Sunday, October 21, 2012

George Smith Partners Arranges $105M in Construction Financing


George Smith Partners Arranges $105M in Construction Financing

The Paseos
From MHN Online
George Smith Partners has successfully arranged $105 million in construction financing for client GLJ Partners, for two new multifamily developments in the Inland Empire region of California, according to Vice President Malcolm Davies. Davies was assisted by George Smith Partners’ Vice President Michelle Lee in these transactions.
The transactions include $52 million in construction financing for Oak Springs Ranch, a to-be-built 312-unit multifamily property in Wildomar, Calif. and $53.7 million in construction financing for The Paseos, a to-be-built 385-unit multifamily property in Montclair, Calif.
-Oak Springs Ranch–Davies arranged $52 million in construction financing for the ground-up development of GLJ Partners’ to-be-built Class A multifamily community, Oak Springs Ranch in Wildomar, Calif. Upon completion, the community will consist of 312 units across 18 buildings. The land is fully-entitled, permitted and shovel-ready for development.
Davies explained, “Our client has owned this land since 2008, but had not yet secured construction financing because they had put the project on hold due to the Great Recession.”
According to Davies, GLJ Partners worked with a joint venture partner to acquire the land in 2008. The project required at least $52 million of proceeds in order to move forward.  In addition, the client required financing which was guaranteed solely at the entity-level, providing protection to the client’s principals.
In order to achieve the required financing, George Smith Partners conducted extensive market research and analysis to show potential lenders that the market was viable for new multifamily development. According to Davies, this research showed that Wildomar is an extremely strong rental market due to a shift in the demand from buyers to renters.
“Finding a lender familiar with the area and willing to reinvest was a challenge,” Davies continued. “By utilizing our extensive industry connections we were able to secure a dual-structured deal, with one lender placing $35 million in construction debt and the other placing $17 million in mezzanine construction debt financing. Through a successful inter-creditor negotiation, we were also able to meet all of the client’s requirements, as well as their joint venture equity partners’ requirements for financing.”
According to Davies, the property is a total of 21 acres, with a density of 15 units per acre, making it the least-dense Class A apartment community in the Southwest area of Riverside County. The property is also adjacent to a major-anchored neighborhood shopping center, and is more proximate to employment centers in Riverside and Ontario than other competing residential communities in the corridor.
-The Paseos–Davies also arranged $53.7 million in construction financing on behalf of GLJ Partners, who will develop a 385-unit luxury Class A apartment community called “The Paseos” in Montclair, Calif.
“This land is fully-entitled, permit- and shovel-ready for development,” explained Davies.  “While construction lenders in the Inland Empire have not been active in recent years due to the recession, we were able to demonstrate the strength of this local market and the area’s increasingly positive multifamily absorption rates, ultimately identifying a lender who recognized the value in this investment.”
According to Davies, by emphasizing GLJ’s extensive track record and substantial liquidity, George Smith Partners was able to secure this financing as well as achieve all the requested terms by the client.
The property is located directly across the street from a major regional mall, the Montclair Plaza, and one block south of the Metro link commuter rail with service to Downtown Los Angeles and Pasadena. Upon completion, the apartment community will contain 385 Class A units situated on 15.4 acres with 722 parking spaces.
The construction financing was a libor based and interest-only loan underwritten to a 65 percent loan-to-cost ratio and a 1.2 stabilized debt coverage ratio.
Davies had previously arranged $25 million in joint venture equity for the acquisition of the to-be-built multifamily property in early 2012.

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