FINfacts™ XXIV – No. 147 | December 12, 2018

MARKET RATES
Prime Rate 5.25
1 Month LIBOR 2.35
6 Month LIBOR 2.89
5 Yr Swap 2.88
10 Yr Swap 2.95
5 Yr US Treasury 2.77
10 Yr US Treasury 2.96
30 Yr US Treasury 3.15

RECENT TRANSACTIONS
$25,500,000 Interest Only Bridge Financing for an Industrial Park Reposition in St. Louis, Missouri

Rate: One-Month LIBOR + 2.40%
Loan to Cost: 100% of the projected CapEx/TI/LC costs to stabilization with no additional borrower equity required
Loan to Stable Value: 70%
Term: Three years plus two one-year extension options
Amortization: Two years interest only; 25-year amortization thereafter
Guarantee: Recourse
Lender Fee: 0.625%
Prepayment: 1% of the outstanding loan balance months 1-12; Open thereafter

Transaction Description

George Smith Partners secured $25,500,000 in bridge financing collateralized by a 72% occupied, multi-tenant, 55-acre industrial park in St. Louis, Missouri. Sized to 70% of as-stable value, proceeds from the interest-only bridge loan were used to refinance out two existing permanent loans, cover closing costs and fund 100% of future costs, including CapEx and leasing costs, associated with the final reposition of the 100-year-old industrial park. The borrower had previously upgraded a portion of the Property, including replacing obsolete structures with new tilt-up buildings, however wanted to also take advantage of recent lease expirations within the functionally obsolete suites. The financing secured by GSP will allow the Borrower to modernize and upgrade the structures in an effort to further improve the park and capitalize on St. Louis’s strong industrial market fundamentals, and the Borrower will benefit from the resulting higher rents and additional cash flow after debt service without having to invest additional equity.

The Property’s existing improvements vary with respect to age, functionality and uses, which made it difficult for the borrower to define a specific suite-by-suite future funding budget. In line with the flexibility required by Borrower’s business plan, the Lender allowed the future loan funds to be pooled in lieu of allocating the capital budget on a suite-by-suite basis since the re-tenanting costs will vary based on each future tenants’ specific use. The loan also provides flexibility with interest paid only on drawn funds plus a nominal 1% prepayment penalty during only the first 12 months of loan term allowing payoff at par thereafter.

Advisors

Gary E. Mozer
Principal/Co-Founder
Kyle Howerton
Senior Vice President
Katie H. Rodd
Senior Vice President
Michael Anderson-Mitterling
Senior Vice President
Akash Rohera
Assistant Vice President

$9,300,000 Construction Loan, 80% LTC, L + 2.75%, 32 Unit Multi-Family Development, Los Angeles, CA

Proceeds: $9,300,000
Rate: LIBOR + 2.75%
Term: 3+1+1
LTC: 80% LTC
Origination Fee: 0.75%
Recourse: Yes

Transaction Description

George Smith Partners secured $9,300,000 for the ground-up development of a 32-unit multifamily building in the Koreatown neighborhood of Los Angeles. The 5-story project will include a mix of 1 and 2 bedroom units with gated subterranean parking. Sized to 80% of actual costs, the 36-month term carries two – 1-year options and is priced at 2.75% over LIBOR.

Our Sponsor requested maximum loan proceeds which would require the acceptance of imputed equity. George Smith Partners identified a Los Angeles based construction lender that understood the value that had been created with re-entitlements and permitting since the property was initially acquired four years ago. This capital provider agreed to value the land at current 2018 values as opposed to the acquisition price. The bank ordered appraisal valued the land at over 3x the Sponsor’s 2014 purchase price and imputed equity was utilized in calculating the Sponsor’s equity contribution. No additional funds were required at closing.

