GSPartners
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Volume XXIII | No. 44 | November 18, 2015
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KEY RATE INDICES
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Prime Rate
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3.25%
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1 Month LIBOR
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0.20%
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5 Yr US Treasury
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1.68%
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5 Yr Swaps
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1.66%
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12-MAT
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0.26%
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3 Month LIBOR
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0.36%
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10 Yr US Treasury
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2.27%
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10 Yr Swaps
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2.20%
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11th Dist COFI
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0.65%
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6 Month LIBOR
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0.60%
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30 Yr US Treasury
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3.04%
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| | | Transaction Description: | | $20,900,000 Acquisition Financing for a Historical Hollywood Mixed Use Property George Smith Partners successfully sourced the acquisition/bridge financing for a 163 unit Historical Hollywood Apartment building with 10,500 square feet of ground floor retail. Despite recently completed remodeling, our Sponsor felt further upgrades would benefit the Net Cash Flow. Financing was sized to 80% of the total capitalization consisting of the $25,250,000 purchase price and $815,000 of capital upgrades. Priced at 30 day LIBOR + 435, the non-recourse loan carriers a 3 year term with two 12-month extension options. |
Challenge: Of the 163 units, 105 (64%) are sub-350 square foot efficiency units. Many tenants are still receiving rent concessions from leases signed at the end of 2013 when the property was vacant. Two of the larger retail tenants were still in abatement and owed money for tenant improvements. Recently rehabilitated in 2013, multiple capital providers were not convinced that further capital upgrades would generate additional rent growth. |
Solution: GSP completed a thorough market evaluation to confirm a high historical occupancy and volume for efficiency units. Market demand for this floorplan is supported with the lifestyle of this market clientele. This market evaluation also confirmed that the Hollywood rental market will not require the Sponsor to offer concessions upon unit turn; therefore, remaining concessions were not underwritten. Professional third-party management was also engaged to alleviate future lease-up concerns for both residential and commercial units. A current lease-comp survey supports the capital upgrade business plan and potential rent growth for the efficiency units. |
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| | | Transaction Description: | | $10,000,000 15-year Acquisition Loan for Multifamily Property in a Secondary Market GSP arranged the $10,000,000 permanent acquisition loan for a large apartment complex in Bakersfield, California. As the new Sponsor intends to significantly renovate units upon lease roll, GSP was able to structure a loan that yielded nearly 100% of the purchase price, but 80% of the total projected capitalization. Despite the rehab business plan, the lender was still confident to structure a long-term fixed rate permanent loan with a 15 year term, amortized over 30 years. Sized to 68% of improved value but 80% of the total cost, the 15 year fixed rate loan priced at 4.64%. |
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| | | Transaction Description: | | $1,575,000 Acquisition/Bridge Financing for a Proposed Multifamily Development Site George Smith Partners successfully placed senior debt to acquire two parcels in Hollywood, California. The Property is currently improved with a small retail structure and a multifamily duplex, but was delivered vacant at close of escrow. The Sponsor will re-entitle the parcels for 33 residential rental units, with 1,000 square feet of ground floor retail. Sized to 75% of the purchase price, the 12 month loan is priced at 9.0% with 7.5% paid current and 1.5% accrued until paid. |
Challenge: Most capital providers top off at 60% of actual purchase price and shy away from transactions that involve entitlement risk. A zoning variance will be required to achieve a 3:1 FAR to secure the intended 33 units. |
Solution: George Smith Partners identified a lender that underwrote he Sponsors’ experience and ability to execute an entitlement plan. A future funding was structured that releases proceeds upon obtaining the 3:1 FAR zoning variance. |
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| | | | National Money Center Bank Construction Lending GSP is working with a national money center construction lender pricing ground-up development from LIBOR+200 for institutional quality assets of $15,000,000 and up to 70% of total capitalization. Non-recourse transactions are considered for 9.5% debt yields. Burn-down or burn-off repayment guarantees at stabilization can also be structured. On-book perm exit opportunities are currently priced up to 30 basis points inside of cmbs executions. |
| | | If you have an inquiry regarding George Smith Partners' commercial real estate financing, please contact your GSP representative or Todd August, Chief Operating Officer, at (310) 867-2995 or TAugust@GSPartners.com | | | Pascale’s Perspective | Fed Minutes Release Conveys Certainty of Liftoff..... Today’s release of the October Fed minutes basically confirmed a rate hike at the December meeting. The statement noted that global troubles had eased and that ‘based on their assessment of the current economic situation and their outlook for economic activity, the labor market and inflation, these conditions could well be met by the time of the next meeting’ (speaking regarding conditions that justify a move). The statement was also bullish on economic conditions. Equity markets rallied, while treasury yields barely moved. Why? Because the markets abhor uncertainty, and the Fed is communicating a consistent message via recent speeches and the official releases. The increase was already ‘baked in’ to yields as they moved after the October meeting itself. Interestingly, the statement also highlighted the risks of delaying a move, which would create uncertainty and further increase the anxiety and ‘perceived importance’ surrounding the next hike. The Fed realizes that they have to act to maintain credibility. …stay tuned… David R. Pascale, Jr. |
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©2015 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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