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FINfacts™ XXIV – No. 55 | February 15, 2017
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| Prime Rate |
 3.75 |
| 1 Month LIBOR |
0.77 |
| 6 Month LIBOR |
1.34 |
| 5 Yr Swap |
 2.08 |
| 10 Yr Swap |
2.43 |
| 5 Yr US Treasury |
2.00 |
| 10 Yr US Treasury |
2.50 |
| 30 Yr US Treasury |
3.07 |
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Rate: 5.11% Fixed
LTV: 68%
Term: 10 Years
Amortization: 30 Years
Interest Only: 3 Years
Non-Recourse
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George Smith Partners arranged $10,390,000 for the refinance of a stabilized office building in Bakersfield, California. The loan was put into application with a verbal commitment from the largest tenant to extend their lease for an additional four years. While in application for the loan, the tenant became non-responsive and it became clear that they were debating whether to extend. As a primary tenant, the extension was critical to the loan closing. GSP worked directly with the tenant and the leasing broker to understand the market and to structure the lease terms to work for the tenant, landlord, and the lender. The lease was executed in a matter of weeks which allowed the lender to fund and avoid an imminent balloon default on the existing loan.
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Rate: 7.90% Months 1-12 | 8.30% Months 13-18
LTC: 50%
Term: 18 months
Amortization: Interest Only
Non-Recourse
Prepayment Penalty: None
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George Smith Partners arranged a $2,700,000 cash-out refinance bridge loan on an unflagged boutique hotel in Sacramento, California. The Borrower approached GSP seeking a financing solution from a lender that could close quickly, provide capital to renovate, and bridge until stabilization. GSP identified a lender who was comfortable lending on an unflagged hotel in the middle of renovations and located in a secondary market. During due diligence, an unpaid occupancy tax from the prior owner was discovered. With the prior ownership unable to pay the tax, the county placed a lien against the property, even though it was under new ownership with no relation to the prior owners. This created a setback for closing, as title could not be cleared until the tax, interest, and fees were paid in full. The borrower weighed the cost of litigating to fight the liens, but chose to pay off the liens which allowed the lender to close on time. Sized to 50% of cost, the interest only loan has an 18 month term to allow for full stabilization of the property and has no prepayment penalty. The loan is priced at 7.90% for the first twelve months and 8.30% thereafter, for the remainder of the term.
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A nationwide bridge lender is lending on transitional and value-add properties on loan sizes $3,000,000 and up to 85% LTV with interest rates starting at 30 Day LIBOR +500. Loans can be up to 5 years interest only to allow a business plan to complete and have the property reach stabilization. Non-cash flowing assets are acceptable. The lender can underwrite a variety of asset classes including office, retail, multifamily, student housing, senior housing, self-storage, and hospitality.
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Janet Yellen’s first congressional testimony during the new administration was highly anticipated. She defended regulations and Fed independence, as expected. She also dropped a minor bombshell when she said “waiting too long to remove accommodation would be unwise” and that the committee will evaluate employment and inflation against expectations to see whether “a further adjustment of the Federal funds rate would be appropriate.” In addition, a recent CPI report showed US consumer prices increased in January by 0.6% (markets expected 0.3%) making it the highest since February 2013. The 12 months ending in January showed an annual increase of 2.5%, the highest since March 2012 and well above the Fed’s stated target of 2.0% (note that the Fed’s preferred indicator, PCE, has not yet hit 2.0%, but this is a strong indication that it will soon). This is definitely a sign that inflation is firming up, both including and excluding energy costs. The 10 year Treasury yield crossed above 2.50%, which could be a key technical level. Other wild cards: (1) Congress and the administration are set to roll back some or most of Dodd-Frank regulations in order to spur more bank lending, etc. This may reduce capital requirements for the money center banks. Much of the capital held by banks is in the form of Treasuries. This may trigger a major selloff. (2) China: The administration is singling out China for currency manipulation and trade practices. If sanctions and/or tariffs are invoked, China may retaliate by selling a good portion of the $1 trillion of US Treasuries it is holding. 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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