot medical/office property in Los Angeles. The loan represented 70% of value and a 1.25x debt coverage ratio. Our team helped the Sponsor secure the previous loan about a year ago at a time when the Property had 20% vacancy. Due to the considerable upside potential, the Sponsor had deliberately chosen a loan with no prepay. Since then, they successfully signed several new leases and achieved 100% occupancy.

    In a survey of the market, GSP found that other lenders were limited by a higher stress rate, an above-market vacancy factor, or a lower LTV constraint. The selected Capital Provider had none of these constraints and was able to provide proceeds $300,000 higher than the rest of the market. The new Capital Provider was also able to provide the Sponsor full credit for the new leases without a seasoning requirement. The Capital Provider also included cash flow from month-to-month tenants and short-term tenants in their underwritten cash flow. As a result, the loan provided a considerable return of equity to the Sponsor. The loan was quoted at a rate of 5 year CMT + 2.55% with no floor. During application, the index rate declined by about 30 basis points. At loan approval, the rate was fixed at 3.98% for 5 years.

    Rate: 3.98%
    Term: 5 years
    Amortization: 30 years
    Prepayment: None
    LTV: 70%
    DCR: 1.25

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    $7,400,000 Interest Only Refinance for a Multifamily Property; 74% LTV at Breakeven DSCR; Venice Beach, CA

    October 8, 2019

    Transaction Description:

    George Smith Partners arranged a $7,400,000 refinance for a multifamily property in Venice Beach. The proceeds provided 74% leverage and was fixed at a rate of 5.00% with interest only payments. Over the past 15 months, the Sponsor renovated four of the units and upgraded the electrical and plumbing. GSP sourced a capital provider that understood the value of the location and the Subject Property along with the strength of the Sponsor in order to mitigate a breakeven debt service coverage ratio and a high loan to value.

    Challenges:
    The Sponsor was traveling for work in another country when loan documents were ready to be signed. Due to the Sponsor’s busy schedule, they were unable to go to a U.S. Embassy to sign loan documents and would not return from their trip for over 3 months.

    Solutions:
    GSP was able to get the Lender comfortable in allowing the Sponsor’s Power of Attorney (POA) to sign loan documents. The Lender has never allowed a POA to act as signer on behalf of a Sponsor and was hesitant to allow for a POA to sign for a new Sponsor. After many conversations GSP was able to convince the Lender to allow the POA to act as signer and even agreed to waive their internal legal fees during this process.

    Rate: 5.00%
    Term: 30 years
    Amortization: Interest Only
    LTV: 74%
    DCR: Breakeven, 1.0:1.0
    Lender Fee: $2,730

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    $1,710,000 Refinance for an Owner Occupied Industrial Building; Santa Clarita, CA

    October 2, 2019

    Transaction Description:

    George Smith Partners successfully secured $1,710,000 of rate and term refinancing for an owner-user industrial property in Santa Clarita, CA. The Property is a free-standing manufacturing building with 25% office.. It was built in 1987 with a net rentable area of 23,350 SF. Santa Clarita offers tremendous access to labor and it is conveniently located close to regional distribution centers, studio and entertainment uses, manufacturing and research and development businesses. The loan is sized to 46% LTV , and is fixed for 5 years at 3.50% with 25-year amortization.

    The Sponsors are in the aerospace machining and assembly and stock car industries, which are highly specialized. The Sponsor plans to sell the Property in 5 years. Although investors have a strong appetite in industrial properties, this Property faces a comparative disadvantage as it only has grade level loading capacity as opposed to dock high loading. Additionally, the Property is built upon single tenant capacity, and it offers a functional obsolescence of 25% office ratio.

    GSP sourced a lender who has a group specializing in the Aerospace and Defense industry. This lender underwrote and understood the opportunities and challenges in the business. The Lender provided a 5-year term, with the last two years open with no prepayment penalty.

