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FINfacts™ XXIV – No. 27 | July 6, 2016
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| Prime Rate |
 3.50 |
| 1 Month LIBOR |
 .47 |
| 6 Month LIBOR |
.93 |
| 5 Yr Swap |
 .95
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| 10 Yr Swap |
1.29
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| 5 Yr US Treasury |
.95
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| 10 Yr US Treasury |
1.37
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| 30 Yr US Treasury |
2.14
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Rate: L+2.55%
Term: 5 years + One, 2-Year Extension
Amortization: 2 Years Interest Only
LTC: 60%
Prepayment: None
Non-Recourse
Lender Fee: 0.75%
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George Smith Partners successfully structured and placed the non-recourse acquisition bridge loan for a medical office building adjacent to a Los Angeles hospital. Our Sponsor will complete a significant capital improvement plan and increase rents upon lease roll-over. The 95% physical occupancy at close supports this business plan as there is significant market demand yet very little supply. Sized to a 9.0% in-place debt yield, additional advances will be funded to maintain the 9.0% debt yield as NOI is increased. Future disbursements will fund capital to complete upgrades as well as pay for tenant improvements and leasing commissions. Interest is only paid as funds are disbursed for the first two years of the five year term. Priced at LIBOR plus 255, there is no prepayment penalty.
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Interest Rate: WSJ Prime+1.50%
Term: 12 months
Amortization: Interest Only
LTC: 80%
Prepayment: None
Recourse
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George Smith Partners successfully structured an 80% of cost construction loan for a 3,650 square foot single tenant restaurant in Menifee, California. Construction will be completed in less than 12 months from initial funding. George Smith Partners identified a capital provider who is knowledgeable about this tertiary location and market, and became comfortable with our investor’s financial strength, expertise, level of repayment guarantee, and business plan. George Smith Partners vetted the risk exposure upfront with the lender and helped structure objective criteria to satisfy the borrower, and new lender, resulting in a highly leveraged and reasonably priced construction loan.
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George Smith Partners identified a national floating-rate balance sheet lender funding bridge/reposition transactions from $35,000,000 to $80,000,000 on a non-recourse basis. With the ability to advance up to 65% of total capitalization, pricing starts at LIBOR + 200 for transactions maintaining a 7.0% debt year at the time of funding. All core asset classes in major metropolitan cities are underwritten with a primary focus on West Coast multifamily.
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Yesterday the 10 year hit an intra-day low of 1.35% and closed at 1.37%. The previous low was July 2012 during a flight to quality due to European concerns (Spanish banks, etc). It’s déjà vu all over again as Brexit fallout (some major British real estate funds suspended trading amid panic withdrawals) and Italian bank concerns (17% of loans ranked as “doubtful”) rattle the markets. With Japanese and German bonds showing negative yields (the Japanese 20 year crossed into negative territory for the first time this week), a 1.35% US Treasury is the “high yield alternative” The low yields reflect expectation of tepid global growth prospects in the coming years. England may go into a recession and the US has not yet achieved “escape velocity” since the financial crisis. The Fed referenced this in their recent use of the term “the new normal” Aging demographics, periodic foreign event shocks, low inflation are all contributing to a consensus that 3.0-3.5% growth may be unachievable for any sustained period of time. Credit Spreads: CMBS loan spreads have widened commensurate with the Treasury yield drop, but new loans are pricing in the 4.25-4.50% range. Life Companies are flooring rates, but are pricing under 4.00% for the right 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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