GSP Insights

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    Construction Financing 80% LTC

    Hot Money

    January 15, 2019

    George Smith Partners identified a regional capital provider lending on transactions up to $16,500,000 on a recourse basis. With the ability to advance up to 80% of purchase price on ground-up construction and luxury SFR’s, Condos and Multifamily, pricing is 1.25-1.50 over Prime for a 24 month term. Other offerings include earn-outs and value-adds for commercial loans, SRO’s, and TIC’s, as well as cookie-cutter industrial, office and industrial.

    Tenancy-in-Common (TIC) owners of a multi-unit property have exclusive usage rights to a particular area of the property. They own percentages in an undivided property, rather than particular units. The deeds reflect only their ownership percentages. Each owner has the right to use a particular dwelling, which is reflected in a written contract signed by all co-owners. This must not be confused with condominium ownership.

    The ability to receive “Fractional Loans,” which enables co-owners to obtain individual loans, significantly reduces the risk of co-ownership. Fractional Loans enable each co-owner to have an individual loan. The loan is secured by the co-owners share of percentage in the property so if one co-owner should default it does not impact the other co-owners. This lender finances the acquisition and development/conversion of multifamily properties into TICs, and is one of the only lenders in California offering Fractional Loans to individual TIC owners.

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    The Fed’s New Years Resolution: Be More Dovish

    Pascale’s Perspective

    January 9, 2019

    Fed Chair Powell kicked off the dove-fest last Friday with his remarks at the American Economic Association’s annual meeting. He said all the right things that markets wanted to hear.  Powell’s December statement and press conference spooked markets into believing that the Fed was on a preset path to raise rates twice in 2019, regardless of the economic environment. Last Friday, he indicated that the Fed was “flexible” and could be patient in light of “muted inflation readings”.  Another buzz word is emerging: “Patience” as the Fed will “listen very carefully” to the market. Powell also addressed the issue that many believe triggered the major volatility during his December speech: the pace of balance sheet reduction. Now he “wouldn’t hesitate” to alter the pace of reduction based on current events. Powell stood with past Fed Chairs Bernanke and Yellen at the Friday event. Perhaps he and Bernanke discussed the “taper tantrum” sparked by Bernanke’s remarks in 2013 regarding potential slowing of bond purchasing by the Fed. Markets rallied big on Friday. This week, other Fed participants have reinforced the message, indicating flexibility and patience. Futures markets indicate zero or one increase in 2019 and a possible rate cut in 2020. The 10 year Treasury dropped to 2.55% last Thursday (pre-Powell remarks) and has now settled at 2.70%. Markets are watching Washington: Government shutdown (how long?) and trade talks with China (is a deal imminent?). Spreads have widened during this recent volatility. The CMBS market is looking for guidance from the first few securitizations of 2019 now under way. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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    National Small Balance Financing Starting at 4.79% w/Step-Down Prepay

    Hot Money

    January 9, 2019

    George Smith Partners is working with a national capital provider providing agency and non-agency small balance loans on multifamily assets from $1,000,000 to $7,500,000 on a non-recourse basis. Rates start at 4.79% for terms from 5 years to 20 years. Loans are structured case-by-case for stabilized assets allowing for longer Interest Only terms and/or step-down prepayment. A recently executed application included two-years IO and a 5,5,4,4,3,2,1 prepayment schedule priced at 4.79% fixed for seven years. Leverage for multifamily is 80% of total value.

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    Kyle Howerton is Mentioned in the St. Louis Business Journal

    In the Press

    January 7, 2019

    Upgrades on deck for North City industrial park as competition heightens

    Dec 21, 2018

    “Clayton-based Green Street has closed on a $25.5 million bridge loan for its 55-acre St. Louis Business Center industrial park in north St. Louis. The loan was used to refinance two existing loans, cover closing costs and fund future costs associated with the park’s reposition,the advisory firm, Kyle Howerton of Los Angeles-based George Smith Partners, said.”

    Click here to read the full article.

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    Happy Holidays from GSP

    Holiday

    December 21, 2018

    Happy Holidays and best wishes for a wonderful holiday season and a very happy new year!  We thank our clients and hope to continue helping make our success your success in 2019.

