FINfacts™ XXIV – No. 141 | October 24, 2018

MARKET RATES
Prime Rate 5.25
1 Month LIBOR 2.28
6 Month LIBOR 2.75
5 Yr Swap 3.10
10 Yr Swap 3.18
5 Yr US Treasury 2.95
10 Yr US Treasury 3.11
30 Yr US Treasury 3.33

RECENT TRANSACTIONS
$6,500,000 Cash-Out Permanent Refinance for a Multi-Tenant Research & Development Facility in Bristol, PA

Rate: 5.03% (10 year swap +1.93%)
Term: 10 Years
Amortization: 2 years Interest Only then 30 years amortization after
Loan to Value: 72%
DSCR: 1.40X
Prepayment: Defeasance
Guarantee: Non-Recourse
Lender Fee: Par

Transaction Description:
George Smith Partners successfully arranged $6,500,000 in cash-out permanent refinance secured by a 104,974 SF, multi-tenant Research & Development facility in Bristol, Pennsylvania. The loan proceeds will be used by the Borrower to pay off the existing debt and to buyout a partner.

Challenges:
The Subject Property is fully occupied with short-term leases. The Major Tenant is one of the largest chemical companies in the world, which occupies 72% of the total building space. The Tenant has a lease term of less than three years, and their lease requires only a 6-months notice period. In addition, the Appraiser had a difficult time finding comparables because of the Research and Development special use of the Facility.

Solution:
GSP identified a CMBS lender willing to provide a 10-year loan structured with 15 months of major tenant cash flow sweep prior to lease expiration. GSP provided comparables that the Lender and Appraiser found acceptable. The appraised value was within the range to receive the full loan amount that the Borrower requested. Priced at 10-year SWAP + 1.92% for the 10-year term, the fixed loan sized to 72% of value, 2 years Interest Only, then 30 years amortization.

Advisors

Gilda Rivera
Senior Vice President
Irene Liu
Assistant Vice President

Construction Loans Los Angeles | $6,000,000 Non-Recourse Predevelopment Financing for Construction of 170-Unit Multifamily Project in Tarzana, CA

Rate: 6.90% Fixed
Term: 12 Months + 2 (6)-Month Extensions
Amortization: Interest Only
LTC: 64.5%
Guarantee: Non-Recourse

Transaction Description:

George Smith Partners secured $6,000,000 in non-recourse predevelopment financing for a 170-unit ground-up multifamily project in the Tarzana community of Los Angeles, CA. The site is a collection of five contiguous lots, parceled together by the Sponsor to create an opportunity for larger scale development in the area. This financing facility allowed the Sponsor to recuperate some of the invested equity to be used towards continued advancement of the predevelopment for the Project, including but not limited to design and construction drawings, entitlement costs and permits. The Sponsor is currently building another ground-up multifamily project nearby and is an active local investor and developer, owning several retail and mixed-use assets in the area.

GSP sourced a lender who offered a fixed-rate financing facility to lessen the burden of development costs on the Project, recapturing nearly 65% of invested dollars for a bridge through the pre-development phase; it will ultimately be taken out by the construction loan when the Project breaks ground. The identified capital group was already familiar with the site, and was able to offer a flexible and low-cost structure without a prepayment penalty. The application was an expeditious process; GSP was able to facilitate a closing less than three weeks from the date the term sheet was signed. The twelve month fixed rate note was priced at 6.90%, and was sized to 64.5% of cost basis.

