FINfacts™ XXIV- No. 72 | June 14, 2017

MARKET RATES
Prime Rate 4.00
1 Month LIBOR 1.16
6 Month LIBOR 1.42
5 Yr Swap 1.80
10 Yr Swap 2.10
5 Yr US Treasury 1.75
10 Yr US Treasury 2.13
30 Yr US Treasury 2.79

RECENT TRANSACTIONS
Southern California – $16,250,000 Ground-Up Construction Loan Fixed for Seven Years at 4.0%

Rate: 4.0% fixed
Term: Ten Years Fixed for Seven Years
Amortization: IO During Construction; 27.5 Years thereafter
Loan to Cost: 75%
Prepayment: 2,2,1,1
Loan Fee: 1.0%
Guaranty: Recourse

Southern California Construction Loans – George Smith Partners facilitated the seven-year fixed-rate construction loan for the ground-up development of 60 Los Angeles “For Rent” housing units.  As part of this capitalization, GSP placed the land acquisition debt in 2015.  Sized to 75% of actual development costs, this institutional capital provider will fund all draw requests at the 4.0% rate that was locked at application.  Interest is paid as drawn; there is no negative arbitrage.  The ten-year term negates the need to process a mini-perm upon Certificate of Occupancy and removes future interest rate risk.  The recourse loan is fixed for seven years at 4.0% and floats at 275 over LIBOR for the remainder of the ten-year term.  Prepayment steps down; 2,2,1,1 open.

Advisors

Matthew Kirisits
Director

$5,275,000 Non-Recourse, Non-CMBS Permanent Loan Fixed for Seven Years

Rate: 4.65%
Term: 10-year term fixed for 7 years
Loan to Value: 50%
Prepayment Penalty: 5%, 4%, 3%, 2%, 1%
Loan Fee: Par
Guaranty: Non-Recourse

George Smith Partners successfully arranged a $5,275,000 non-recourse, 7-year fixed rate, non-CMBS loan for a non-anchored retail center in Imperial Beach, CA.  While the property is 100% occupied in a coastal California location, the Sponsor needed a non-recourse loan with a flexible prepayment penalty on a long-term fixed rate basis which is extremely hard to locate outside of CMBS. Life insurance companies were not able to get comfortable with the collateral since the largest tenant was a is a non-credit gym and there is significant near-term lease roll. Other bank lenders would not provide full credit for the significant cell tower income which limited their loan proceeds. GSP was able to identify a typically recourse lender that was willing to provide a non-recourse loan on this property and was able to underwrite the full cell tower income.

Advisors

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

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HOT MONEY
High Leverage Non-Recourse Construction and Bridge Financing

GSP is originating non-recourse, construction, bridge and quick-close financing opportunities from $5,000,000 to $25,000,000 to 85% LTC and 75% LTV.  Acquisition and pre-development, transitional use, and adaptive reuse will also be considered.  Pricing starts at LIBOR plus 800 with current pay and accrual structures.  Loans can close in as little as two weeks.  All product types including entitled land in coastal or infill areas will be considered.  The lender is active in major markets west of Denver, CO.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Fed Increase And Yield Curve Flattens

The Fed raised short term rates for the second time in 3 months and set forth the procedures for reducing its $4.2 billion balance sheet.   The 10 year Treasury rallied today with the yield dropping to 2.13%.    This was due to lowered expectations for growth and inflation: (1) The Fed lowered their inflation forecast for 2017 to 1.7% and now expects to reach the elusive 2.0% target in the “medium term”; (2) This week’s CPI and Retail Sales reports both disappointed; (3) Oil prices are back well below $50 per barrel on reports that OPEC may be relatively powerless to raise prices due to massive shale production here; (4) the long awaited “Infrastructure week” of announcements was short on specifics or a major cohesive plan;   (4) The very act of raising short term rates will dampen growth and inflation.  Balance Sheet:  The Fed will finally trim its balance sheet, Fed Chair Yellen indicated that “normalization” could be “relatively soon” with a cap on reduction of about $6 billion per month, increasing by $6 billion increments every 3 months over a 12 months period until it reaches $30 billion per month.   This would suggest a pace of about $1 trillion of reduction every 3 years.   The Fed will most likely pull back on that target during volatile economic periods, so who knows how long or how deep the reduction will go.  Stay tuned.  By David R. Pascale, Jr. , Senior Vice President at George Smith Partners.

 

More Perspectives ›

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Office 310.557.8336
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