    Bryan Shaffer, Steve Bram, Gary Tenzer, Jonathan Lee, Shahin Yazdi, Gary Mozer, Malcolm Davies and the entire GSP family.

     

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    Markets Tank on Fed “Vote of Confidence”

    Pascale’s Perspective

    December 19, 2018

    The big question today was “Will the Fed Pause It’s Planned Rate Increase in the Wake of Recent Market Volatility?” The answer: “No” And the reaction: More volatility (which markets hope will make the Fed think twice about next year’s planned increases). The Fed today continued its “march to neutral”. The big long term questions are: “What is the neutral rate? Are we there yet?” Remember that Powell spooked markets by saying “We’re a long way from neutral” in early October. Then markets rallied on his late November comment that we are “just below” neutral. That comment and subsequent rally convinced many investors that the December Fed statement could be “one and done”, ie. an increase today and then a pause. Markets were up this morning pre-announcement on that expectation – hope/hype. But Fed Chair Powell tried to thread the needle today. First off, a unanimous decision to increase the rate, which amounted to a “Declaration of Independence” by the Fed in light of recent pressure from the Executive Branch. The Fed’s independence is critical to its standing in the world. Then the “dot plot” of future increases and Powell’s press conference indicated TWO more increases on tap for 2019, contrary to market expectations as the futures markets indicate zero increases for next year. Today, Powell said that we are at the “lower end” of neutral with the increase of the Fed Funds rate to 2.50% (note that 2.50% – 3.50% is the target range for the neutral rate amongst Fed officials). The Fed lowered their growth projections for 2018 to 3.0% (down from 3.1%) and 2019 to 2.3% (down from 2.5%). A seemingly offhand remark put today’s selloff into overdrive: when asked about continuing to trim the Fed’s balance sheet, Powell indicated no pause. Markets were hoping for a “dovish olive branch” in the form of a pledge to pause selling bonds purchased during Quantitative Easing. The 10 year Treasury yield dropped on the “flight to quality”, now at 2.76% (down 50 bps from last month’s high). Stay tuned  By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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    National Non-Recourse Portfolio Perm w/Zero Pre-Pay

    Hot Money

    December 19, 2018

    George Smith Partners is working with a national portfolio capital provider that is structured with no pre-payment penalty. Loan origination fees of 0.50% for transactions up to $50,000,000 and there are no exit fees. Non-recourse funding up to 60% of cost, rate is set at acceptance of LOI, DSCR requirement of 1.45-1.50x and most loans close within 60 days of pre-screen. Higher leveraged options are available under similar pricing with a personal repayment guarantee. Properties must be in sub-market areas with communities of 100,000+ population.

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    Yield Curve Partial Inversion Reaction Leads to Some Steepening

    Pascale’s Perspective

    December 12, 2018

    Markets sold off heavily last week as the yield curve partially inverted, the first inversion since before the Great Recession. The sell off immediately spurred a flight to quality, the 10 year T yield dropped a low 2.82% on Monday, the 2 year dropped to 2.69%. The “inversion point” of the 3 and 5 year Treasuries is now less than 1 basis point (3 year at 2.775%; 5 year at 2.699%). Maybe recession fears are “so last week” as the market is now cheering progress in US – China trade talks. But the curve is nowhere near a “healthy” steep curve. Recent statements by ex Fed Chairs Bernanke and Yellen indicate a feeling that this indicator may not be relevant. Bernanke pointed out that “regulatory changes and quantitative easing in other jurisdictions” has distorted the “normal” market signals (by normal he means the “old normal”). The Fed seems set on raising rates next week, despite pressure from the executive branch to leave rates unchanged. The pressure may actually end up convincing the Fed that they must raise rates in order to retain credibility (for a lesson in central bank meddling, see recent economic events in Turkey). The question then becomes how many increases in 2019? Futures markets in Fed Funds and the LIBOR curve have lowered their 2019 rate forecasts considerably over that past few weeks as economic growth expectations continue to cool in China and Europe, and the effects of tax cuts and government spending will be wearing off in the US. Stay tuned.  By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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    Fixed Rate Capital for Western US Land Loans

    Hot Money

    December 12, 2018

    GSP is working with a capital provider that will provide recourse fixed rate financing to 75% of cost (90% + on build to suits) including, acquisition, improvements, development, pre-development, discounted payoffs, bankruptcy exit, purchase of notes and cash-out. Fixed rate pricing starts at 9% for terms up to 1 year with extension options up to 3 years for Multifamily, Office, Industrial, Retail, Special-Use, Entitled Land and Construction. Loan sizes range from $1,000,000 to $10,000,000 for transactions located in California, Arizona, Nevada, New Mexico and Washington.

