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FINfacts™ XXIV – No. 10 | March 9, 2016
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| Prime Rate |
 3.50% |
| 1 Month LIBOR |
0.44% |
| 6 Month LIBOR |
 0.90% |
| 5 Yr Swap |
1.28% |
| 10 Yr Swap |
1.69% |
| 5 Yr US Treasury |
1.38% |
| 10 Yr US Treasury |
1.87% |
| 30 Yr US Treasury |
 2.66%
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Indices changes since March 2, 2016.
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Rate: 4.24%
Term: 10 Years
Amortization: 30 Years
LTV: 68%
Prepayment: Yield Maintenance
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Transaction Description: George Smith Partners successfully arraigned $12,500,000 of non-recourse debt for the refinance of a newly constructed single-tenant office building in Bakersfield, California. The single-tenant, three-story building is part of a larger development that will eventually become a corporate campus. Initially underwritten to a 65% loan-to-value constraint in order to qualify for non-recourse; the appraised value came in lower than anticipated. George Smith Partners was able to negotiate a modification to the LOI in order to secure the non-recourse aspect of the loan without cutting proceeds. Fixed at 4.24% for 10 years, the loan sized at a 68% LTV and is amortized over 30 years. The lender’s fee was 0.5%.
Challenge: The single tenant in the office is an energy company, which caused some concern given the recent volatility in the energy sector.
Solution: GSP was able to highlight the long history that the tenant has in the area. Low vacancy rates in the submarket helped ease the lender’s concerns.
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Rate: 8.50% Fixed
Term: 18 Months
Amortization: Interest Only
DCR: Breakeven
Non-Recourse
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Transaction Description: George Smith Partners successfully arranged a structured bridge loan to provide 80% of acquisition and 100% of all rehabilitation dollars for a 360-unit multifamily purchase that needed to close within seven calendar days. A significant seller discount was offered for the capacity to fund within seven days. In addition to acquisition funds, the subject property required an extensive capital repairs reserve to remain competitive in the Columbus, Ohio market. Fixed at 8.5%, the non-recourse 18 month loan was sized to break-even debt coverage on an interest only basis.
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Rate: 3.84% Fixed
Term: 7 Years
Amortization: 30 years
LTC: 67%
Lender Fee: 0.25%
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Transaction Description: George Smith Partners successfully placed a $2,880,000 permanent loan on a single-tenant NNN CVS property located in a tertiary Wisconsin market. The property was constructed in 2014 and has 24 years remaining on the initial lease term. GSP sourced the seven-year, 3.84% fixed-rate loan by highlighting the tenant’s BBB+ investment grade rating and long lease term to mitigate the lack of operating history and low acquisition cap rate in a tertiary market. Third party and lender legal costs were capped at $12,000 with recourse limited to the top 50% of the loan proceeds. Prepayment is limited to the SWAP breakage cost – if any.
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Founding Principal, Gary M. Tenzer will be moderating the Finance Panel at the USC/Gould Real Estate Law and Business Forum at the downtown location of The Jonathan Club on Thursday March 10th. Gary’s panel will focus on the regulatory changes imposed by Dodd Frank, HVCRE, BASEL III and other changes affecting commercial financing. Designed to appeal to professionals in the real estate field, the luncheon key-note speaker will feature Kevin Demoff (COO Los Angeles Rams) who will discuss the Rams return to Los Angeles and the new stadium. Open to the public, program information and registration is available on-line.
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National permanent loan program funding on a non-recourse basis to 75% of value for core product types. Transactions ranging $1,000,000 to $10,000,000 are priced between 5.5% to 6.3% for ten year terms on a 30 year amortization schedule. A step-down prepayment schedule is provided with no additional spread adjustment. This capital provider will finance “story” credit issues and roll over risk with a high certainty of execution without B Piece or Basel III concerns.
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Last Friday’s job report for February was encouraging, especially as it showed wage inflation and tightening labor conditions in certain markets. The Fed watches wages very closely and considers rising wages to be one of their central mandates. The 10-year T hit 1.90%, up from 1.66% on February 11. With oil prices and other commodities (iron ore, etc.) showing price gains, is inflation finally “back”? This week will feature announcements by the ECB and Bank of Japan. Both institutions need to restore confidence as recent plunges into negative rates and other untried measures have not instilled confidence in the markets. Most expect more QE from the European Central Bank, but the “style” may be as important as the substance. Next week’s US Fed meeting will most certainly not include a rate increase (so the 4 raises in 2016 or 1 per quarter is “off the table”). The “dot plot” containing the estimates for future rate increases will be highly scrutinized to see if the Fed is ready to admit that their “4 raises” was an overstatement and no longer justified. Stay Tuned. David R. Pascale, Jr.
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Constellation Place
10250 Constellation Blvd., Ste. 2700
Los Angeles, CA 90067
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© 1999 - 2024 George Smith Partners, Inc. DRE # 00822654 FINfacts is an ePublication of George Smith Partners, Inc. For Promotional Purposes Only. All Rights Reserved.
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