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FINfacts™ XXIV – No. 9 | March 2, 2016
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| Prime Rate |
 3.50% |
| 1 Month LIBOR |
0.44% |
| 6 Month LIBOR |
0.88% |
| 5 Yr Swap |
 1.23% |
| 10 Yr Swap |
1.63% |
| 5 Yr US Treasury |
1.34% |
| 10 Yr US Treasury |
1.83% |
| 30 Yr US Treasury |
2.68% |
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Indices changes since February 24, 2016.
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Rate: Prime + 1.00% w/4.75% floor
Term: 2 Years + Options
LTC: 65.0%
LTV: 45.0%
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Transaction Description: George Smith Partners structured the non-recourse ground-up construction financing for 18 luxury townhomes in the La Jolla Village neighborhood of San Diego. Designed to fulfil the demand for Class-A residential product, the townhome style development is centrally located in the heart of La Jolla and is only a few blocks from restaurants, shopping and the bluffs overlooking Torrey Pines and the Pacific Ocean. Sized to 65% of total development cost, the 24 month loan is priced at PRIME + 1.00% with a floor of 4.75%. A construction completion guarantee was provided although there is no repayment guarantee.
Challenge: The residential market in the area is extremely strong, but there is negligible velocity to provide new product comparables. Cash equity was not fully funded at recordation.
Solution: Market research was conducted to support sales prices per square foot from the limited residential trades that did execute. Demographics and asset quality supported larger unit footprints and thus the higher “all-in” exit prices. Our capital provider is active in this greater market area and is comfortable with the sell-out analysis. The Sponsor strength and experience in this product added additional comfort and allowed the Lender and Sponsor to fund the remainder of cash equity dollar-for-dollar, simultaneously with construction draws.
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Rate: 4.00% Fixed for 5 Years
Term: 10 Years
Amortization: 30 Years
DCR: 1.25
Recourse
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Transaction Description: George Smith Partners successfully placed the refinance a 44,867 square foot single tenant Class-B Flex Office/Laboratory in Orange County recently NNN leased to a non-credit regional healthcare company. The Lease had been signed, but tenant improvements have yet to be fully completed; the tenant was only occupying ½ of the building at the time of funding. GSP structured a permanent loan program that allowed for the existing debt to be fully satisfied with a future funding after year 5 post tenant rent increase. Fixed at 4.0% for five years, the loan will float for the remaining five years of the term, amortized over 30 years.
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Rate: Prime + 7.75%
Term: 12 Months + Two 6-month extensions
Amortization: Interest-Only
LTC: 65%
Non-Recourse
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Transaction Description: George Smith Partners arranged the $2,680,000 non-recourse acquisition loan on a fully entitled 16 acre parcel of land in North San Diego County. Our Sponsor acquired the land to re-entitle for a higher density housing development for re-sale to a homebuilder. The loan was sized to 65% of purchase, priced at 7.75% over Prime.
Challenge: Several capital sources viewed the Sponsor’s business plan to re-entitle the land within 12 months more as an unentitled land transaction than a re-entitlement opportunity. Due to the higher risk nature of re-entitlement and secondary market location, many lenders rejected the transaction or offered very low leverage with full recourse.
Solution: GSP identified a lender who was comfortable with the business plan, land basis, and short duration that the loan would be outstanding given the Sponsor’s financial strength and previous land entitlement experience. There is no recourse beyond the standard carve-outs.
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Founding Principal, Gary M. Tenzer will be moderating the Finance Panel at the USC/Gould Real Estate Law and Business Forum at the downtown location of The Jonathan Club on Thursday March 10th. Gary’s panel will focus on the regulatory changes imposed by Dodd Frank, HVCRE, BASEL III and other changes affecting commercial financing. Designed to appeal to professionals in the real estate field, the luncheon key-note speaker will feature Kevin Demoff (COO Los Angeles Rams) who will discuss the Rams return to Los Angeles and the new stadium. Open to the public, program information and registration is available on-line.
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National fixed rate pem lender funding stabilized core assets from $10,000,000 to $60,000,000 on a non-recourse basis. Structured similar to a CMBS loan, this on-book product is fixed for 10 years from 4.5% to 4.8% to 70% of appraised value – 75% for Class A multifamily rentals. Debt Yields must be 8.5% or greater but may provide a period of interest only prior to rolling into a 30 year amortization schedule for five or 10 year loan terms.
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The past week has seen equity markets rally on stronger than expected US economic reports (4th quarter GDP, ISM manufacturing index, construction spending) and signs (hope) that oil prices bottomed. The Chinese Premier’s comments to the US Treasury secretary indicating that the government is moving along with difficult reforms rather than an additional currency devaluation also helped reduce volatility. All of this is now pushing expectations of the next Fed rate hike; the futures market now has a 41% possibility for this year compared to 17% one month ago. Inflation: CPI rose 2.2% annually in the January report – above the Fed’s target. But the Fed prefers to watch the PCE (Personal Consumption Expenditures) which stands at 1.4%. Of course both reports exclude food and energy. The 10 year T is 1.83%. Stay Tuned. David R. Pascale, Jr.
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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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