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FINfacts™ XXIV – No. 19 | May 11, 2016
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| Prime Rate |
 3.50% |
| 1 Month LIBOR |
0.44% |
| 6 Month LIBOR |
0.90% |
| 5 Yr Swap |
 1.16%
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| 10 Yr Swap |
1.60%
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| 5 Yr US Treasury |
1.19%
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| 10 Yr US Treasury |
1.73%
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| 30 Yr US Treasury |
2.58%
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Rate: 2.03%+ 1 Month LIBOR
Term: 10 years
Amortization: Interest Only
LTV: 55%
Non-recourse
Lender Fee: .25%
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Transaction Description: George Smith Partners successfully placed the permanent debt for a 98% leased, 566-unit, institutional quality apartment property located in Downtown Los Angeles. Orsini II is a mid-rise, over podium apartment complex comprised of five stories built over a three-level parking garage, walking distance of central downtown Los Angeles and adjacent to the LA Music Center. The non-recourse loan floats at 2.03% over 30 day LIBOR, netting a current all-in coupon of 2.47% today. The lender spread was locked 90 days prior to funding to avoid incurring defeasance costs, yet circumvent secondary market fluctuations with spreads. Sized to 55% of current value, there is no amortization during the 10-year term.
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Rate: LIBOR + 9.25%
Term: 12-months plus one 6-Mth option
Amortization: Interest only
Loan to Purchase Price: 79%
Prepayment: Six-month yield maintenance
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Transaction Description: GSP arranged the $10,700,000 non-recourse first mortgage for the acquisition of a 33,600 square foot land parcel located in Hollywood, California. The parcel is currently improved with 21,425 square feet of retail and office space; 18% of the space held vacant by the seller with the remaining tenants on short-term leases. An interest reserve was funded as in-place cash flow is inadequate to cover debt service. Cash flow will further decrease post-closing as the Sponsor vacates existing tenants in order to demolish existing improvements and build a 38,000 square foot grocery store. GSP was able to source a lender comfortable with the high loan per square foot due to tight market vacancy and in-place tenants paying significantly below market rate rents. Sized to 79% of purchase price, the two-week quick close acquisition loan priced at 9.25% over 30-Day LIBOR for the 12-month loan duration.
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Rate: 4.30% Fixed
Term: 10 Years
Amortization: 30 Years
LTV: 65%
Prepayment Penalty: 5-4-3-2-1 par
Lender Fee: Par
Non-Recourse
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Transaction Description: George Smith Partners placed the senior non-recourse debt for the refinance of a 33,000 square foot, Pacific Palisades mixed use office & retail property. Sized to 65% of value, the loan is fixed for 5 years at 4.30%, and will float for the remaining 5 years at 310 basis points over the six-month LIBOR, amortized over 30 years. A step-down prepayment penalty is structured from 5% and is open after the 5th year. There was no lender origination fee. Our Borrower acquired the asset less than a year prior to this refinance although Sponsor experience and the T-12 cash flow justified the return of equity.
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George Smith Partners is placing low fixed-rate financing for stabilized multi-family, office, industrial and retail assets in California. Loan requests range from $1,000,000 to $10,000,000; sized to 75% of value, with three, five and seven year fixed-term options. Current pricing reflects a recent drop in index rates, and quality multifamily properties are being quoted as low as 1.85% over the 10-Year Treasury, currently 3.60% all-in fixed for 10 years. There is never any prepayment penalty or exit fee. Stabilized collateral must cash flow to support a 1.15x DSCR for residential, and 1.25x DSCR for commercial properties on a 30 year amortization schedule. Lender requirements include full-recourse to a minimum of 51% of the ownership and control of the borrowing entity.
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Today’s sale of $23 billion of 10 year notes attracted record demand from “Indirect Bidders” which includes foreign central banks. This development was interesting on a day when oil prices jumped 3%; with most types of crude settling above $45 a barrel. The 10 year T hit a low of 1.71% today. The flight to quality was due to: (1) Concerns about consumer spending, a major component of US growth since the crash (retail stocks took a beating as Disney and Macy’s reported disappointing earnings); (2) Higher oil prices that will lead to higher gas prices – further eroding consumer buying power; (3) International: The possibility of a “Brexit” (a British exit from the European Union), with the election just 6 weeks away. This will be uncharted territory and potentially disruptive as the US Fed and IMF see this as the biggest threat to the global economy. Regarding the Fed, the markets seem to be pricing in only one rate increase this year as wage inflation continues to be stagnant – CMBS: Bond buyers are increasingly looking at “branding” pools by originator. An “all-bank” pool priced at the best spread since October 2015 with AAA’s at T+117, while a “non-bank pool” priced at T+130. New full leverage 10 year loans are being originated at spreads as low as T+270, putting the all-in coupons in the 4.50% range. 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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