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FINfacts™ XXIV – No. 17 | April 27, 2016
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| Prime Rate |
 3.50% |
| 1 Month LIBOR |
0.44% |
| 6 Month LIBOR |
0.91% |
| 5 Yr Swap |
1.32% |
| 10 Yr Swap |
1.76% |
| 5 Yr US Treasury |
1.32% |
| 10 Yr US Treasury |
1.85% |
| 30 Yr US Treasury |
2.70% |
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Rate: L+4.25%
Term: 3 years plus two 1-year extensions
Amortization: Interest Only
LTC: 67.5%
Prepayment: Open Prepayment with 18 month interest make whole
Release Provisions: Structured release provisions
Non-Recourse
Lender Fee: 1.00%
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Transaction Description: George Smith Partners successfully structured and placed the non-recourse acquisition bridge loan for an off-market and significantly undermanaged four property multi-tenant industrial portfolio, totaling 445,000 square feet in the Western United States. At acquisition the portfolio was 74% occupied with a going in debt yield of sub 7.5%. $22,050,000 of the on-book financing was funded at closing. The remaining $4,700,000 is to be future funded for immediate property improvements, future upgrades including funds for the Sponsor’s strategic spec-suite program, as well as future good news leasing expenses. There are release provisions to allow individual buildings to be sold or refinanced. The interest rate floats at L+4.25% for a three year term on an interest only basis, with two (2) one year extensions. Our Sponsor purchased a two year cap at closing with a required renewal in the third year.
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Rate: 4.30%
LTV: 57%
Term: 10 Years
Amoritzation: 30 Years
Non-recourse
Prepayment: Yield Maintenance
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Transaction Description: George Smith Partners successfully arranged a $9,700,000 permanent loan for a three-tenant, 111,000 square foot mixed use retail & back office/warehouse property located in Anchorage, Alaska. The well-maintained asset is of high quality construction and has a strong historical cash flow that is supported by its’ sold occupancy history. Fixed for 10 years at 4.3%, the non-recourse loan amortizes over 30 years.
Challenges: Market concerns as an “oil patch” added additional scrutiny by lenders fearing a dependency on oil production. Appraisal comparibles were difficult to obtain due to the lack of comparable properties trading. Local brokers and owners are reluctant to share lease rates in determining value and event risk. Capital market volatility made the all-in coupon difficult to predict.
Solution: GSP was able to educate the lender on the diversity of the economy and demonstrated the subjects’ position in the market insulating the cash flow from potential economic disruptions. Mr. Brooks also called on his relationships within the community to obtain lease and sale compatibles to assist with the appraisal process. The low loan to value allowed the lender to approve the loan as applied for despite secondary market fluctuations.
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Rate: 4.10%
Term: 10 Years
Interest Only: 5 Years
Amortization: 30 Years thereafter
LTV: 75%
Non-Recourse
Lender Fee: PAR
Prepayment: 5,4,3,2,1%
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Transaction Description: George Smith Partners placed the non-recourse senior debt for the cash-out refinance of an 18 Unit Live/Work loft project in Oxnard, California. Acquired by our Sponsor less than a year prior to this refinance, the subject was stabilized only five months ago. Shahin identified a capital provider who was able to structure a loan to 100% of total costs, limited to 75% of the current value. Fixed for 5 years at 4.10%, the loan provides for interest only during this fixed term prior to floating for the remaining 10 years of the term at LIBOR + 275.
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George Smith Partners is placing Joint Venture Equity requests for value-add opportunities to as low as $1,000,000 for the institutional co-invest. Typical splits are sized to 90/10 and structured with an 8% preferred return with a wide variety of splits, waterfalls or IRR lookbacks based on the transaction. Ground-up is not considered as some level of cash flow at close is required.
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Today’s Fed meeting statement indicated less concern about global headwinds risks, but no hurry to raise rates. This follows Fed Chair Yellen’s dovish speech last month. This allows the Fed to “watch the data” until the June meeting, when the next “dot plot” mapping out of future rate hikes is due. The 10 year treasury rallied, the yield dropped to 1.85% after peaking at 1.96% yesterday. This follows a familiar pattern of recent years: bond yields rise globally indicating a more bullish sentiment for growth, inflation, etc; only to once again fall as confidence ebbs. Consensus is two more hikes in 2016. CMBS: Bond spreads continue to contract on supply/demand dynamics as originators and their B-Piece buyers tighten up on underwriting standards. Consequently, servicers are receiving more extension and workout requests for maturing CMBS loans originated in the “heyday” of 2006, where the existing borrowers are unable to refinance. Lenders are originating full leverage (about 8.5% debt yield) as low as T + 2.50%, putting all-in rates around 4.50%–for good transactions. Stay Tuned. David R. Pascale, Jr.
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Constellation Place
10250 Constellation Blvd., Ste. 2700
Los Angeles, CA 90067
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© 1999 - 2024 George Smith Partners, Inc. DRE # 00822654 FINfacts is an ePublication of George Smith Partners, Inc. For Promotional Purposes Only. All Rights Reserved.
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