FINfacts™ XXIV – No. 153 | February 6, 2019

MARKET RATES
Prime Rate 5.50
1 Month LIBOR 2.51
6 Month LIBOR 2.78
5 Yr Swap 2.59
10 Yr Swap 2.72
5 Yr US Treasury 2.50
10 Yr US Treasury 2.69
30 Yr US Treasury 3.03

RECENT TRANSACTIONS
$39,300,000 Forward Rate Lock Permanent Financing of a 154-Unit Luxury Multifamily Property in Ventura, CA

Rate: 1.47% spread over 10 YT
Term: 192 months (16 Years)
Amortization: 2 Years Interest Only; 30-Year Amortization Thereafter
LTV: 60%
Guarantee: Non-Recourse
Prepayment Penalty: Yield Maintenance

Transaction Description:
George Smith Partners successfully arranged the permanent financing for a newly constructed luxury 154-unit apartment complex located in Downtown Ventura, one mile from the Pacific Ocean. The Sponsor sought a permanent loan to refinance the construction loan. The Sponsor’s goal was to lock in a long-term, low interest rate in a rising interest rate environment prior to the building reaching stabilized occupancy.

Challenges:
There was significant lease up risk for the permanent lender, as the Property had not yet stabilized with less than a month of operating history at the time of loan underwriting.

Solution:
GSP was able to make the Lender comfortable by highlighting the Sponsor’s successful track record, the Property’s strong position in the market with few comparables available, the Property’s excellent location, and the prospects for strong rent growth. GSP secured an early rate lock at a low 1.47% spread over the 10 Year Treasury for a 16 year fixed rate loan term. Sized to 60% of value, the non-recourse financing includes 2 years of interest only payments, which enhances the cash flow during the early years of the loan. The loan closed in 30 days.

Advisors

Gary M. Tenzer
Principal/Co-Founder

Investment Sale: GSP Connects New Qualified Opportunity Zone Fund with Shovel Ready Apartment Complex

Price: Undisclosed

GSP has successfully sourced and brokered the off-market sale of a Los Angeles Koreatown shovel ready multifamily development site in an Opportunity Zone to a mission based community development lender who has just launched an Opportunity Zone Fund. The new tax law allows companies who develop or improve projects located in Opportunity Zones to defer capital gains from the sale of an asset and to reduce or eliminate the taxable gain on the new property.

Originally engaged to place the construction debt, GSP’s Team Shaffer used our expertise in Opportunity Zones and lender relationship with the newly launched Opportunity Zone Fund to match the buyer and seller together. Our long term client, had purchased the multifamily land with a loan arranged by GSP in 2017. They are a very successful developer/owner in Koreatown and have several larger projects starting construction this year, so the opportunity to flip their project for a large gain and work with a buyer who will focus in making the community better, offered a unique way for both parties to achieve their goals.

Advisors

Bryan Shaffer
Principal/Managing Director
Max Lehrman
Vice President

$4,075,000 for Purchase of 38 Unit Seattle Multifamily Property; Sized to 1.2 DCR on an Actual Mortgage Constant

Rate: 4.70% fixed for 5 years, then floating at 6M LIBOR + 3.25%
Term: 20 years
Amortization: 2 years Interest Only followed by 30 year amortization
Prepayment Penalty: 3,1,0
LTV: 65%
DCR: 1.20x
Guarantee: Non-Recourse

George Smith Partners secured $4,075,000 in proceeds for the purchase of a 38-unit multifamily property located near Seattle. Proceeds were maximized by using a 1.20x Debt Coverage Ratio on the actual mortgage constant. The loan has an open prepay after 2 years, an unusual feature for a non-bank loan. In order to maximize underwritten cash flow, the selected lender was able to separate out regular operating expenses from capital expenditures in the historical P&Ls. Final underwritten cash flow allowed for proceeds of about $300,000 higher than the original loan application. Although the Property has tuck under parking, the Lender was able to pre-screen the Property to eliminate the need for earthquake insurance. Fixed at 4.70% for 5 years, the first two years are interest only before rolling into a 30 year amortization schedule for the 20 year term loan.

Advisors

Shahin Yazdi
Principal/Managing Director
Jonathan Lee
Principal/Managing Director
David Stepanchak
Senior Vice President
Matthew Kirisits
Vice President
Olga Alworth
Senior Vice President
Samuel Sarshar
Assistant Vice President

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HOT MONEY
Non-Recourse Bridge Financing 85% of Cost

George Smith Partners is placing non-recourse bridge debt, mezzanine debt, and preferred equity to 85% of cost through a national portfolio lender funding transactions from $2,000,000 to $15,000,000. The Capital Provider offers flexible loan structures with interest only terms between 1 to 5 years and extension options. Floating rate pricing starts from LIBOR + 325. Lender has a strong appetite for Multifamily, Office, Industrial, Retail and Hospitality properties located in primary, secondary and tertiary markets.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Deadlines Loom, Securitization Markets In Gear

The 10 year Treasury yield has settled into a range of about 2.65-2.75% in recent weeks as the “Goldilocks” outlook is in vogue: not too hot, not too cold: the economy is strong with potential headwinds and slowing growth with little inflation. With the shutdown now over (for now), Washington deadlines are in the spotlight: February 15 to pass another funding bill, March 1 to finalize a trade agreement with China (or big tariffs ensue), and very important is the March 1 reinstatement of the debt ceiling. This means that the government will have a few months of financial manipulation before defaulting on US Treasury debt. Now comes word that the debt ceiling extension may be rolled into the government funding talks. CMBS/CLO: Floating rate securitizations are going very well after a post crash record 2018 of issuance, some originators are cutting spreads accordingly. The first 2019 CMBS securitizations are pricing soon, but pricing talk is optimistic, about 5 bps inside of the final 2018 pools. Stay tuned.  By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

More Perspectives ›

As Seen in the Commercial Observer – February 1, 2019

Written By: Huber Bongolan, Assistant Vice President

Over the past five years, “cautiously optimistic” has been a favorite tagline when asked one’s temperature on the market. “Cautious to negative” is the 2019 phrase to keep in mind. We’re seeing many clients search for yield in secondary markets. LIBOR and other floating-based indices are increasing, and Fed Chairman Powell indicated two rate increases in 2019…

Click here for the full article.

If you have an inquiry regarding George Smith Partners’ commercial real estate financing, please contact your GSP representative or Todd August, Chief Operating Officer (310) 867-2995 or TAugust@GSPartners.com


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