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FINfacts™ XXIV – No. 5 | February 3, 2016
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| Prime Rate |
 3.50% |
| 11th Dist COFI |
0.66% |
| 1 Month LIBOR |
0.43% |
| 3 Month LIBOR |
0.62% |
| 6 Month LIBOR |
0.86% |
| 5 Yr Swap |
1.26% |
| 10 Yr Swap |
1.78% |
| 5 Yr US Treasury |
1.28% |
| 10 Yr US Treasury |
1.89% |
| 30 Yr US Treasury |
2.71% |
| 12-Mat |
0.35% |
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Rate: 30 Day LIBOR + 325 (<4.0%)
Term: 3 Years plus options
Prepayment: Locked for 2 Years then steps down
Recourse: Carve-Outs Only
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Transaction Description: George Smith Partners successfully placed the cash out refinance of a Southern California multifamily rental property with a national on-book capital provider. Over half the units are fully furnished inclusive of linens, bedding and flatware for extended stay corporate users. Residents can move in with just a toothbrush. Located near a hospital and adjacent to a white-collar employment center, the subject will appeal to residents who require a stay over 30 days but unable to sign a six or 12 month lease. Although stabilized for three months, having just completed a renovation, our Sponsor lacked trailing cash flow on the short term rentals. A tiered future funding schedule was negotiated to allow for future earn-outs consistency in recurring cash flow is proven. Priced at 325 basis points over 30 day LIBOR, the non-recourse loan is interest only for three years. There is no LIBOR or interest rate floor allowing for an all-in coupon under 4% today.
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Rate: LIBOR + 300
Lender Fee: Par
Term: 24 Months
LTC: 80.0%
Recourse: Personal Repayment Guarantee
Lender Fee: 0.5%
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Transaction Description: George Smith Partners successfully placed acquisition & recapitalization financing for a four-parcel land assemblage in the Koreatown area of Los Angeles. Our Sponsor will construct a 90-unit multifamily project on the fully entitled site. All four parcels are currently improved with duplexes or four-plexes. Two of the four subject parcels are owned free and clear, and the additional two were under contract for purchase. Market research identified a strong and improving employment and demographic trajectory of the area. Underwriting modeled the land basis in terms of loan per buildable unit. Recent land sale comparables with similar entitlements produced sufficient value for the lender to qualify the value to justify this level of leverage. Sized to 80% of total capitalization, no additional cash equity was required to complete the purchase. Priced at LIBOR plus 300, there is no interest rate floor netting an all-in coupon under 4.0%.
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Rate: 10.0%
Term: 12 Months
Amortization: Interest Only
LTC: 75% of Purchase, 100% of Total Capitalization w/Signed Lease
Recourse: Carve-Outs Only
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Transaction Description: George Smith Partners placed the acquisition debt for an underperforming Sacramento strip retail center. Our Sponsor acquired the asset with two LOIs in hand with national credit tenants. His business plan contemplates a lot split, partial demolition and ground-up construction for a build-to-suit. Financing was completed in six days and provided 75% of acquisition cost. Upon signing of the new leases, the lender will rebate the cash down payment and fund 100% of future advances to construct and complete the project on a non-recourse basis.
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Rate: 8.0%
Term: 2 Years
Amortization: Interest Only
Recourse: Carve-Outs Only
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Transaction Description: George Smith Partners secured the $2,000,000 cash-out refinance bridge loan for a two-property Southern California portfolio. The non-recourse interest only loan was closed in 20 days and provided for cash out allowing the borrower to implement and execute a revised business plan allowing for future owner user financing. Additionally, the loan consolidated title and the proceeds were used to pay off multiple notes, ultimately reducing the properties effective interest rate.
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The Fed stands alone in the world with their plan to ‘gradually’ raise rates in 2016. The rest of the world’s central banks are easing monetary policy in order to spur growth. Last week, the Bank of Japan lowered its key rate below zero; they are charging a 0.10% penalty on excess reserves to banks that deposit funds there. Sweden and Denmark’s Central Banks have already lowered rates below zero. England’s Central Bank is now indicating that they will not raise rates until well into 2017. The ECB is expected to cut their rate from minus 0.3% to minus 0.4% and increase bond purchases. Countries around the world are looking to spur inflation, ward off deflation and lower the value of their currencies in order to spur exports. All of these developments (and the Fed’s raising of rates) are strengthening the US dollar, thereby lowering our inflation and hurting exports. Today’s 10 year T is at 1.87%, down 25 bps in the last 20 days. Interestingly, the 2 year T is at 0.73%, down from 1.00% in December. The 2 year T is most sensitive to the rate controlled by the Fed. The market is increasingly skeptical of the Fed’s plan to raise rates four times in 2016. A March increase is ‘off the table’ based on futures and recent statements by prominent Fed officials.
Credit Spreads: CMBS, Life Company, Bank and Debt Fund spreads are widening due to a ‘perfect storm’ of regulatory issues, alternative investment spreads widening, risk adjusted pricing, etc. More on spreads and pricing in next week’s FinFacts…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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