FINfacts™ XXIV – No. 159 | March 20, 2019

MARKET RATES
Prime Rate 5.50
1 Month LIBOR 2.49
6 Month LIBOR 2.67
5 Yr Swap 2.41
10 Yr Swap 2.55
5 Yr US Treasury 2.34
10 Yr US Treasury 2.54
30 Yr US Treasury 3.01

RECENT TRANSACTIONS
$22,367,000 Cash-Out Refinance of 200 Secondary Market Rental Units, CA

Rate: 4.73% Fixed
Term: 7 Years
Amortization: Two Years Interest Only; 30 Years Thereafter
Loan-to-Value: 60%
DCR: 1.35
Recourse: Carve-Outs Only
Prepayment: Loss of Yield
Loan Fee: 0.50%

Transaction Description:

GSP placed the $22,367,000 non-recourse cash-out permanent loan for 200 stabilized units in a secondary California market. This represented a substantial return on equity. Loan proceeds were increased post application as the supportable underwritten net cash flow improved during the due diligence process. Occupancy constantly operated at 98% with future increases forecasted at unit turn. Fixed for seven years at 4.73%, the non-recourse loan is interest-only for two years prior to amortizing over 30 years for the balance of the term.

Advisors

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

$8,400,000 Bridge Loan for Big Box Retail Center in Tertiary Market

Rate: L+425
Term: 3 Years + Two, 1-Year Extensions
Amortization: Interest Only
LTC: 75% LTC
Prepayment: 18 Months Yield Maintenance
Lender Origination Fee: 1.0%
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners secured $8,400,000 of bridge financing for the lease-up of a two-tenant retail center located in Greeley, CO. The Sponsor recently leased a 50,000 square foot space to a national fitness center. The new 10-year lease, which has a corporate guaranty, required a large tenant improvement package. Loan proceeds will be used to refinance the existing loan and fund leasing costs without requiring the Sponsor to bring in any additional equity. The other tenant at the center, a national specialty retailer, agreed to extend their lease term to 10 years concurrently, eliminating any rollover risk. GSP found a capital source that understood that the tenants are uniquely positioned to serve the market, allowing the Lender to get comfortable with the completed value of the center. The non-recourse financing was sized to 75% LTC and priced at One Month LIBOR + 4.25%.

Advisors

Steve Bram
Principal/Co-Founder
Patrick O’Donnell
Vice President

$4,235,000 Acquisition Bridge Financing for a 19 Unit Mixed-Use Property in Santa Barbara, CA

Rate: 9.25% Fixed
Term:
2 year term with Two, 6-month extension options and 50 bp extension fee
Amortization:
Interest Only
Loan to Value:
68% max LTV “as complete”
Loan to Cost:
75%
Yield Maintenance:
24 months
Loan Fee:
1%
Guaranty:
Non-Recourse

Transaction Description:

George Smith Partners arranged $4,235,000 of acquisition/bridge financing for a 19 unit residential mixed-use property in Santa Barbara, CA. The Property, originally constructed as a 10 unit apartment building in 1951, was converted to mixed-use with a second and third floor office and residential penthouse addition in 1973. The change in use was a response at the time to demand for office given the Property’s close proximity to the popular State Street retail corridor just a block away. The Borrower plans to seek approval to convert the 1973 office addition portion of the project back to residential use and lease all but two front commercial units with long term leases. The challenge was finding a Lender that could underwrite the business plan and get comfortable with take-out financing of this mixed-use residential/office project. GSP was successful in identifying a lender that could get comfortable with the uncertainty of the Borrower’s ability to convert the project to mostly residential.

Advisors

Alina Mardesich
Senior Vice President
Michael Smilove
Assistant Vice President

SPEAKERS CORNER

Michael Anderson-Mitterling, Senior Vice President will be participating at RENTV’s Annual San Diego State of the Market Conference tomorrow – Thursday, March 21.  He will be speaking on the Industrial panel at 10:15 am. The conference will be held at the Marriott La Jolla. For more information, click here.


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HOT MONEY
Unentitled Land Financing 85% LTC

George Smith Partners is working with capital provider funding non-recourse senior bridge transactions from $1,500,000 to $50,000,000 with a focus on core infill locations within top growth markets across the United States. Leverage at 85% for unentitled or entitled land and existing asset repositioning projects. Rates for bridge loans start at 7.9% for fixed terms up to two years and flexible prepay.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
The Fed Tries to “Nail the Landing” (For Once), Yield Curve

Today’s Fed announcement and subsequent news conference by Chairman Powell made the recent “about face” official.   Not only did the Fed not raise rates today, it indicated (via the infamous “dot plot”) that there are NO increases planned for 2019.    In fact, futures markets now predict a rate cut before any future rate hikes.  The Fed is not afraid of inflation, between steady commodity and energy prices and consumer prices remaining flat, the old relationship between full employment and inflation appears to be officially broken (RIP Phillips curve).  Powell also spoke of slowing growth in the US, China and Europe.  As the effects of the tax cut wane, he noted “slower growth of household spending and business fixed investment”.  Today’s comments had the feeling of an economy in “balance” with Powell again indicating the present Fed rate is, “in broad estimates of neutral”, advocating for patience and (importantly) that the data does not justify a move in either direction.  Past Fed actions (rate increases during expansions) have been blamed for causing recessions and cutting economic rallies short.   Maybe things are different this time?  Maybe the lack of inflationary pressures are allowing this Fed to “stop and smell the roses” while the economy enjoys a plateau instead of a peak? Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

 

More Perspectives ›

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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