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FINfacts™ XXIV – No. 35 | August 31, 2016
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| Prime Rate |
 3.50 |
| 1 Month LIBOR |
0.52 |
| 6 Month LIBOR |
 1.24 |
| 5 Yr Swap |
1.19 |
| 10 Yr Swap |
1.41 |
| 5 Yr US Treasury |
1.19 |
| 10 Yr US Treasury |
 1.58
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| 30 Yr US Treasury |
2.23
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Rate: 10 Years Fixed @ 3.78%; L+2.50% Thereafter
Term: 15 years
Amortization: 3 Years IO; 27 Years Thereafter
Prepayment: 5,4,3,2,1
LTV: 75%
DCR: 1.20
Lender Fee: Par
Recourse
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George Smith Partners secured $6,170,000 in proceeds for the cash-out refinance of a 48-unit multi-family property in Hollywood. Our Sponsor purchased the brick building in 2012 and has since renovated several units and released them at market rent. A wireless provider also leased space on the rooftop and a unit for their equipment. A 30 day right to cancel these leases was mitigated with a market-rate underwriting of the wireless provider’s above-market rents. Since our Sponsor had dramatically improved the financial performance of the property over the past four years, the loan proceeds were able to provide a return of equity as well as a significant return on equity. Fixed for 10 Years at 3.78%, the loan was sized to 75% of current value with little consideration given to the initial capitalization. The loan provides for 3 years of interest only before amortizing over 27 years for the remaining 12 year term; and steps down from 5% with no prepayment penalty after the fifth year.
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Rate: LIBOR + 2.75%
Term: 12 months
Amortization: Interest Only
LTC: 63%
Prepayment: 0.50% exit fee
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George Smith Partners successfully arranged acquisition financing for a 50% leased shopping center in a 95% occupied retail market in Vista, California. The secondary market location was mitigated with our Sponsor’s resume and turn-around experience. His personal repayment guarantee allowed for aggressive pricing in the low 3% range. Sized to 63% of purchase and priced at LIBOR plus 275, the one-year term may roll into a 5, 7 or 10 year fixed-rate loan with an earn-out once stabilized.
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Managing Director/Principal, Gary M. Tenzer will be conducting a one-on-one interview with Los Angeles-based developer and founder of G.H. Palmer Associates, Geoff Palmer, at the upcoming Connect Apartments Conference on September 15. Since establishing G.H. Palmer Associates in 1978, Mr. Palmer has developed an excess of 10,400 apartment units, a majority of those in the heart of Downtown Los Angeles. With a real estate holdings portfolio valued over $3.0 billion, Mr. Tenzer arranged over $1.5 billion in financing for G. H. Palmer Associates. Conference registration is available online.
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George Smith Partners identified a CMBS originator that holds their B-piece on-book, mitigating the pending Dodd/Frank regulatory risk retention issue. Rather than layering on mezzanine debt, they increase the B-piece that is ultimately held, allowing for a singular debt stack to 85% of value without the A/B tranche and separate documentation. This capital provider also serves as the master servicer of the loan. Transactions from $10,000,000 are funded for 3 to 10 year terms with an option of offering a step-down prepayment schedule.
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The 10 year Treasury closed out August today at 1.57%. Due to the extremely low treasury in late July, the 11 basis point increase in August turns out to be the largest monthly gain since last June. After Fed Chair Yellen (and other Fed officials) indicated that a rate increase is “appropriate”, the possibility of a September rate bump hangs over the market. As the Fed has pretty much blown off international “headwinds” (Brexit, etc) in their focus, US economic reports loom large. Friday’s August jobs report will be one of the final major factors in the run up to the September 20th Fed meeting. Today’s comments by Boston Fed President Rosengren are relevant to our business: Mr. Rosengren indicated that continued low interest rates create future risks for commercial real estate and that the Fed should raise rates soon in order to avoid future volatility in this sector. 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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