    Rate: 5-year Treasury + 2.05% (all-in rate 3.5%), no floor
    Term: 5 year fixed
    Amortization: 25 years
    Loan to Value: 46%
    Debt Coverage Ratio: 1.25x
    Prepayment: 3%, 2%, 1%
    Guaranty: Recourse
    Lender Fee: 0.25%

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    $13,350,000 for the Acquisition of an Apartment Building, Sized to 6.50% Stabilized Debt Yield; Los Angeles, CA

    October 2, 2019

    Transaction Description:

    George Smith Partners secured $13,350,000 of bridge financing for the acquisition and renovation of a an apartment building in West Los Angeles. The building, which was constructed in 1969, is in need of a major renovation. The financing provided 77% of the acquisition and renovation cost. The Sponsor intends to complete an extensive renovation to the exterior and common areas. At acquisition the building was 60% occupied, so the Sponsor will immediately improve the vacant units and rent at market. The loan was sized to a 6.50% stabilized debt yield, which equated to 77% of total project cost. The non-recourse financing has a floating interest rate of LIBOR + 4.75% and has a 3-year term.

    Rate: 1-Month LIBOR + 4.75%
    Term: 3 Years
    Amortization: Interest Only
    Prepayment Penalty: 18 Months Minimum Interest
    LTC: 77%
    Stabilized DY: 6.5%
    Fees: 1% in/1% out (waived if refinanced with current lender)
    Guaranty: Non-Recourse

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    $6,086,000 Non-Recourse Refinance Loan for Multifamily Property; Seattle Area, WA

    September 25, 2019

    Transaction Description:

    George Smith Partners secured a $6,086,000 non-recourse refinance loan for a 43-unit multifamily property in the greater Seattle area. The loan provided 70% leverage and is fixed at 4.04% for ten years. The collateral for the new loan excluded a free-standing building that was part of the original purchase, which gives the Owners an option to redevelop that parcel. Over the past several years, the Borrower has completely renovated the exterior of the Property and turned about one quarter of the units. The Lender gave the Borrower maximum credit for the higher rents on the newly refurbished units without requiring any seasoning. Additionally, the Lender did not apply a loan-to-cost constraint, which allowed the Borrower to receive a significant amount of cash-out from the refinance. The Lender also provided 5 years of Interest Only payments. Net operating income was underwritten at the actual note rate, resulting in higher proceeds than what other lenders were offering. The loan closed on the same day that the prepay on the existing loan dropped to 0%.

    Rate: Fixed at 4.04% for 10 years then floats at LIBOR + 3.25%
    Term: 20 years
    Amortization: 5 yrs Interest Only, then 30 years
    Prepay: Stepdown
    LTV: 70%
    DCR: 1.2
    Guaranty: Non-Recourse

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    Low Debt Yield, 3.77% Coupon Permanent Financing for the Acquisition of a Recently Developed Grocery-Anchored Retail Center; FL

    September 25, 2019

    George Smith Partners successfully placed $14,690,000 in non-recourse, ten-year fixed rate first mortgage debt for the acquisition of an approximately 54,000 square foot, 96% occupied, recently developed retail center in Western Florida. An investment-grade grocery anchor on a newly signed long-term lease comprises approximately 75% of the collateral. The anchor has no sales history at the Property and is not required to report sales going forward. GSP sourced a lender to provide full term non-recourse Interest-Only financing subject to a low 7.35% debt yield. The 65% leverage loan has a 3.77% fixed coupon over the ten-year term.

    Rate: 3.77%, Fixed
    Term: 10 years
    Amortization: Full Term Interest-Only
    Loan to Value: 65%
    Prepayment: Defeasance
    Lender Fee: None

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    $3,500,000 Refinance of a 3-Tenant Industrial Property; Pasadena, CA

    September 18, 2019

    Transaction Description:

    George Smith Partners successfully secured a $3,500,000 permanent refinance of a 3-tenant, 29,000 square foot industrial property in Pasadena, CA. The Sponsor wished to refinance into a lower interest, fixed rate loan as quickly as possible due to the conversion of the existing loan from a fixed rate to a variable rate. GSP obtained a significantly lower rate thanks to the Lender not having a rate floor. This greatly benefited the Borrower in the fluctuating Treasuries environment. In addition, GSP’s strong relationship with the Lender and reliable execution enabled a smooth and timely closing process.

    Rate: 3.45% Fixed
    Term: 5 Years
    Amortization: 25 Years
    LTV: 44%
    Guaranty: Recourse

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