FINfacts™ XXIV – No. 44 | November 2, 2016

MARKET RATES
Prime Rate 3.50
1 Month LIBOR 0.53
6 Month LIBOR 1.26
5 Yr Swap 1.26
10 Yr Swap 1.63
5 Yr US Treasury 1.26
10 Yr US Treasury 1.79
30 Yr US Treasury 2.57

RECENT TRANSACTIONS
$16,800,000 Refinance Movie Theater Anchored Retail Center in a Tertiary Market to 65% LTV

Rate: WSJ Prime + 0.50%
Term: 3 years
Amortization: 25 years
LTV: 65%
DCR: 1.25
Prepayment Penalty: None
Lender Fee: 0.25%
Recourse

George Smith Partners arranged $16,800,000 for the rate & term refinance of a 91,000 square foot retail center anchored by a national movie theater. Located in the Inland Empire submarket of Los Angeles, this tertiary market location added a level of complexity for this special use retail asset. Our Sponsor sought to reduce monthly debt service yet maintain prepayment flexibility. The movie theatre operator is a privately held company and provided limited financial information for underwriting, but GSP sourced a regional lender experienced with this location and comfortable with Sponsor’s financial strength, track record and guarantee. Floating at 0.50% over WSJ Prime, the three year debt is sized to 65% of value with a 25-year amortization schedule and does not carry a prepayment penalty.


$2,100,000 Two Loan Multifamily Cash out Refinance

Rate: 3.5%/Studio City, CA; 4.0%/Austin, TX fixed for 5 years.
Term: 30 Years
Amortization: 30 Years
LTV: 70% for Studio City, CA; 75% for Austin, TX
DCR: 1.20
Prepayment Penalty: None
Recourse

George Smith Partners placed $2,100,000 in permanent financing on a two-property multifamily portfolio for a Los Angeles-based operator. Located in Studio City, California and Austin, Texas, the properties were financed by a single capital provider that provided un-crossed loans. Sized to 70% of appraised value for Studio City and 75% for Austin with a 1.20 DCR for both properties, the loans self-liquidate over 30 years. Fixed for five years at 3.5% for Studio City and 4.0% for Austin, rates will reset and float at 300 over 1-Year Treasuries for the remaining 25 year term. GSP sourced a Lender confident with both markets and willing to provide permanent loan execution with no prepayment penalty. The loan also provided for a net $1,000,000 return of equity to the Sponsor.


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HOT MONEY
Commercial Real Estate Non-Recourse Line of Credit to 75% of Capitalization

George Smith Partners identified a real estate revolver lending program through a Western States Capital Provider funding from $5,000,000 to $20,000,000. Pricing ranges from LIBOR+500 to 700 for a 12 month term to 75% of capitalization; to 80% by exception. This non-recourse credit facility is collateralized with a 1st Trust Deed during the life of the interest only term. In addition to certainty of financing and pricing, Lender provides expedited funding within 7 to 14 days of application.

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Pascale's Portrait
PASCALE'S PERSPECTIVE
Fed Indicates December Rate Hike Almost Certain; Market Volatility Rises on Election Uncertainty

Note to our readers: This column is not an endorsement of any candidate but is meant to discuss the possible capital market reactions to the post-election outcome.

As Expected, today’s Fed meeting did not produce a rate hike (although 2 members voted to raise). This was expected as the meeting comes days before a national election and there was no press conference scheduled. However, the Fed used “Fed speak” to say “we’re hiking rates next month – count on it”. The 3rd quarter GDP growth of 2.9% annualized and the seemingly stabilized 5% unemployment rate has given the Fed confidence that their policies have had their intended effect. The final piece of the puzzle is inflation, which is finally picking up. The Fed’s favorite gauge, Personal Consumption Expenditures, showed an annualized core rate of 1.7% last month. Another closely watched index, expected price increases, hit its highest level in more than a year. The December meeting is the Fed’s last chance to raise rates in 2016 (remember they predicted about 4 rate increases for 2016 at the end of 2015!). Futures markets are pricing in a 75% chance of a December increase. Election: Markets like certainty, continuity and a divided government (ie President and Congress from two different parties). Until last week’s bombshell FBI announcement, it looked like a likely Democratic President and Republican Congress with the Senate a toss-up. A potential Trump victory has markets nervous as it may be a Brexit like moment. It may cause Fed Chair Yellen to resign as that result may be seen as a negative referendum on Fed policy. Markets also could react negatively to a close, highly contested result like 2000 that drags into December. Treasuries (along with Munis and other ultra safe investments) may rally with yields dropping on a flight to quality. Credit spreads could widen as stocks and riskier instruments drop in price. This may cause the Fed to postpone the expected December rate increase. Look for markets to remain on edge until this uncertainty has been resolved somehow. Stay tuned.   David R. Pascale, Jr.

More Perspectives ›

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