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FINfacts™ XXIV- No. 80 | August 9, 2017
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| Prime Rate |
 4.25 |
| 1 Month LIBOR |
1.23 |
| 6 Month LIBOR |
1.45 |
| 5 Yr Swap |
1.89 |
| 10 Yr Swap |
 2.21
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| 5 Yr US Treasury |
1.81
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| 10 Yr US Treasury |
2.25 |
| 30 Yr US Treasury |
2.86
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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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Transaction Description
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: 7.99%
Term: 1 year with a 1 year extension option
Amortization: Interest Only
Guaranty: Non-Recourse
Prepayment Penalty: None
LTV: 50%
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Transaction Description
George Smith Partners secured a $4,000,000 non-recourse acquisition loan to purchase a partially developed SFR project in Bel Air. The spec house development project had halted, and the previous developer was forced to sell the project. Our sponsor became involved in a competitive bid process and needed a quick close loan to purchase the property. George Smith Partners was able to identify a private money lender who not only closed in 5 days, but also gave the sponsor the necessary proceeds to take down the property. The interest only loan is priced at 7.99% and represents 50% of the property’s current value. The loan has a 1-year term with a 1-year extension option and no prepayment penalty.
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GSP is originating non-recourse bridge and construction debt for transactions nationwide from $5,000,000 to $75,000,0000 for a balance sheet lender with a strong reputation for closing on terms as applied. Loans can close as quickly as 30 days from application. Pricing starts at LIBOR plus 6.50% and advance up to 75% of cost. The lender will finance foreign nationals with U.S. based assets. Ideal transactions are bridge deals that require structure and ingenuity where the lender can price like debt, but give the sponsor the advantages of equity by moving quickly and understanding multi-phase business plans.
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Today’s relatively weak demand auction of 10 year T’s followed a strong 3 year T auction yesterday. This could be an indication that the market believes that future Fed hikes will be slow and gradual, and that low short term rates may push inflation. Also, recent statements by Fed committee members indicate that the long awaited balance sheet reduction may start next month. Since those holdings are mostly long dated Treasuries and MBS, the unprecedented public to private “demand transfer” may lead to higher long term rates. As of now, the 10 year is 2.24%, so still trading in a tight range. 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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© 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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