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G.H. Palmer Secures $233.6M Cash-Out Financing on 1,400-Unit Multifamily Portfolio

George Smith Ptnrs Arranges Refi on Medici, Orsini I Apts
March 5, 2018
George Smith Partners has negotiated $233.6 million in cash-out refinancing for G.H. Palmer's multifamily portfolio comprised of the Medici (pictured, left) and the Orsini I in downtown L.A.

G.H. Palmer, a Southern California-based commercial real estate developer, has secured almost $233.59 million in cash-out refinancing for its multifamily portfolio comprised of two downtown Los Angeles properties - the Medici and Orsini I.

Gary M. Tenzer, principal and co-founder of George Smith Partners, one of the nation’s leading commercial real estate capital markets service providers, arranged the financing on behalf of the sponsor.

The 10-year, non-recourse loan closed at 4.02 percent and was sized at 60 percent to value. George Smith Partners was able to arrange the loan as interest-only for the entire ten-year term.

"The sponsor had existing debt on the portfolio, with two years remaining and pre-payment penalties in place, which would typically discourage an early refinance," Tenzer noted. "However, by looking at the whole picture, it became clear that the long term savings of securing a 10-year fixed rate loan at today’s low interest rates outweighed the relatively minimal defeasance fees. The result was an exceptionally accretive transaction for our client."

Tenzer explains that the sponsor was able to reduce its interest rate by about one percent and generate net cash proceeds, making the transaction lucrative in both the short and long-term.

  Related News: G.H. Palmer Secures $266.8M Refi of 1,300-Unit PortfolioNOVEMBER 08, 2017  |  KAREN JORDAN

"This strategy is all about looking holistically and making recommendations that will best serve the client and the investment," said Tenzer. "While an early refinance doesn’t make sense in every situation, it is an optimal solution for a borrower with existing debt at a higher rate than current interest rates, for a relatively short remaining term. In these cases, borrowers can save money by prepaying their loan early and locking in fixed-rate financing now, before rates spike."

Continued rate increases are a near-certainty, according to Tenzer, who expects to see rates increase 50 to 75 basis points in the next 12 to 24 months.

"These market pressures are only going to increase, and borrowers who make strategic financing choices now will be better positioned to weather the storm," he adds. "We are currently advising borrowers to examine their existing debt carefully to determine if an early refinance will save them money over the life of their loans."

The Medici features studios, one-, two- and three-bedroom floor plans with a 24-hour doorman, complimentary tanning salon, a private one-acre park, a jogging track, two tennis courts, a putting green, golf driving cages, and several pools and spas. The property is located at 725 S. Bixel St. in Los Angeles' Westlake Multifamily submarket.

Orsini I features studios, one- and two-bedroom apartments equipped with designer finishes. The property offers a host of on-site activities and amenities, including complimentary yoga classes, a regulation size indoor basketball court, a movie theatre, karaoke lounge, virtual bowling and golf, as well as a heated swimming pool and spa, private dry saunas and steam rooms, and a rooftop pool and spa. The property is located at 550 N. Figueroa St. in Los Angeles' Chinatown Multifamily submarket.

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