Term: 5 Years Fixed
Amortization: 30 Years
Prepayment Penalty: 2, 1, 0
Lender Fee: None
Reserve Account: None
Deposits Required: None
George Smith Partners arranged $2,600,000 in permanent financing for the refinance of a stabilized 8-unit, multifamily property in Los Angeles, California. The Sponsor acquired the Property a few years ago and was looking to lower their rate as they finished completion of a light renovation. As the environment was changing drastically day to day with the COVID-19 pandemic, GSP identified a Capital Provider offering fantastic terms. There were no holdbacks, no deposits were required to be held at their branch and provided a flexible prepayment penalty structure that allowed the Sponsor plenty of options during these challenging times.
June 16, 2021
George Smith Partners successfully arranged the cash-out refinance of a 200+ unit multifamily property. The loan is floating at a starting rate of 2.56% and allows the Sponsor to complete a value-add strategy to increase the NOI and refinance into a permanent loan at higher proceeds in 18-24 months.
While processing the loan, GSP worked with the Lender to understand the historical cash flow which was extremely choppy due to the inconsistent rent payments during the Covid-19 pandemic. The analysis resulted in a $3,000,000 increase to the loan amount and an additional year of interest only payments.
January 20, 2021
George Smith Partners was retained to refinance a 2-Property multifamily portfolio. Sensing buying opportunities in the multifamily market, the Sponsor wanted to pull cash out of their existing multifamily portfolio to use as equity to purchase new properties. GSP obtained a fixed rate of 3.15% for the first 5 years of the 30-year term.
With the global pandemic and uncertainty in the market, it was critical to select a capital provider who could successfully close and provide the cash out for the additional purchases. Any delays would have been very costly because of penalties in the purchase contract. In addition, most lenders were overwhelmed with year-end financing requests as several other lenders pulled out of the market and forbearance requests from their current borrowers. There were complex issues around appraisals and inspections that required GSP’s daily oversight.
Because of GSP’s strong relationship with this capital provider, we were confident that the loan officer would stay focused, close on time and keep the agreed rate and proceeds. GSP is in the debt market every day which gave us the ability to ensure that the selected Capital Provider was closing deals and meeting deadlines. GSP’s experience working with appraisers, inspectors and title/escrow during the COVID period was critical to getting this transaction completed in a timely manner. The loan closed on time and the Sponsor was able to utilize the cash-out to purchase another project. As is common during the COVID crisis, the Capital Provider wanted a 12-month payment reserve. GSP was able to convince the Capital Provider to only require 6-months and allow the reserve to be applied to the first 6-months of payments.
$8,600,000 Cash-Out Refinance of a 2-Property Multifamily Portfolio During the COVID Pandemic; Los Angeles, CA
July 8, 2020
George Smith Partners was retained to develop and implement a strategy to refinance a 5-Property $50,000,000 multifamily portfolio. GSP divided the properties between two capital providers in order to provide maximum flexibility to the Sponsor. The second part of the portfolio involved obtaining a 70% LTV permanent loan of $8,600,000 to provide the Sponsor with over $1,500,000 in cash-out capital to purchase additional properties during a changing market and maintain a strong cash position. GSP obtained a fixed interest only rate of 3.95% for the first 5 years.
With the COVID-19 global pandemic and uncertainty in the market, it was critical to select a capital provider who could successfully close. Borrowing costs are on the rise as lenders ratchet up their credit standards. The proceeds for this transaction were targeted for the acquisition of an additional asset which had a firm closing date and a large non-refundable deposit. Any delays would have been very costly. With the current crisis, lenders were 100% focused on rent collections and overwhelmed with new financing requests as several other lenders pulled out of the market as well as forbearance requests from their current borrowers. In addition to the usual due diligence requirements, the Lender required much more information. There were complex issues around appraisals and inspections that required lots of hand-holding.
GSP selected a capital provider that we have a strong relationship with and has closed numerous loans for us. We knew the loan officer would stay focused on the need to close on time and keep the agreed to rate and proceeds throughout the loan process. Because GSP is in the debt market every day, we were able to ensure that the capital provider was truly closing deals and meeting deadlines. Because of the market disruption, borrowing rates jumped by over 100 basis points overnight. We were able to lock the 5-year interest only rate at 3.95%, the following day, rates jumped to 4.75%. It was clear that the Lender was mindful of their reputation with GSP and didn’t want to get a reputation of crazy rate increases or abandoning their customers when they are needed the most. GSP’s experience working with appraisers, inspectors and title/escrow during the COVID period was critical to getting this transaction completed. The loan closed on time and the Sponsor was able to utilize the cash-out to purchase another project. As is now common during the COVID crisis, the Capital Provider required a 12-month interest reserve. We were able to convince the Capital Provider to apply those funds to the first 12 months of the loan payments.
Cash Out Refinance for 14 Unit Renovated Multifamily Property; 3.5% Fixed; Bank Financing Closed During Covid-19 Pandemic; Los Angeles, CA
June 24, 2020
George Smith Partners secured a first trust deed on an unencumbered 14-unit Los Angeles multifamily property. The loan is fixed at a rate of 3.5% for seven years and has five years of Interest Only payments. The Sponsor acquired the Property in an all-cash transaction 12 months ago and completed a full gut renovation. Unit interiors were updated to a high level of finish with an investment of $27,600/per unit, and the Property was leased up to 100% occupancy. The loan was placed into application with a California based bank about one week before the stay-at-home order was implemented. Despite the resulting economic uncertainty, the Sponsor was able to maintain collections close to 100%. As a result, the Capital Provider made one small change to the original term sheet, adding a twelve-month payment reserve. The payment reserve is based off Interest Only payments and it will be used to make the interest payment on the loan. In order to cover this reserve, the Capital Provider was able to increase loan proceeds from the amount in the original application. As a result, our Sponsor received the same amount of cash out that was originally applied for.
May 13, 2020
George Smith Partners secured $1,400,000 to refinance a stabilized multifamily building in Silver Lake, CA. The Property, which was built by the Sponsor in 1991, is 100% occupied. The Sponsor has owned and managed the building for over 25 years, but this is currently the only asset in his portfolio. Refinancing provided the ability to achieve a lower interest rate and return equity to increase his liquidity position. The non-recourse financing carries a fixed interest rate of 4.05% for 5 years.
The Sponsor’s lack of real estate experience and non-third-party property management deterred some capital providers from offering non-recourse financing. The Sponsor also had limited pre-closing liquidity which made it difficult to qualify for the most attractive rates. Lastly, the eventual lender required a 6-month interest reserve due to recent uncertainty surrounding the multifamily market.
Even though the Sponsor has limited real estate exposure, GSP was able to highlight the strong historical occupancy that the Sponsor has been able to maintain while self-managing the subject property for over two decades. GSP identified a lender that only required liquidity equal to 5% of the loan amount to qualify for their non-recourse program. The interest reserve was structured as pre-paid interest that goes directly to pay the first six months of principal and interest payments. This avoids having a held-back reserve that would only release upon hitting certain covenants in the future.
Rate: 4.05% Fixed
Term: 5 Years
Amortization: 30 Years
Prepayment: 1.75% for Years 1-3, 1.00% for Years 4-5
Loan Fee: Par
- Advisors: Patrick O’Donnell