LOS ANGELES, Calif. – November 3, 2014 – (RealEstateRama) — Commercial real estate investment banking firm George Smith Partners has successfully arranged a $172.3 million bridge loan for a portfolio of 36 properties located in 17 states nationwide, according to George Smith Partners’ Senior Vice President J. Jay Brooks.
“This portfolio had been mired in complex litigation for many years as a result of a loan maturity default that took place during the recent recession,” explained Brooks. “George Smith Partners was intimately involved in the finance process for this portfolio from beginning to end. By keeping our client in front of the best capital providers during a volatile time, the client was able to negotiate the terms of the bankruptcy exit and ultimately secure the bridge financing needed to maintain their ownership of this portfolio.”
The portfolio includes regional malls, office buildings, industrial properties and mobile home parks located in both secondary and tertiary markets from Louisiana to Alaska.
According to Brooks, in order to settle the litigation, there was a required certainty of close that included a drop-dead date. If this date was not met, the client would have suffered significant financial loss.
“In order to complete this financing in the allotted time frame, we worked hand-in-hand with the lender and the borrower to navigate the complexities that come along with such a large portfolio, and especially one that is already in default,” explained Brooks.
Brooks notes that there were a multitude of property-specific complexities that had to be addressed in order to finance the portfolio as a whole.
“Among the 36 properties, we faced issues such as ground leases and environmental issues, as well as major capital and tenant improvement projects, that needed to be addressed and factored into the underwriting for this financing,” he explained. “In addition, we had to address the overall stigma that is associated with properties and borrowers involved in litigation, as many lenders will not even consider these deals.”
Brooks notes that George Smith Partners’ deep knowledge of the financial markets was key in identifying lending platforms and professionals that could appropriately underwrite the property values and cash flow structures.
“George Smith Partners engaged two lenders that contributed a total of four loans including both senior and mezzanine debt,” explained Brooks. “Ultimately the cooperation and collaboration of an incredibly talented group of professionals including the lending team, the client’s team, as well as our team at George Smith Partners, made this financing possible.”
According to Brooks, the prepayment and yield maintenance flexibility were a critical component of the structure, as they will allow the borrower to extract properties from the loan structure in the coming years.
The secured loans were priced with either a floating rate with an interest rate cap, or with a fixed interest rate with six-months to 24-months of yield maintenance. The leverage varied depending on the stability of each asset. The term was structured to provide adequate time to sell some assets and to also find permanent debt for others.
Founded in 1992, George Smith Partners is a leading national real estate investment banking firm that specializes in arranging financing for commercial and multifamily properties, including acquisition, construction, bridge and permanent loans, as well as mezzanine loans, highly leveraged participating loans and joint venture equity. The company has arranged more than $35 billion in financing since its inception. Additional information about George Smith Partners is available at www.GSPartners.com.
Corynne Randel/ Jenn Quader
Brower, Miller & Cole