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FINfacts™ XXIV – No. 58 | March 8, 2017
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| Prime Rate |
 3.75 |
| 1 Month LIBOR |
 0.85 |
| 6 Month LIBOR |
1.42 |
| 5 Yr Swap |
2.17 |
| 10 Yr Swap |
2.51 |
| 5 Yr US Treasury |
2.09 |
| 10 Yr US Treasury |
2.56 |
| 30 Yr US Treasury |
3.15 |
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Rate: 11%
LTC: 70%
Term: 12 Months + Two 3 Month Extension
Amortization: Interest Only
Recourse
Prepayment Penalty: None
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Transaction Description:
George Smith Partners secured a $2,250,000 bridge loan for the 70% completed spec luxury waterfront single family residence in Naples, Florida. The sponsors self-funded the development and sought to use the proceeds to recapitalize for other projects.
Challenge:
The Sponsor requested maximum cash-out proceeds that dissuaded many capital providers from considering the request given the luxury home’s vulnerability in a market downturn and overall development risk. Most lenders were not comfortable going over 60% loan to cost.
Solution:
GSP identified a private capital source who was comfortable with the incomplete project and understood the upside potential at completion. Our Sponsor’s considerable development track record and financial strength further encouraged the capital provider not to shy away from the high dollars per square foot. Sized to 75% of total cost and 53% of as-complete value, the 12-month loan is interest only with no prepayment penalty or yield maintenance.
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Rate: 4.375% Fixed for first 6 years; 4.875% Fixed for final 4 years
Term: 10 Years
Amortization: 25 Year Amortization
LTV: 61%
Recourse
Lender Fee: None
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Transaction Description:
George Smith Partners secured $1,420,000 in acquisition financing for a single tenant building in Atwater, California. The tenant is a national bank with a strong credit rating and has seven years remaining on the lease with extension options available. The Sponsor wanted to put long term fixed-rate financing on the property. GSP was able to identify a capital source that would provide a 10-year term, even though the tenant rolls within that period. The interest rate is fixed at 4.375% for the first 6 years of the loan. The rate then resets and is fixed again for the last 4 years, with a maximum increase of 50 basis points above the original rate (4.875%). This ensures that the Sponsor has a fixed rate throughout the entirety of the 10-year term, and eliminates interest rate risk. Loan proceeds were constrained by a 1.25x DSCR on a 25 year amortization.
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An active CMBS lender is lending up to 80% LTV and as low as 5% going-in debt yield on fixed rate non-recourse loans. The lender will originate the CMBS loan and hold the B-piece. Transactions range from $5,000,000 to $50,000,000 and term can be up to 10 years.
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Today’s ultra strong payroll report not only showed great “topline” numbers (nearly 300,000 new private sector jobs vs. the expectation of just under 200,000), but it also demonstrated the jobs came from increases in construction and manufacturing as opposed to the service sector. Employers are confident that Washington will deliver on infrastructure and deregulation. Recent remarks by Fed committee members have prepared markets for a March increase plus two more this year. That would put LIBOR at about 1.50% by year end. The 10 year Treasury yield climbed above 2.50%. Note that 2.60% is seen as a “key technical” level,. If the yield climbs above that, it could easily climb to 2.75% according to some metrics. CMBS spreads are still tight, with full leverage pricing in the low 200’s over Swaps (around 4.60%-4.75%) and low leverage (50-60% LTV), pricing around 4.25% with lots of interest only as originators chase quality loans that push their overall leverage down. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners.
© 2017 George Smith Partners, Inc. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited.
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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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