FINfacts™ XXIV – No. 24 | June 15, 2016

MARKET RATES
Prime Rate 3.50
1 Month LIBOR .44
6 Month LIBOR .93
5 Yr Swap 1.07
10 Yr Swap 1.46
5 Yr US Treasury 1.09
10 Yr US Treasury 1.59
30 Yr US Treasury 2.43

RECENT TRANSACTIONS
$20,600,000 Ground-Up Construction Loan for a Mixed-Use Boise Multifamily over Retail

Rate: LIBOR + 2.50%
Lender Fee: 0.50%
Term: 36 Months
LTC: 75.0%
Recourse: Warm-body; burning down at CofO

Transaction Description: George Smith Partners arranged the ground-up construction debt to for a 159 unit multifamily over 4,000 square feet of ground-floor retail space in the heart of Boise, Idaho. Our Sponsor has construction/heavy rehab experience in the Boise market, but the project represented a substantial increase of residential rental product. Sized to 75% of total cost, the repayment guarantee (aka recourse) burns–down at Certificate of Occupancy until fully eliminated at stabilization. Priced at LIBOR + 250, there is no interest rate floor for this three year loan. A five-year mini-perm option is also part of the debt package upon stabilization.


$6,500,000 Acquisition/Bridge Financing for 50-Unit Multifamily Property w/4.8% Debt Yield

Rate: P+0.75% with a floor of 4.50%
Term: 5 years
Amortization: 3 years IO, 30 years amortization thereafter
LTC: 66%
Prepayment Penalty: None
Guaranty: Recourse
Lender Fee: 0.50%

Transaction Description: George Smith Partners arranged the acquisition and renovation debt for a Koreatown 50-unit multifamily asset. Fully occupied at funding, our Sponsors confirmed that existing rents are sustainably underperforming the market and will initiate a plan to renovate units and re-stabilize the subject. The cash flow in place (4.8% debt yield) constrained a majority of the capital markets to 50% of purchase. Mr. Yazdi identified a regional capital provider who underwrote proforma rents at market and structured three years of interest only before rolling into a 30 year amortization schedule. A small reserve of $230,000 is held until a 1.25 DCR is obtained. Proceeds for the renovation are exclusively Sponsor controlled and discretionary. This acquisition funded 40 days from application. Floating at Prime plus 0.75%, the loan carries a 4.50% floor. There is no prepayment penalty or exit fee.


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HOT MONEY
Non-Recourse National Bridge w/Bank Pricing

National portfolio lender funding value-add reposition transactions from $10,000,000 to 65% of total capitalization @ 30 day LIBOR + 265 on a non-recourse basis. Limited service flagged hospitality will be priced from L + 350 to 55% of cost. The traditional three year term will offer options to extend for a fee. Secondary markets are considered for well healed borrowers.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Treasury Yields Drop, Fed Signals No Raise Until Fall

Today’s Fed Announcement and Fed Chair Press Conference signaled the markets that the anticipated summer rate hike is off the table: No hike today and none is expected for July. The futures markets now indicate a 7% probability of a July hike and 29% chance in September – down from 21% and 35% respectively. The Fed also dialed back the eventual “stabilized” Fed Funds interest rate, down from 3.25% to 3.00%. Even achieving that lower rate may take longer than previously thought; well into 2018 or beyond. Global concerns such as Brexit worries (which is looking more likely and presents a threat to market stability) have caused government bond yields to plunge. The benchmark German Bund is in negative territory; the 10 year UST is at 1.59%. (Note that the all-time low was 1.37% in 2012). Markets are awaiting tomorrow’s announcement from Bank of Japan who may further expand their record stimulus program. This combined with the recent weak jobs report makes The Fed’s announced estimate of 2 separate rate increases extremely unlikely this year. Look for only a single rate increase in 2016. stay tuned

David R. Pascale, Jr.

More Perspectives ›

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