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

Transaction Description:

GSP arranged the $8,750,000 ($935/Building SF) non-recourse first mortgage from a REIT to refinance a maturing bridge loan on a 29,500 square foot land parcel located along a major thoroughfare in Coastal Los Angeles. The Borrower recently entitled the land for a retail redevelopment and is now pre-leasing the Project. The loan repaid the existing debt, covered 100% of closing costs, and repatriated equity to the Borrower. The loan provides an additional 12 months of term while the Borrower pre-leases the Project. Although the loan is non-recourse, the Lender did not require an appraisal or other third-party reports, nor did it require an interest or carry reserve although there is no in-place cash flow. Sized to 60% of value, the loan priced at 6.90% fixed for the 12-month loan duration.

Rate: Fixed for 5 years @ 4.515%; floating @ 6 Month LIBOR+2.25%
Term: 30 years
Amortization: 30 years after 2 Years of Interest Only Payments
LTV: 65%
Prepayment Penalty: 3,2,½
DCR: 1.15x

Transaction Description:

George Smith Partners secured $7,125,000 in proceeds for the refinance of a 50-unit multifamily property located in Los Angeles. Fixed at 4.515% for a period of 5 years, the loan self-liquidates at 6 month LIBOR plus 2.25% for the remaining 25 year term; there is no balloon date. Two years of Interest Only payments precede loan amortization. Sized to a 1.15 Debt Coverage Ratio, proceeds were coverage constrained. Prepayment steps down from 3% with no penalty after the third year.

Although the building was previously retrofitted, several capital providers required a new PML earthquake risk assessment study due to the masonry construction. As cap rates continue their compression, cash flows are often the limiting constraint for sizing loan proceeds. Industry standard DCR constraints are limited to 1.20x or 1.25x and often use an inflated rate over the actual indexed note rate.

The selected lender did not require any additional structural reports. Our underwriter allocated credit to our Sponsor for their success in fulfilling their business plan over the past two years; the balance sheet basis was not an underwriting factor. Net cash flow included the Property’s higher rental income as well as previously unreported RUBs income, parking income, and laundry revenue. A quoted competitive spread of 160 basis points over the 5 year swap rate demonstrated the Capital Provider’s belief in this location and sponsorship. Our 1.15 DCR constraint resulted in proceeds above the rest of the market.

Advisors

Matthew Kirisits Director

Rate: 4.85% Fixed
Term: 10 Years
Amortization: Full Term Interest Only
Guarantee: Non-Recourse
Prepayment Penalty: Defeasance
LTV: 60%
Lender Fee: None

Transaction Description:
George Smith Partners successfully placed $6,283,000 in permanent financing for the acquisition of an 83,000 square foot shopping center located outside of Salt Lake City, Utah. The shopping center had unique tenancy that included both national and local tenants, as well as a call center as the anchor tenant. It was crucial for GSP to find a loan with a low interest rate and an interest only component in order to achieve the required return thresholds of the Borrower. GSP ultimately sourced a 10 year non-recourse loan with a fixed rate of 4.85%. The loan is interest only for 10 years.

Challenge:
Numerous lenders where not interested in the Property because of the nature of retail real estate today. Additionally, there had been severe prior environmental issues at the Property as a result of an onsite dry cleaner. Finally, the call center anchor tenant became very problematic for lenders. It was an abnormal use and anchor for a retail property. More importantly, the call center tenant, which made up approximately 33% of the Property’s gross income, could give 6 months notice to terminate their lease and vacate the space at any time. As a result, many lenders could not use the anchor tenant’s cash flow when underwriting the Deal. Because this was an acquisition it was important to close in a timely manner.

Solution:
George Smith Partners leveraged their strong lender relationships to identify several groups who were still active and making competitive loans on retail properties. GSP provided data to the Lender explaining why the call center anchor tenant would not vacate the space. Finally, GSP worked with the Lender and Borrower to add additional structure to the loan, which further mitigated any risk with the call center anchor tenant.