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FINfacts™ XXIV – No. 37 | September 14, 2016
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| Prime Rate |
 3.50 |
| 1 Month LIBOR |
.52 |
| 6 Month LIBOR |
1.25 |
| 5 Yr Swap |
 1.21 |
| 10 Yr Swap |
1.53 |
| 5 Yr US Treasury |
1.21 |
| 10 Yr US Treasury |
1.70 |
| 30 Yr US Treasury |
2.47 |
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Rate: LIBOR+4.75% w/5.25% Floor
Term: 2 Years + Two 1-Year Extensions
Amortization: Interest Only for Two Years; 20 Years on Extension Options
LTV: 65%
Prepayment: Open Prepayment
Recourse: Non-Recourse
Lender Fee: 1.00%
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Transaction Description: George Smith Partners successfully placed the cash-out refinance of a multi-tenant industrial business park in Portland, Oregon. This non-recourse financing provided for a return of equity with no hold back to our Sponsor while allowing for an opportunity to earn a return on equity once the Borrower finalizes their business plan. At funding the property was 90% occupied in a 3% vacant market. Sized to 65% of current value and floating at LIBOR+4.75% (floored at 5.25%) interest only two years, there is no prepayment penalty or exit fee.
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Rate: 4.35% Fixed
Term: 10 years
Amortization: 25 years
Prepayment: SWAP Breakage
Recourse
Lender Fee: Par
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Transaction Description: George Smith Partners placed the $5,000,000 refinance of a 1079 unit self-storage facility located in the Pacific Southwest. George Smith Partners was engaged as the in-place debt opened to prepayment and our Sponsors sought to reduce their current 6.75% coupon while recapitalizing their partnership. Sized to 48% of appraised value, this financing returned over $500,000 of equity to the Sponsor. Funded as a Prime plus execution, the loan was synthetically fixed with a SWAP and locked at 4.35% for ten years, amortizing over 25 years. As a Prime based loan, there was no prepayment penalty although there is the potential for a SWAP breakage fee.
Challenges: The self-storage property is in a sub-market that has been slow to recover from the economic downturn, historically operating below break-even coverage. To achieve requested proceeds and cover the existing debt, capital providers needed to look past historic cash flow and focus on trailing 3 month collections.
Solutions: George Smith Partners promoted the significant operational turnaround since the instillation of a new management company. George Smith Partners then identified a portfolio lender that vetted and underwrote the new operator, allowing them to model the recent cash flow to secure the requested proceeds. A higher than expected appraised value and Sponsors’ financial strength further solidified the return of equity.
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George Smith Partners is placing requests for ground-up construction transactions and min-perms with a balance sheet lender funding from $2,000,000 to $30,000,000 for Western state projects. Oil regions are not discriminated against. With the ability to advance up to 80% of total capitalization, this capital provider underwrites to the take-out. Whole loans are priced from LIBOR+300 and non-recourse construction will be considered for transactions to 50% of actual cost.
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The 10 year Treasury spiked as high as 1.73% yesterday, that’s a 20 basis point jump since September 6th. Note that 1.69% is considered a key technical level. This follows last week’s volatility as investors were “near certain” of a September rate hike and a feeling that central banks are nearly “out of bullets” after the ECB’s Mario Draghi offered little stimulus in his highly anticipated remarks. Markets were calmed on Monday by Fed Governor Lael Brainard’s highly dovish comments, which were significant due to their timing; she was the final Fed official to speak going into the quiet period before the September meeting. So now markets are expecting no increase next week. This means that if there is an increase, markets will most likely react very negatively and will be reminiscent of the 2013 “Taper Tantrum”. This week’s reports over the next few days will now be watched closely: Core PPI, Industrial Production, CPI, etc. Meanwhile; yesterday’s blockbuster median income report showing a 5.2% increase (the largest single increase since record keeping began in 1967) indicated an economy possibly “turning the corner” after the great recession. Gains by the poor and middle class are sure to factor into future Fed decisions, but most likely not this month. 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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