Advisors

Malcolm Davies
Principal/Managing Director
Zachary Streit
Vice President
Evan Kinne
Vice President
Alexander Rossinsky
Assistant Vice President
Rachael Lewis
Assistant Vice President
Aiden Moran
Analyst

$4,250,000 Refinance of Multi-Tenant Shadow Anchored Retail Center

Rate: Confidential
Term: Five years
LTV: 70%
DSCR: 1.20x (global)
Guarantee: Recourse
Lender Fee: 0.50%

Transaction Description:

George Smith Partners successfully arranged a $4,250,000 mini perm to refinance an existing bridge loan collateralized by a 2007 constructed, 25,000 square foot shadow anchored shopping center located in the Inland Empire. The prior loan, also sourced by GSP, enabled the Sponsor to restructure the ownership entity plus take advantage of a discounted payoff dating back to the last recession. The most significant challenge was attributed to rising interest rates that ultimately governed the final loan sizing. After evaluating the firm’s extensive lending relationships, GSP sourced a community lender who became comfortable with this location and tenant mix as well as the Sponsor’s financial strength, track record, and personal guarantee. The new loan has a flexible prepayment structure that is open to repayment at any time.

Advisors

Loren Bedolla
Senior Vice President

SPEAKERS CORNER

Please join Reuven Risch, Vice President at GSP from 7:30 am – 5:00 pm on Thursday, October 25th for the Apartment Owners Association FREE Million Dollar Trade Show and Landlording Conference at the LA Convention Center in West Hall B. Mr. Risch will be at booth #206. Click here to register.


Picture
HOT MONEY
National Full Capitalization Hotel Financing

George Smith Partners identified a national “Full Structured” hotel financier funding permanent hotel bridge, mezzanine loans and preferred equity investments secured by hotel assets for acquisitions, recapitalizations, cash-out re-financings, and renovations. Permanent financing up to $50 million; fixed for 20-30 years at 4.5%-6.5% with terms up to 10 years and leverage up to 80% of cost. Bridge debt to $50 million; fixed or floating at 6.0%-9.0% with terms to 5 years and 85% of stabilized value. Mezzanine tranches to $10 million; rates from 12%, Interest only or matched to senior loan. Leverage is limited to 85% of value. Preferred Equity to $10 million; rates between 13% to 20% to 95% of cost. There is no participation for the Pref Equity once their returns are realized.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Market Volatility Driving Yields Downward

Stock markets worldwide are in a fear-driven, bumpy ride. This has brought bond yields down in a flight to quality. Markets are always watching what is coming next. The fear is that companies are experiencing “peak earnings” and that tariffs and other factors are taking their toll (nascent inflation, labor shortages, etc). Caterpillar’s earnings spurred a major selloff this week as they indicated margins are being cut due to increasing costs partially related to tariffs. Also, new home sales dropped, has housing peaked also? This seems not to be supply/demand driven but buyers are reeling from peak sales prices and higher interest rates. This begs the question in the post crisis economic world: can the economy thrive as ultra low interest rates go away? Geopolitical concerns: (1) Saudi Arabia and Turkey: tensions are rising between two major global economic powers; (2) Italy: populist government submitted a budget rejected by the EU, setting up a showdown. The EU is very concerned about Italy’s debt load becoming unsustainable. Note that an economic collapse/default in Italy would have serious worldwide repercussions. Italy’s economy is the 4th largest in Europe and 10 times the size of Greece’s economy (and the possibility of a Greek default caused major consternation a couple of years ago). Interesting that the Italian 10 year bond is trading at 3.61%, only a 0.50% premium to “ultra safe” US Treasuries; (3) China: remember that China’s growth was the only bright spot in the years after the financial crisis, now, the economy is sputtering despite regulators moving to increase liquidity. 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


WWW.GSPARTNERS.COM

Constellation Place
10250 Constellation Blvd., Ste. 2700
Los Angeles, CA 90067
Office 310.557.8336
Fax 310.557.1276
Email finfacts@finfacts.net
© 1999 - 2018 George Smith Partners, Inc. DRE # 00822654 FINfacts™ is an ePublication of George Smith Partners, Inc. For Promotional Purposes Only. All Rights Reserved.
Hi, just a reminder that you're receiving this email because you have expressed an interest in George Smith Partners. Don't forget to add finfacts@finfacts.net to your address book so we'll be sure to land in your inbox!

You may unsubscribe if you no longer wish to receive our emails.