Dealmaker: George Smith Partners Arranges $126M

George Smith Partners, Los Angeles, arranged $40 million in joint venture equity and facilitated $82 million in bridge financing to convert two historic Los Angeles buildings into Class A creative office spaces.

The properties are on the border between the city’s Fashion District and its historic core. The adjacent century-old buildings in downtown Los Angeles will be repositioned to highlight original construction aspects while adding modern design elements.

One of the two buildings was already well into the rehabilitation process, thus requiring an equity recapitalization of existing partners, which made the transaction more complex. The George Smith Partners team worked with the sponsor and JV equity partner to structure a JV equity financing agreement that provided mutually favorable terms while capitalizing the business plan.

In northern California George Smith Partners arranged $4 million in construction financing for a senior care facility. The complex, which will function as an assisted-living facility, will include four contiguous houses accommodating six patients each.

California law says any care facility accommodating six patients or fewer does not require a license to operate. By building four smaller facilities, the sponsors will realize a greater upside while still abiding by California regulations. While this regulation substantially simplified the pre-development process, it also made financing the project significantly more difficult, George Smith Partners said. Conventional lenders could not become comfortable with this subset class of an operationally dependent and niche asset. Due to the complex asset type, the sponsors requested a mini-perm structure where they had a guaranteed takeout of the construction loan.

The interest-only loan will remain fixed for two years at 6.5 percent, then convert to a five-year mini-perm loan at 5.5 percent. It has no prepayment premium.