FINfacts™ XXIV – No 136 | September 19, 2018

MARKET RATES
Prime Rate 5.00
1 Month LIBOR 2.17
6 Month LIBOR 2.57
5 Yr Swap 3.08
10 Yr Swap 3.13
5 Yr US Treasury 2.96
10 Yr US Treasury 3.08
30 Yr US Treasury 3.22

RECENT TRANSACTIONS
$80,228,000 Cash-Out, Fixed-Rate Refinance of a 297-Unit Multifamily Property; 10-Years Interest Only at 4.20%

Rate: 4.20% Fixed
Term: 120 months
Amortization: Interest-Only
LTV: 55%
Guarantee: Non-Recourse
Prepayment Penalty: Yield Maintenance

Transaction Description:

George Smith Partners successfully placed a 10-Year, Cash-Out, Fixed-Rate refinance of a 297-unit multifamily property located in Downtown Los Angeles, California. This loan refinanced a 10-Year floating rate loan with a remaining term of 8 years, also arranged by GSP.

Two years ago the Sponsor decided on a variable rate loan and paid an early prepayment penalty on his prior loan, allowing for a significant cash-out and reduction in interest carry. Our client benefited from lower interest rates for the past two years, however, as the long-term interest rates began to increase they decided to switch to a long-term fixed-rate strategy.

There were two objectives for this transaction: 1) leverage appreciated equity, and 2) replace floating rate risk with a long-term fixed-rate. Recent fluctuations in the 10-year Treasury prompted additional urgency in the transaction and GSP moved quickly to arrange the new loan as soon as the former loan’s two-year lockout period expired. Sized at 55% of value, the non-recourse, interest-only loan is fixed at 4.20% for 10 years.

Advisors

Gary M. Tenzer
Principal/Co-Founder
Minjoo Kim
Assistant Vice President

$10,750,000 Preferred Equity for Condo Construction; 83% Loan to Cost

Rate: 13%
Term: 36 Months
Amortization: Interest Only
LTC / LTV: 83% / 70%
Recourse: Full Recourse
Lender Fee: 1.0%
Exit Fee: 1.0%

Transaction Description:

George Smith Partners successfully arranged $10,750,000 in preferred equity financing for the ground-up development of 61 condo units in an infill Los Angeles location.  The Sponsor acquired multiple adjacent single-family homes and successfully took them through the entitlement process. The Sponsor arranged the senior construction financing up to 65% Loan to Cost with a local bank and was seeking additional debt to complete the capital stack.  George Smith Partners located a preferred equity provider that give full credit for the imputed land value which put the preferred equity at 83% of total project cost and did not require any additional cash from the Sponsor.

 

Advisors

Steve Bram
Principal/Co-Founder
Allison Higgins
Senior Vice President

$3,037,500 Cash-Out Refinance for an Unanchored Multi-Tenant Shopping Center in Florissant, Missouri

Rate: 4.875%
Term: 5 year fixed
Amortization: 25 year amortization
LTV: 75%
DSCR: 1.25X
Prepayment: No prepayment penalty
Guarantee: Recourse
Lender Fee: Par
Free rate lock for 120 days

Transaction Description:

George Smith Partners successfully arranged $3,037,500 in a cash-out permanent refinance secured by an unanchored shopping center located in a tertiary market in Florissant, Missouri. The Property consists of 14 tenants, with a total rentable area of 133,330 SF.

The Property was 95% occupied at closing, but all of the leases will roll within the first four years of the loan term. In addition, the buildings were constructed in 1964, and sizable improvements have not been made since then.

GSP identified a capital provider who was comfortable offering a 5 year fixed rate loan instead of a short-term bridge loan, and able to size it at 75% of value and 1.25x Debt Service Covenant. The loan was structured with no holdback, upfront or on-going Tenant Improvements/Leasing Commission. Considering GSP’s strong relationship with the Lender and Sponsor’s sturdy track record, GSP negotiated a 120 day free rate lock while interest rates are pushing higher. The 75% leverage recourse loan has a fixed interest rate of 4.875% for 5 years, with a 25 year amortization.

Advisors

Gilda Rivera
Senior Vice President
Irene Liu
Assistant Vice President

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HOT MONEY
Mezzanine Financing for Affordable Housing

George Smith Partners identified a private commercial real estate finance company that provides non-recourse mezzanine financing for the acquisition, renovation and development of multifamily properties (with at least 20% of the units classified as affordable) located in the Western U.S. The financing is structured as a tax-exempt private activity housing bonds or 501(c)(3) bond. They can be used on mixed use 80/20 projects, for non-profit corporations, can be subordinate to HUD and Rural Development Loans and can be repaid from the sale of tax credits. With the ability to advance 90% of mezzanine loan programs range from $5,000,000 to $15,000,00. Interest-Only pricing for Acquisition / Rehab ranges from 8% – 10%, compounded monthly and Development ranges from 10% – 12%, compounded monthly.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
10 Year Treasury Above 3%

The 10 year treasury yield is above the key psychological and technical level of 3%. Factors include continued US economic growth seemingly unaffected by trade disputes, ECB discussing an end to their longtime bond buying program, and supply demand dynamics.

David Pascale, Senior Vice President at George Smith Partners, joined RealCrowd on a podcast to discuss how the Federal Funds Rate impacts real estate.

Mr. Pascale joined George Smith Partners more than two decades ago, leaving behind a successful career in intellectual property rights management.  Mr. Pascale has directly overseen the placement of nearly $4 billion capital into commercial real estate. He has an expertise in virtually every aspect of commercial real estate debt placement with distinct specializations in CMBS, bridge loans, credit tenant leases. He has worked extensively on retail, multifamily, hotel, office, and mixed use transactions. With a background in law, Mr. Pascale also brings loan document expertise and is able to explain and negotiate deal points and structure.  Click here to listen to the podcast or read the full transcript.

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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