Dealmaker: George Smith Partners Arranges $106M for Arizona Mixed-Use Development

George Smith Partners, Los Angeles, completed $105.5 million in financing for a portion of The Watermark Tempe, a master-planned mixed-use development on Tempe Town Lake in Tempe, Ariz.

Fenix Development, Los Angeles, is developing the project.

GSP Senior Vice President Scott Meredith arranged $25 million in mezzanine construction financing and an $80.5 million senior loan to fund the speculative development of a 250,000 square-foot, 15-story Class A office building with 44,000 square feet of retail space.

“As the very first high-end mixed-use project in this city, there is tremendous potential to leverage Tempe’s high-tech employment, rapidly growing population and affluent local community,” Meredith said. But he noted the perceived historical volatility of the Tempe and Phoenix office markets presented a challenge to closing the deal.

CBRE, Los Angeles, recently rated Tempe, home to State Farm’s new regional headquarters and large ADP, Uber, Amazon and eBay offices, the number one market in the country for office absorption and rising rent rates.

Meredith said Fenix already had a senior loan in the works, but the lender required a high pre-leasing threshold prior to funding. “This limitation had proven insurmountable as the local leasing market would not commit to signing new leases without a confirmed delivery date,” he said. So GSP identified a structure the senior lender agreed with that included an alternate structure with no pre-leasing requirement. The GSP team also sourced multiple mezzanine investors that could supply the $25 million in mezzanine construction financing to fill the remainder of the capital stack.

The Watermark Tempe development site at 430 North Scottsdale Road also includes a for-sale, 1.6-acre hotel pad that is entitled for up to 251 keys and up to 278 feet in height.