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FINfacts™ XXIV- No. 82 | August 23, 2017
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| Prime Rate |
 4.25 |
| 1 Month LIBOR |
 1.24 |
| 6 Month LIBOR |
1.45 |
| 5 Yr Swap |
 1.80
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| 10 Yr Swap |
2.11
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| 5 Yr US Treasury |
1.74
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| 10 Yr US Treasury |
2.17
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| 30 Yr US Treasury |
2.79
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Rate: 4.32% Fixed for Five Years
Term: Five Years plus Two 1 Year Options
Amortization: 30 Years
LTV: 55%
DCR: 1.60
Guarantee: Non-Recourse
Lender Fee: Par
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Transaction Description:
George Smith Partners placed the non-recourse $16,400,000 rate and term refinance of a Southern California mixed use office and specialty retail center. Proceeds were used to retire the existing maturing loan and cover refinance costs. Actual in-place cash flow exceeded a 1.60 debt coverage ratio. Loan documents were drafted to allow for the transfer of ownership interests for estate planning purposes. Fixed for five years via a synthetic SWAP, the on-book loan allows for two – 1 year options; amortized over 30 years.
Challenges:
Anchored by a fitness center, store sales and membership information was not available. Approximately 30% of the net rentable office space was vacant and several tenants were also month-to-month.
Solutions:
Sized to 55% of value, our capital provider gained comfort of not having anchor store sales with physical inspections showing a strong client presence at this location. Our Sponsor demonstrated daily hands-on management addressing occupancy and maintaining good relations with existing office tenants. Three-quarters of the gross revenue is generated by the retail operations.
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Term: 24 Months + Three 12 Month Extensions
Rate: 1-Month LIBOR + 4.75%
Amortization: interest only for the entire loan, including extensions
LTC: 81% LTC
Guarantee: Non-Recourse
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Transaction Description
George Smith Partners arranged $5,810,000 of non-recourse, bridge financing to acquire and renovate a 117-unit multifamily apartment in Dallas, TX. The property is well-located in the North Dallas sub-market with visibility to over 192,000 cars per day. Although the property is 97% occupied, current rents are 10% or more below market. The business plan is to renovate 77% of the units, develop one additional unit, and improve the exterior. These renovations will help bring rents closer to market. GSP was able to source a Capital Provider to structure $5,470,000 of loan proceeds to be funded at closing and include a $340,000 capital expenditure reserve to be future funded. This Capital Provider was able to get comfortable with both the Sponsor’s operational history and the fact that a portion of the equityis crowd funded.
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GSP is working with a national portfolio lender who will finance borrowers with credit challenges such as prior foreclosures, bankruptcy, low FICO scores, low liquidity, poor global cash flow, etc. In addition, the lender will also review properties with weak operating history, deferred maintenance, and other challenging property conditions. Fixed rate loans start at 4.30% with terms ranging from 3 years to 10 years. The lender can finance loans up to $25,000,000 for commercial and up to $40,000,000 for multifamily.
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Today the 10 year T Yield dropped to 2.18%, the lowest in months. Today’s “risk off” trade was spurred by last night’s Presidential speech in Phoenix that included a threat of a government shutdown if border wall funds are not approved by Congress. Shutdown talk before September’s “must pass” debt ceiling increase definitely spooked markets. September’s Congressional session is crucial: debt ceiling, tax reform and/or tax cuts, budget or continuing resolution are all on the docket. Recent feuding among politicians is not providing any certainty. The old adage is that Wall Street loves gridlock, but that means “old school” gridlock where the government still was open and free of default. This week’s annual Jackson Hole symposium features speeches by the world’s major central bankers. Will this be an opportunity for the “big rotation” out of monetary policy hinted at by Draghi and Yellen earlier this year? The ECB has already indicated that this will not be the time to announce their long anticipated tapering of bond buying, but that is coming soon. The bankers are expected to discuss the “confusing” lack of inflation worldwide after nearly a decade of accommodating policy. 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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