FINfacts™ XXIV – No. 146 | December 5, 2018

MARKET RATES
Prime Rate 5.25
1 Month LIBOR 2.38
6 Month LIBOR 2.90
5 Yr Swap 2.96
10 Yr Swap 2.97
5 Yr US Treasury 2.79
10 Yr US Treasury 2.92
30 Yr US Treasury 3.17

RECENT TRANSACTIONS
$115,000,000 of Non-Recourse High-Leverage Senior Construction Financing for the Ground Up Development of a 326-Key Four-Star Radisson BLU Hotel in Anaheim, CA

All terms are confidential.

Transaction Description

George Smith Partners placed a $115,000,000 non-recourse senior construction loan for the ground up development of a 326-key four-star Radisson BLU Hotel in Anaheim, CA. The Property is located in the Disneyland/Anaheim Convention Center submarket less than 1 mile from Disneyland Park. Once completed, the 12 story luxury hotel will be one of the few four star offerings available outside the Park and will feature an innovative, modern design. The amenity rich property will include a rooftop pool and deck with unobstructed views of the famous Disneyland nightly fireworks show and surrounding area. Catering to the Park-going family travelers, bunkbeds will be included in over half the rooms, and the hotel will feature a ground floor pool as well as upscale food and beverage offerings.

Challenges

The Project will be the first major development east of Interstate 5 in the Disneyland submarket. Additionally, the Hotel is slated to be the 4th Radisson BLU in the United States and will be one of the first four-star offerings available outside of the Disneyland Park.

Solutions

GSP focused on the submarket’s underlying fundamentals, including 28 million annual visitors, as well as its resilient occupancy rates and average daily rates that stayed relatively consistent through the recession. GSP also demonstrated that the Hotel is likely to capture an outsize share of the submarket’s 4 million annual international visitors. This is due to Radisson’s strong international branding supported by the fact that nearly all 300 Radisson BLUs are located outside the United States. Finally, GSP highlighted the Hotel’s upscale nature, which currently does not exist outside the Park, family friendly design and strong amenity package.

These efforts resulted in a high leverage, non-recourse execution.

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

$8,700,000 Acquisition Bridge Loan for Renovation of Strip Retail Center and New Pad Construction

Rate: 1-Month LIBOR + 410
Term: 36 Months + Two, 12-Month Extensions
Amortization: Interest Only
Loan to Cost: 76% LTC
Lender Fee: 1.0% Origination Fee
Prepayment: 12 Months of Yield Maintenance
Guarantee: Non-Recourse

Transaction Description:
George Smith Partners secured $8,700,000 of non-recourse, bridge acquisition financing for a 45,000 square foot retail center located in Richardson, TX. The Center, which was built in 1985, has a diverse mix of regional tenants and sits on the corner of two of the main thoroughfares in the area.

Challenges:
The Sponsor purchased the Property with the intent to add value through two approaches: (1) increasing rents for tenants that are rolling and paying below-market rates, and (2) constructing an additional 12,000 square feet on undeveloped land within the parcel. There were complications with parcelizing the existing building and the land, which meant that a single lender needed to fund the entire project. The large renovation and construction budget also resulted in only 41% of the total loan being funded at closing.

Solution:
George Smith Partners identified a lender that could structure the financing to have two holdback reserves, one for the CapEx and TI/LC’s for the existing space and the other dedicated to funding the construction of the new building. The separate reserves allow the Sponsor to pursue both value-add opportunities simultaneously, which drastically reduces the project timeline and maximizes the Sponsor’s IRR. Our capital source was able to get comfortable with the construction component by requiring 75% of the space to be pre-leased prior to funding.

Advisors

Steve Bram
Principal/Co-Founder
Patrick O’Donnell
Assistant Vice President
Nick Rogers
Assistant Vice President

$7,000,000 Stabilized Senior and Collateralized Line of Credit

Senior
Rate: 4.75% Fixed for Five Years; 6L+270 thereafter
Amortization: 30 due in 30 Years
Fee: Par
Prepayment: 3-3-2-2-1 open
LTV: 60% Blended
DCR: 1.20

Revolver
Rate: Prime
Amortization: Interest Only

George Smith Partners placed the structured senior and collateralized Line of Credit revolver in a cash-out execution for a Hollywood multifamily rental. The two loans are both recorded deeds of trust with the senior loan fixed @ 4.75% for five years prior to rolling into a LIBOR based floater and self-liquidating over the remaining 25 year term. At $4,200,000 there was a small return of equity to the Borrower. A $2,800,000 Second Trust Deed is a true revolver that can be used as a check-book to tie up additional properties in a competitive acquisitions market. Funds may be drawn down, re-paid and re-drawn without additional bank approval. Priced at Prime, the revolver is interest only with interest accruing only on drawn funds. There is no non-utilization fee. As the Credit Line is collateralized, there is no mandatory “clean-up” for funds outstanding over 12 months.

Advisors

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

SPEAKERS CORNER

Zack Streit, Vice President of George Smith Partners, will be speaking on Thursday, December 6th, at the Urban Land Institute program, “Attracting Capital to Your Development Project.” He will be participating on two panels, “The State of the Capital Markets for Small Scale Developers” and “Gap and Mezzanine Financing Options.  This event will take place at the Andaz San Diego located at 600 F Street.  For more information, please visit https://americas.uli.org/event/attracting-capital-to-your-project/

 


Picture
HOT MONEY
Fixed Rate No Pre-Payment Penalties Western States Lender

George Smith Partners identified a capital provider offering fixed-rate debt for transactions from $2,000,000 to $15,000,000 specializing in the 10 western states. This lender will finance Industrial, Manufactured Home Communities, Mixed Use, Multifamily, Office, Restaurant, Retail, Self Storage, Medical Office, Single-Tenant Net Lease. No pre-payment penalties, 3 years’ interest only, 30 year amortization and terms up to 15 years on partial or non-recourse loans.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Yield Curve Partial Inversion Roils Markets, What Happens If and When It More Fully Inverts?

On Monday, the US Treasury “yield curve” partially inverted as the 5 year T yield dropped below the 3 year T yield.  A typical “classic” inversion occurs when the 10 year yield drops below the 2 year yield, that is the most scrutinized relationship on the range of treasuries. Stock markets tumbled. (Dow dropped 800 points yesterday) as this added to uncertainty. An inverted yield curve is a classic harbinger of recessions (every recession since the 70’s).  Other macro economic concerns helped fan the flames (Brexit, mixed signals regarding the China/US “cease fire” on trade, etc). This is the first inversion in a decade, so it’s a major uncertainty. The major question facing markets: Is this “old school” indicator still valid in the “new normal” era of post Great Recession metrics of massive central bank accommodations, and stubbornly low inflation? Or “are things different this time?” We are again in uncharted territory. The Fed is still holding massive amounts of long dated Treasuries as it is now in its second year of the long slow unwind of its $4 trillion balance sheet. Markets seem to be counting on a very gradual sell off, keeping the long yields down. But most importantly, the lower 10 and 30 year bond yields are a product of reduced growth and inflation expectations for 2019, 2020 and beyond. Potential causes: the effects of US tax cuts fade, Italy weakening the Eurozone, continued trade disputes, etc. Many major economic groups are lowering growth forecasts for the next few years. Inflation is still spotty and not steady, note that oil prices again dropped today (after rising from lows) as the long awaited OPEC production cuts may be “off”. 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


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.