Advisors

Jonathan Lee
Principal/Managing Director - Debt
Shahin Yazdi
Principal/Managing Director
Olga Alworth
Senior Vice President
David Stepanchak
Senior Vice President
Matthew Kirisits
Vice President
Samuel Sarshar
Assistant Vice President

$4,930,000 (75% LTV) Acquisition Loan for Single-Tenant Office

Rate: 4.875%
Term: 7 Years
Amortization: 30 Years
Recourse: Full Recourse
Prepayment Penalty: None
Lender Fee: 1.0%

Transaction Description

George Smith Partners secured $4,930,000 for the acquisition of a single-tenant office. The 30,000 square foot building was built in 1997 and was recently renovated by the seller as part of the tenant improvement package for the incoming tenant. The tenant signed a new, 7-year NNN lease that includes two, 5-year options and has a rental rate that increases by 2.5% annually. GSP was able to secure 75% LTV financing for the Sponsor’s purchase. The 7-year loan is fixed at a 4.875% interest rate for the entire term. It has a 30-year amortization and no prepayment penalty.

Advisors

Steve Bram
Principal/Co-Founder
David R. Pascale, Jr.
Senior Vice President
Patrick O’Donnell
Vice President

SPEAKERS CORNER

Malcolm Davies was a guest on the Lodging Leaders Hospitality Podcast with Jonathan Albano, CHO. Malcolm reveals the basics of financing for new hotel development, the types of hotels lenders and investors are looking to be involved in, which cities and locations are most desirable for lenders and investors now, and how to set realistic revenue projections to recession-proof your property.

Click here to listen to the podcast.

Click here to read the transcript.

Please join Steve Bram, Principal/Co-Founder at George Smith Partners on Friday, December 14th for GTEN at Thompson Coburn LLP from 7:00 – 9:00 am. Mr. Bram will provide an overview of the capital markets as well as discuss recent financing structures. Please register here.


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HOT MONEY
Fixed Rate Capital for Western US Land Loans

GSP is working with a capital provider that will provide recourse fixed rate financing to 75% of cost (90% + on build to suits) including, acquisition, improvements, development, pre-development, discounted payoffs, bankruptcy exit, purchase of notes and cash-out. Fixed rate pricing starts at 9% for terms up to 1 year with extension options up to 3 years for Multifamily, Office, Industrial, Retail, Special-Use, Entitled Land and Construction. Loan sizes range from $1,000,000 to $10,000,000 for transactions located in California, Arizona, Nevada, New Mexico and Washington.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Yield Curve Partial Inversion Reaction Leads to Some Steepening

Markets sold off heavily last week as the yield curve partially inverted, the first inversion since before the Great Recession. The sell off immediately spurred a flight to quality, the 10 year T yield dropped a low 2.82% on Monday, the 2 year dropped to 2.69%. The “inversion point” of the 3 and 5 year Treasuries is now less than 1 basis point (3 year at 2.775%; 5 year at 2.699%). Maybe recession fears are “so last week” as the market is now cheering progress in US – China trade talks. But the curve is nowhere near a “healthy” steep curve. Recent statements by ex Fed Chairs Bernanke and Yellen indicate a feeling that this indicator may not be relevant. Bernanke pointed out that “regulatory changes and quantitative easing in other jurisdictions” has distorted the “normal” market signals (by normal he means the “old normal”). The Fed seems set on raising rates next week, despite pressure from the executive branch to leave rates unchanged. The pressure may actually end up convincing the Fed that they must raise rates in order to retain credibility (for a lesson in central bank meddling, see recent economic events in Turkey). The question then becomes how many increases in 2019? Futures markets in Fed Funds and the LIBOR curve have lowered their 2019 rate forecasts considerably over that past few weeks as economic growth expectations continue to cool in China and Europe, and the effects of tax cuts and government spending will be wearing off in the US. Stay tuned.  By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

More Perspectives ›

If you have an inquiry regarding George Smith Partners’ commercial real estate financing, please contact your GSP representative or Todd August, Chief Operating Officer (310) 867-2995 or TAugust@GSPartners.com


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