FINfacts XXIV – No. 474

Transaction Description:

George Smith Partners successfully arranged $4,400,000 in construction takeout financing for a newly completed 23-unit affordable housing community located in South Los Angeles. The financing supports the refinancing of existing construction debt and provides additional capital for property stabilization. The loan features a structured funding approach with the possibility of an earn-out upon achievement of operational milestones. 

Transaction Description: 

George Smith Partners secured $50.53 million in proceeds ($41.6 million in senior debt/CMBS execution, and $8.93 million in preferred equity by AXCS Capital, GSP’s parent company) to refinance a 297-unit apartment complex in Richmond, TX. The Sponsor executed an affordable housing partnership with the Housing Authority by which the Property’s unit mix would be restricted to 87 units for families earning ≤80% Area Median Income (AMI);62 units for families earning ≤60% AMI;148 market-rate units; and at least 5 units reserved for Housing Choice Voucher holders. Accordingly, the Property would be conferred property tax exemptions. The partnership is structured as a ground lease (99-year term) with the Housing authority. The Sponsor needed to pay off the existing loan balance from Loancore.  

Several challenges were encountered when discussing the transaction with capital providers, including educating capital providers with the unusual PFC structure and legislation in Texas, as well as dealing with an ongoing property management change. GSP also had to marry a preferred equity piece with senior debt that would be securitized, which added an additional layer of complexity.