FINfacts™ XXIV – No. 140 | October 17, 2018

MARKET RATES
Prime Rate 5.25
1 Month LIBOR 2.29
6 Month LIBOR 2.60
5 Yr Swap 3.19
10 Yr Swap 3.26
5 Yr US Treasury 3.06
10 Yr US Treasury 3.20
30 Yr US Treasury 3.34

RECENT TRANSACTIONS
$17,000,000 Non-Recourse Multifamily Refi with $10,000,000 Cash Out Sacramento, CA

Rate: 4.24%
Term: 10 years
Amortization: 30 years
LTV: 65%
DCR: 1.35x
Prepayment Penalty: Yield Maintenance
Guarantee: Non-Recourse
Lender Fee: 0%

Transaction Description:

George Smith Partners successfully arranged the refinance of a 14 building, 120-unit multifamily asset located in the Arden-Arcade neighborhood of Sacramento, CA. GSP worked with a life company with a strong appetite for multifamily lending and ultimately structured a loan in which the Sponsor pulled out $10,000,000 of cash. The non-recourse loan has a fixed rate of 4.24% and refinanced an existing agency loan. Some of the unique features of this loan included: rate lock at application, assumption rights in the event of a sale and future loan advances/top-offs upon increase in NOI.

Advisors

Antonio Hachem
Principal
Wendy Wang
Vice President

$13,130,000 Acquisition and Reposition Financing with Low 3% Going-In Debt Yield on Two Multifamily Properties in the San Fernando Valley, California

Rate: 30-Day LIBOR + 3.20%
Term: Two years plus three 12-month extensions
Amortization: 36 months interest only
Max Loan to Cost: 75%
Guarantee: Non-recourse
Lender Fee: 1.00%

Transaction Description:

GSP arranged the $13,130,000 first mortgage on two 1960’s vintage multifamily assets in the San Fernando Valley. The National Balance Sheet Lender provided a non-recourse loan at 75% of total project cost including 100% of future CapEx funds to complete an extensive interior and exterior renovation of $45,500 per unit. Interest expense is not incurred on CapEx funds until drawn. The 30-Day LIBOR plus 3.20% coupon requires interest rate risk protection throughout the term, and in order to minimize associated sponsor cost the Lender structured the initial term as two years, with three, one-year extensions and no hurdles or fees for the first extension. Due to low going-in cash flow, the Lender structured an interest reserve to cover debt service during the peak reposition period.

Advisors

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

$10,100,000 Acquisition Bridge Financing for 90 Condo Unit Assemblage

Rate: 1-Month LIBOR + 3.90%
Term: 2 Years with an additional 12-month extension
Amortization: Interest Only throughout the term of the loan
Prepayment: Yield Maintenance for 9 months, open thereafter
Fees: 1.0% Origination, 0.5% Exit
Guarantee: Non-Recourse

Transaction Description:

George Smith Partners secured bridge financing for the acquisition and renovation of 90 condominium units to be operated as a multifamily rental property. Our Sponsor was involved with the initial assemblage of the units. The collateral is part of a 105-unit development that was built in the 1960’s in the Phoenix metro market. The 90 units are contiguous, almost all are 2 bedroom, one story casitas style units with 2 units per building. All units have exterior access in a well landscaped setting. The Sponsor was able to purchase the units for a below-market per unit value and is planning a major renovation for both the exterior of the Property and interior of the units. There is some deferred maintenance, including roofing and HVAC, that will be addressed during the rehab. The Lender structured the loan to provide 75% financing for the acquisition and included a significant holdback for the repairs. A major challenge to the financing was a lack of operating history. The units were being operated by several owners, some owning as little as 1 or 2 units. GSP and the Sponsor created a pro-forma operating budget that the Lender was able to accept due to the Sponsor’s extensive experience in the market. The total debt is sized to 75% loan-to-cost and has an interest rate that floats at 1-month LIBOR + 3.90% for the 2-year term.

Advisors

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

SPEAKERS CORNER

Please join Gary M. Tenzer, Principal/Co-Founder at George Smith Partners, and other top-level industry leaders on Monday, October 29th for the RealShare Apartments Conference at the Westin Bonaventure Hotel. Mr. Tenzer will be moderating the Debt and Equity Financing Panel, “The Issues Affecting Deal Flow”. The discussion will cover the macro issues affecting debt financing, the direction of interest rates, and where we are in the overall housing cycle. Register here and use the coupon code, “GSP20” for 20% off the ticket price.


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HOT MONEY
Co-GP Equity Provider

George Smith Partners identified a Co-GP equity provider for multifamily, student housing, senior Independent-living, hospitality, industrial, office (including medical and other uses on a selective basis), self-storage and mixed-use sectors. Looking for value-add and opportunistic opportunities (mostly 90/10 or 95/5 deals) in primary and secondary markets nationwide. Target equity investments between $1-10M per deal with an investment period of 2 to 10 years.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Rising Rates Affect on Consumers, Fed Minutes Indicate Resolve

Increasing rates are supposedly the solution for an overheating economy. Rising rates are affecting the housing markets (negatively) and apartment metrics (positively in a contrarian way). Higher rates are slowing down the home refinance market to a crawl and also putting pressure on buyers and sellers. (higher rates = less loan proceeds of course). Today a Freddie Mac study indicated higher mortgage rates are turning some would be buyers into renters (at least until prices go down), thereby increasing occupancy and rents for apartment owners. Of course many apartment owners are bemoaning the increase in fixed and floating rates for their acquisitions and perms. Today’s Fed minutes indicate the committee is united (last month’s increase was unanimous) and convinced more hikes are in order. This is a significant message to markets that the Fed is not bowing to pressure from the executive branch. The 10 year T hit 3.20% again today after a week of huge market volatility. In other contrarian news, the Sears bankruptcy will be good news for many retail owners as many of the affected Sears (or Kmart) locations involve rock bottom below market rent for good infill retail locations. Savvy and well capitalized operators can repurpose the space. 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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