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FINfacts™ XXIV- No. 78 | July 26, 2017
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| Prime Rate |
 4.25 |
| 1 Month LIBOR |
1.23 |
| 6 Month LIBOR |
 1.45
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| 5 Yr Swap |
1.90 |
| 10 Yr Swap |
 2.25 |
| 5 Yr US Treasury |
1.83 |
| 10 Yr US Treasury |
2.29 |
| 30 Yr US Treasury |
2.91 |
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Loans: Four Stand-Alone Uncrossed Loans
Rate: 4.52% Fixed for Five Years
Term: 9.5 Years
Amortization: 30 Years
LTV: 50%
Lender Fee: ½ point
Prepayment: 5,4,3,2,1, open
TI/LC Reserves: None
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George Smith Partners placed the rate and term refinance of four stand-alone Rite Aid Drug Stores. The loans are structured as four separate un-crossed loans to maintain reposition flexibility. At the time of loan commitment, the Walgreens/Rite Aid merger was still under consideration by the FTC and it was unknown if Walgreens would close any of the subject units. Our Sponsor wanted to maintain options and not to allow one store closure to negatively affect the remaining portfolio. Store sales were not available. Each lease has approximately 9.5 years remaining on the initial term. The balance sheet loan is coterminous with the lease term and does not carry the traditional two-year lease hang-out. No reserve structure is required prior to the tenant notice date, six months before the lease and subsequent loan expiration. Fixed at 4.52% for five years, the rate will float over LIBOR for the remaining loan term and amortizes over 30 years. Prepayment steps down allowing for additional reposition flexibly if needed.
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Rate: 30-Day LIBOR + 5.15%
Term: 36 months plus two 12-month extensions
Amortization: 36 months interest only; 30-year amortization thereafter
Loan to Cost: 70%
Prepayment: 18-month minimum interest with a 0.5% exit fee thereafter
Guaranty: Non-recourse
Lender Fee: 1.00%
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GSP successfully arranged $12,000,000 in first mortgage debt for the acquisition and reposition of a 300-unit workforce multifamily asset in the Pacific Southwest. The national balance sheet lender provided a non-recourse loan up to 70% of total project cost that includes funding 100% of future planned expenses (approximately $3,500,000) to upgrade the property’s common area amenities and interiors and implement a green and energy saving initiative. Interest expense is not incurred on the capital improvement funds until drawn. Borrower cash flow is maximized as the loan is interest only during the initial three-year term. Additionally, lender structured an interest reserve to cover a debt service shortfall during the peak reposition period.
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Rate: 7% fixed
Term: 9 months
Amortization: Interest Only
Loan to Cost: 65%
Guarantee: Recourse
Lender Fee: 1.5%
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George Smith Partners arranged $3,500,000 in quick-close acquisition bridge financing for a waterfront Newport Beach multifamily property. The sponsor approached GSP with an extremely tight closing time frame and a property with one down unit. The sponsor valued certainty of execution above all else, so he could close on the property in short order. GSP identified a non-bank lender with a long history of providing quick close bridge execution, familiar with the location and comfortable with the property’s weak in place cash flow. Sized to 65% of purchase with no hold back requirement for interest reserve or capital expenditures, the loan carries a 9-month term, interest only payments at a 7.00% fixed rate and no prepayment penalty. The loan also includes two 3 month extensions and a 1.5% lender fee.
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GSP is originating loans from $1,000,000 to $30,000,000 for a private lender funding loans on all asset classes in gateway cities throughout the U.S. The lender will finance transitional assets, distressed assets, and loans that are stabilized and need quick funding at leverages up to 95% of purchase price or 75% of total capitalization. Rates start at 8% and with origination from 1% to 3% for terms up to 2 years. No prepayment penalty or minimum interest is required. Loans can close as quickly as one week from signed application.
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Today’s Fed meeting closed with no rate increase (as expected). The real action was in the inflation outlook in the accompanying statement. Earlier this year, the weak inflation environment was described as “transitory” with anomalies such as cell phone billing plans cited as factors. Today’s statement indicates a “puzzled” Fed wondering why a strengthening job market is not spurring inflation. It seems that the Fed is wondering why the “new normal” is not conforming to traditional economic metrics. The Fed’s preferred inflation index is stuck at 1.4% so markets are interpreting this stance as potentially staving off any increases for the rest of the year. The assumed December rate increase is now in doubt. The Fed also continued telegraphing their other major policy issue, the “normalization” of the balance sheet, i.e. trimming their holdings of mortgage bonds and treasuries. The statement said that normalization will start “soon” (September is assumed as the Fed probably doesn’t want to start increasing bond supply in the summer months). The wild card is the debt ceiling. The Treasury is estimated to run out of extraordinary measures to keep paying government obligations. Congress has a end of September deadline to increase or risk roiling capital markets worldwide. The Fed would most likely not start the process in this case. Already, the 3 month Treasury yield has spiked to its highest yield since 2009 on default worries. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners.
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Constellation Place
10250 Constellation Blvd., Ste. 2700
Los Angeles, CA 90067
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