Contact:
Kelly Stephens/Judy Brower
Brower, Miller & Cole
(949) 509-6551
kstephens@browermillercole.com

GEORGE SMITH PARTNERS CLOSING $28.5 MILLION CONSTRUCTION LOAN - COMMERCIAL REAL ESTATE LENDING INCREASING

LOS ANGELES (February 4, 2010) - Commercial real estate investment banking firm, George Smith Partners, is finalizing the details on a $28.5 million construction loan for a 50,000 square-foot medical facility in Santa Monica, California. The deal, expected to close by mid-February, is an optimistic sign that capital markets are beginning to thaw. George Smith Partners’ team included Steve Orchard, Jay J. Brooks, Gary E. Mozer and Josh Roseman.

“This transaction has proven to be a bellwether of the capital markets,” said Steve Orchard, Senior Vice President of George Smith Partners. “When we began seeking financing in February of 2009, fear and caution ruled - there was no appetite amongst lenders. By November of 2009, we saw a shift in that appetite from banks, life companies and pension funds. Lenders are looking to put their money back to work.”

This trend is constrained to preferred industry sectors, according to Orchard. “Quality cash flow is critically important in securing financing today. As a result, lenders are emphasizing sectors that are considered more predictable, such as multifamily, investment grade credit leases and need-based services such as healthcare and grocery-anchored retail,” he said.

The $28.5 million loan is for a project by developer Randall Miller, involving the construction of a three-story outpatient surgery facility that is 100 percent leased to the University of California Los Angeles. The facility, slated to open in 2011, will feature special improvements for imaging and radiation services, a robotic parking garage and is slated to achieve LEED Gold certification.

“The project represented an impeccable investment opportunity and was an ideal candidate for financing. Before the crisis it would have been easily financed. Our challenge was the capital markets,” Orchard explained. “Today, financing is hand-to-hand combat. We work every detail and leverage trusted relationships. In this instance, we studied the project and surveyed decision makers at key institutions to surface issues without exposing the deal. Then we pursued the sponsor’s best options, including some non-traditional bond financing alternatives. Ultimately, improving capital markets allowed us to focus on more traditional models. We secured multiple offers with diverse structures; the developer had several very good and well-qualified options to choose from.”

Sponsorship of the loan was a key component in bringing the deal to fruition. The developer’s track record and ability to secure the necessary guarantees was imperative. George Smith Partners analyzed and helped prepare the guarantors’ personal financials and then reviewed them with potential lenders. Based on this analysis, George Smith Partners encouraged the sponsor to enhance the guaranty, and then negotiated a workable guaranty structure. With the guarantees in place, U.S. Bank, a subsidiary of Minneapolis-based U.S. Bancorp, agreed to underwrite the loan.

“Underwriting treatments are still conservative,” added Orchard. “There’s a lot of equity in this deal. Prior to the downturn, this project would have likely had offers approaching 100 percent of cost with cash-out to the sponsor at closing based on re-entitled land value.”

“The good news is that this large loan is entirely underwritten by one bank with no syndication, evidencing U.S. Bank’s liquidity and healthy capital ratios. This capital was also priced very competitively with a 5.25 percent start rate. It shows positive movement in the market; lenders are cautious, but increasingly motivated and willing to capitalize the right investment opportunity.”

About George Smith Partners
Founded in 1992, George Smith Partners is a leading national real estate investment banking firm that specializes in arranging financing for commercial and residential properties, including acquisition, construction, bridge and permanent loans, as well as mezzanine loans, highly leveraged participating loans and joint venture equity. George Smith Partners’ Lender Services, Asset Sales and Advisory Group offers clients full service solutions to manage both performing and non-performing loans including consulting, asset restructures, asset sales and discounted pay-off negotiations. George Smith Partners also provides litigation support, serving as a financial advisor and expert witness in diverse real estate litigation matters. The firm’s Principals and Senior Associates offer extensive expertise in the legal matters affecting real estate financing, real estate bankruptcy and mortgage brokerage issues.  Information about George Smith Partners is located on the company Web site, www.gspartners.com.