FINfacts™ XXIV – No. 158 | March 13, 2019

MARKET RATES
Prime Rate 5.50
1 Month LIBOR 2.48
6 Month LIBOR 2.68
5 Yr Swap 2.57
10 Yr Swap 2.70
5 Yr US Treasury 2.51
10 Yr US Treasury 2.62
30 Yr US Treasury 3.02

RECENT TRANSACTIONS
$9,650,000 Purchase of 95-Unit Seattle Multifamily Property; Sized to 1.15 DCR on an Actual Mortgage Constant; 68% LTV

Rate: 4.5% fixed for 5 years, then floating at 6M LIBOR + 3.25%
Term: 15 years
Amortization: 3 years Interest Only followed by 30 year amortization
Prepayment Penalty: 3,2,1,0
LTV: 68%
DCR: 1.15x
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners secured $9,650,000 in proceeds for the purchase of a 95-unit multifamily property located near Seattle. Proceeds were maximized by using a 1.15x Debt Coverage Ratio on the actual mortgage constant. The Seller’s historical P&Ls included many corporate and non-recurring expenses. GSP was able to separate out these expenses using the Seller’s general ledgers. Additionally, our team demonstrated the Sponsor’s successful track record bringing operating expenses in line with typical multifamily properties. As a result, the selected Lender was able to underwrite to a normalized expense ratio and provide 68% LTV on the purchase. Fixed at 4.50% for five years, the first three years are interest only before rolling into a 30 year amortization schedule for the 15 year term loan. The loan closed in about 45 days.

Advisors

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

$5,900,000 Cash-Out Financing for Office Building with Short Term Lease, Pasadena, CA

Rate: 6.20%
Term: 3 year term with two 1-year extension options and 33 bps extension fee contingent upon min 1.20 DSCR, max LTV of 65%
Amortization: 25 years
Loan to Value: 70% max LTV “as is”, 65% LTV at each extension
Yield Maintenance: 24 months
Guaranty: Partial-Recourse, 25% of the loan amount

Transaction Description:

George Smith Partners arranged $5,900,000 of cash-out refinancing for a 21,220 SF office property occupied by a non-profit tenant in Pasadena, CA. The Property is 100% leased to a non-profit tenant with 4.5 years of remaining on the lease term. The challenge was finding a 5 year loan term option despite the short term nature of the lease.

GSP was able to exceed the Sponsors expectation with respect to cash-out proceeds which were based on 70% “as is” LTV. The 5-year floating-rate execution is partial-recourse and amortizes over 25 years with a partial cash flow sweep while still providing net cash flow to the Borrower. The floating rate was 370 bps over the 30 day Libor.

Advisors

Alina Mardesich
Senior Vice President
Michael Smilove
Assistant Vice President

$5,300,000 Acquisition Financing for Creative Office Value-Add in Seattle

Rate: 6.25% fixed
Term: 36 Months
Amortization: Interest Only for the first 24 months, then 30 year amortization
Prepayment Penalty: 5,4,3,2,1,0
LTC: 75%
LTV: 70%

Transaction Description:
George Smith Partners successfully arranged financing for a 25,000 sq ft office property in the Georgetown neighborhood of Seattle. The Sponsor purchased the Property to capitalize on the success of the adjacent property, the Seattle Design Center, which is showroom space for design-related tenants.

Challenges:
While the Sponsor intends to add value through improving the physical appearance of the building and lease it to creative or design-related tenants, the building had existing tenants at below market rent with lease expirations through 2021. Many lenders were not comfortable with the Sponsors ability to negotiate with the existing tenants to vacate. Lenders were also concerned with the depth of tenants in this submarket as it is in the midst of gentrification.

Solutions:
George Smith Partners located a lender that was comfortable with the Sponsors track record in the submarket and with the value-add business plan. The Lender was able to provide a short-term, fixed rate loan that provided reserves for the capital improvements to the façade and tenant improvements for the interior units.

Advisors

Steve Bram
Principal/Co-Founder
Allison Higgins
Senior Vice President
Huber Bongolan, Jr.
Vice President
Nick Rogers
Assistant Vice President

SPEAKERS CORNER

Please join Gary Tenzer, Principal/Co-Founder at GSP on Thursday, March 21st for Connect Los Angeles. He will be moderating the Opportunity Zone discussion at 3:20 pm. Enter GSP20 for 20% off your registration. For more information, click here.

Gilda Rivera, Senior Vice President at GSP will be a panelist at CCIM – Lender Panel 2019 at noon on Thursday, March 21st at Cross Campus DTLA. For more information, click here.


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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 ›

SPECIAL ANNOUNCEMENT

Congratulations to Steve Bram and his family on the occasion of his daughter’s wedding.


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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