FINfacts™ XXIV – No. 50 | January 4, 2017

MARKET RATES
Prime Rate 3.75
1 Month LIBOR 0.77
6 Month LIBOR 1.32
5 Yr Swap 1.94
10 Yr Swap 2.29
5 Yr US Treasury 1.93
10 Yr US Treasury 2.44
30 Yr US Treasury 3.03

RECENT TRANSACTIONS
$34,400,000 Non-Recourse Mixed-Use Retail and Office Refinance of a Leasehold Interest

Rate: LIBOR+5.45%
Term: 3 Years + One-Year extension
Amortization: Interest Only
LTC: 92%
Prepayment Penalty: 18 Month Minimum Interest
Recourse: Non-Recourse; Carve-Outs to Entities
Lender Fee: 1.00%

George Smith Partners successfully placed the $34,400,000 non-recourse bridge loan, sized to 92% of total cost, for a 238,000 square foot retail shopping center and 67,000 square foot Southern California office building. This 1960s vintage property is well-located and sits on a 17 acre parcel with a traffic count of over 60,000 vehicles per day. Proceeds will be used to satisfy the existing term loan and a majority of the $17,400,000 in planned renovations, tenant improvements, leasing commissions, and other capital expenditures. Retail occupancy includes four value oriented chains, several local retailers, a future grocer and a national fitness/gym chain. The office building will be renovated to feature street level retail pre-leased to regional and national restaurant chains including Chipotle, Five Guys Burgers, and Ono Hawaiian BBQ. Office occupancy of the upper three floors will include a mixture of full floor tenants and local businesses. Several of the office tenants are currently leased month to month, but is supported by a strong occupancy history. Subject to several ground-leases executed in the 1950’s, all leases were recently restated and extended. Floating at 545 over 30 day LIBOR, the non-recourse loan provides for carve-outs executed at the entity level only with no warm body guarantor. The three-year term has one 12 month extension with interest paid current monthly; there is no interest reserve or amortization.

Advisors

Steve Bram
Managing Director & Principal / GSP Co-Founder
David R. Pascale, Jr.
Senior Vice President

Permanent Financing of Luxury Hollywood Multifamily

Rate: 3.61%
Term: 20 Years; 5 Years Fixed, 15 years Floating
Amortization: 30 Years
LTV: 65.0%
Prepayment Penalty: Yield Maintenance
Recourse

George Smith Partners arranged $2,546,000 in permanent debt for a five-unit luxury multifamily project in Hollywood, California. The property received certificate of occupancy and was fully leased as the construction loan neared its term. Built adjacent to Paramount Studios, luxury rentals of this quality are not common in the area. Although the property recorded full occupancy, due to its limited operating history and lack of comparable properties, securing the fully requested proceeds was challenging. In order to retain proceeds for our Sponsor, GSP supported the high dollar per unit loan request with substantial market data. Sponsor secured 100% of total construction cost financing at an interest rate of 3.61% fixed for five years with 15 years floating thereafter.


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HOT MONEY
Non-Recourse Bridge Loans to 85% of Value

George Smith Partners is placing non-recourse senior bridge debt, mezzanine debt, and preferred equity to 85% of value through a national portfolio lender funding transactions from $5,000,000 for debt and from $2,000,000 for mezzanine or preferred equity. Capital Provider offers flexible loan structures with interest only terms between 2 year to 5 years and customized prepayment structures. Floating rate pricing starts from LIBOR + 400. Lender has a strong appetite for multifamily, senior housing, and office properties located in secondary markets for middle market borrowers on properties with some in place cash flow. Non-cash flowing assets and other product types will be reviewed on a case by case basis. Lender will budget ‘good news’ dollars for tenant improvements and leasing commissions. Interest will not be paid on future funding until disbursement.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Welcome to 2017, Are we moving from the “New Normal” to “Normal”?

Today’s “Hawkish” release of the December Fed Minutes is significant for what didn’t happen. The minutes indicated the Fed committee assuming the return of fiscal policy under a Trump administration (infrastructure, tax cuts, etc).  Also, some members pointed out that economic growth and inflation may be faster than currently anticipated and more or quicker rate increases by be warranted. In recent years, such a statement would most likely have caused a stock market sell off and other market disruptions, as the world economy was largely dependent on monetary policy i.e. central bank stimulus. Today, the markets barely “blinked” with major stock indices holding on to their gains. This is significant as markets are transitioning to focusing on fiscal policy from the President elect and Congress (and possibly from Europe soon), like the “old normal”. Treasuries, Predictions: After the major post-election selloff that saw the 10 year rise from 1.71% to 2.60% (December 15th), it has settled into a tight range at about 2.45% for the past week. Is this a “pause” in the steep climb? Where are rates going from here? Longtime FINfacts readers will recall George Smith and me reporting on the annual interest rate forecast in the Wall Street Journal. Last week’s New Year’s Eve survey of 16 economist from the major banks indicate a range of 1.35% to 3.10% with an average of 2.63%. Three economists have a 3.00% or above prediction, 13 of the 16 predict a year end above today’s rate. stay tuned.   David R. Pascale, Jr.

More Perspectives ›

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