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    Yield Curve Partial Inversion Roils Markets, What Happens If and When It More Fully Inverts?

    Pascale’s Perspective

    December 5, 2018

    On Monday, the US Treasury “yield curve” partially inverted as the 5 year T yield dropped below the 3 year T yield.  A typical “classic” inversion occurs when the 10 year yield drops below the 2 year yield, that is the most scrutinized relationship on the range of treasuries. Stock markets tumbled. (Dow dropped 800 points yesterday) as this added to uncertainty. An inverted yield curve is a classic harbinger of recessions (every recession since the 70’s).  Other macro economic concerns helped fan the flames (Brexit, mixed signals regarding the China/US “cease fire” on trade, etc). This is the first inversion in a decade, so it’s a major uncertainty. The major question facing markets: Is this “old school” indicator still valid in the “new normal” era of post Great Recession metrics of massive central bank accommodations, and stubbornly low inflation? Or “are things different this time?” We are again in uncharted territory. The Fed is still holding massive amounts of long dated Treasuries as it is now in its second year of the long slow unwind of its $4 trillion balance sheet. Markets seem to be counting on a very gradual sell off, keeping the long yields down. But most importantly, the lower 10 and 30 year bond yields are a product of reduced growth and inflation expectations for 2019, 2020 and beyond. Potential causes: the effects of US tax cuts fade, Italy weakening the Eurozone, continued trade disputes, etc. Many major economic groups are lowering growth forecasts for the next few years. Inflation is still spotty and not steady, note that oil prices again dropped today (after rising from lows) as the long awaited OPEC production cuts may be “off”. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

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    Fixed Rate No Pre-Payment Penalties Western States Lender

    Hot Money

    December 5, 2018

    George Smith Partners identified a capital provider offering fixed-rate debt for transactions from $2,000,000 to $15,000,000 specializing in the 10 western states. This lender will finance Industrial, Manufactured Home Communities, Mixed Use, Multifamily, Office, Restaurant, Retail, Self Storage, Medical Office, Single-Tenant Net Lease. No pre-payment penalties, 3 years’ interest only, 30 year amortization and terms up to 15 years on partial or non-recourse loans.

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    Gary E. Mozer is a Guest on the CMA Podcast

    Podcast

    November 29, 2018

    Gary E. Mozer, Principal/Co-Founder of George Smith Partners participated as a guest on the podcast, Capital Markets Today with Louis Amaya.  Gary talks about the advice he gives his best clients regarding mitigating risk and talks about his economic sentiment for 2019.

    Click here to listen to the show focused on Structured Debt/Equity CRE Financing.

    Louis Amaya: You had mentioned taking different types of risk. Do you see that as speculation in today’s market, as we maybe head into something that is at least a stabilization of the growth that we’ve been seeing?

    Gary E. Mozer: When interest rates increased so much in the last 12 to 18 months, you had a little bit of a dislocation in the marketplace because different people perceive different risks. Some people think there’s cycle risks. Some people think there’s product risks.  Different people underwrite and perceive the risks and price them differently. Some people say, “Oh, this retail deal, it’s retail so I don’t even want to do it.” Another guy says, “Oh, it’s retail and I’m concerned about it because it’s still retail.” Another guy says, “Oh, this is the right real estate with the right sponsor and the right market with the right business plan and we’ll price through the marketplace.” The inefficiencies in the marketplace is all about the perception of risks. Different people have different perceptions of risks. Some people said multifamily was the best product to be in. Some markets are being overbuilt and therefore the rent growth is slowing. The absorption is slowing. Multifamily is still a great product to be in, but you’re going to have to change your parameters of how you price and structure those risks.