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FINfacts™ XXIV- No. 73 | June 21, 2017
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| Prime Rate |
 4.25 |
| 1 Month LIBOR |
1.22 |
| 6 Month LIBOR |
1.44 |
| 5 Yr Swap |
1.83 |
| 10 Yr Swap |
2.14 |
| 5 Yr US Treasury |
1.77 |
| 10 Yr US Treasury |
2.16 |
| 30 Yr US Treasury |
 2.74
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Term: 3 Years with one, 5-year extension
Rate: Floating at 2.75% over 1-month LIBOR
Amortization: 25 years
Prepayment Penalty: 1% for the first 24 months, open thereafter
LTC: 70%
Origination Fee: 1.0%
Guaranty: Recourse
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George Smith Partners arranged the acquisition financing for a single tenant office located in the downtown area of a top Southern California market. The tenant is a private technology company that has 2 years remaining on their lease term. Due to the short lease term, GSP structured in reserves for tenant improvements, leasing commissions, and interest payments in the event that the tenant decides to vacate. If the tenant signs a new lease, the reserves that were held back will be released to the Sponsor. The lender was able to get comfortable with funding the reserves since the tenant is currently paying below-market rents and the property should see an increase in value with higher implemented rents at lease expiration. The financing has a 3-year term and carries a 5-year extension option that can be executed once the tenancy has been finalized and certain financial metrics have been realized. The recourse loan has an initial funding of $8,990,000 and is sized to 70% of total cost, floating at a rate of 2.75% over the one month LIBOR. The additional future funding for re-tenanting the building is not charged interest until drawn.
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Term: 24 Months + Two 12 mo. Extensions
Rate: Confidential
Amortization: Interest Only
LTC: 74%
Guaranty: Non-Recourse
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George Smith Partners arranged $5,100,000 of non-recourse, bridge financing to complete the conversion of a 26,000 square foot, 100% vacant, 1920’s vintage, industrial building into creative office space in a major Southwestern city. The property is well-located near a central business district and is 100% preleased to a single, non-credit-rated tenant. Although not investment-grade, GSP was able to source a Capital Provider comfortable with the tenant’s financial history and business operations. The sponsor acquired the property with cash and proceeds will be used to complete the conversion, taking advantage of the growing creative office market.
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GSP is working with an opportunity fund to arrange senior and mezzanine debt for pre-development, construction, and heavy bridge deals for large transactions throughout the top 20 MSAs in the U.S. The unique feature of this lender is that they fund the whole loan and do not syndicate the construction loan which has become increasingly common for large construction deals. Mezzanine Loans from $20,000,000 and up will be considered as well as whole construction loans $75,000,000 and up. A representative loan structure would be class A multifamily construction at 75% Loan to Cost at LIBOR plus 5.50%.
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Further reading into the Fed’s rate increase, accompanying statement, press conference, and subsequent commentary indicates they are bent on “normalization” regardless of weak data. The price of oil dropped to $42.50 per barrel, a 10 month low and officially entered “bear” territory for the year. The 30 year Treasury yield hit a 7 month low at 2.72%. Note that the 30 year T is the one most sensitive to inflation conditions. The Fed’s description of recent low inflation reports as “transitory” or “seasonal” shows they are looking “past the data” and their own stated inflation thresholds in order to effect normalization (higher rates, shrinking holdings). Perhaps they are trying to get ahead of events to prevent a panicked series of rapid rate increases in the future. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners.
Correction: In my column last week, the Fed Balance sheet was quantified at $4.2 billion, the correct number is $4.2 trillion.
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Constellation Place
10250 Constellation Blvd., Ste. 2700
Los Angeles, CA 90067
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