FINfacts™ XXIV – No. 160 | March 27, 2019

MARKET RATES
Prime Rate 5.50
1 Month LIBOR 2.50
6 Month LIBOR 2.68
5 Yr Swap 2.21
10 Yr Swap 2.35
5 Yr US Treasury 2.16
10 Yr US Treasury 2.36
30 Yr US Treasury 2.81

RECENT TRANSACTIONS
$101,300,000 in Financing for 375,000 SF, 37-Acre Shopping Center in La Habra, CA

Rate: One-Month LIBOR + 3.20%
Term: Two years plus three, one-year extension options
Amortization: Full-term interest only
Loan to Initial Value: 75%
Loan to Stable Value: 70%
Guaranty: Non-recourse
Lender Fee: 0.75%
Prepayment: 15-month spread maintenance

Transaction Description:

George Smith Partners secured $101,300,000 in non-recourse bridge debt to refinance out an existing senior loan and mezzanine loan for a regional Southern California shopping center. The Property is a 373,000 square foot open-air, dual grocery anchored shopping center currently midway through a center-wide reposition. The Property is 96% leased but requires additional funds to complete the stabilization, including the construction of a new pre-leased pad building. The Center required a major leasing and re-leasing effort to modernize the 37 acre site into a true lifestyle center. Loan proceeds repaid the existing financing, covered closing costs, and will fund 100% of future CapEx, tenant improvement, and leasing commission costs associated with stabilizing the Property. The loan offers a 24-month initial term plus three extension options with durations of one year each, which provide the Borrower maximum flexibility. The non-recourse floating-rate loan priced at 3.20% over One-Month LIBOR and offered full term interest only payments.

 

Advisors

Steve Bram
Principal/Co-Founder
David R. Pascale, Jr.
Senior Vice President
Patrick O’Donnell
Vice President
Nick Rogers
Vice President

$6,350,000 Cash Out Refinance of 28 Units in Los Angeles; Maximum Credit for Unit Renovations

Rate: 4.4% fixed for 7 years, then floating at 6M LIBOR + 2.25%
Term: 30 years
Amortization: 3 years Interest Only followed by 30 year amortization
Prepayment Penalty: 3,2,1,0
LTV: 65%
DCR: 1.15x
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners secured $6,350,000 in proceeds for the refinance of two properties comprising 28 units in Los Angeles. Since acquisition, the Borrowers made significant upgrades to the Property including renovating 12 units at a cost of nearly $30,000 per unit. These units were re-leased at market rate, resulting in a considerable increase in income. The selected lender was able to give the Borrower maximum credit for the higher income without using a loan-to-cost constraint. Additionally, two of the renovated units were leased just a week before close. The Lender was able to use the additional income based on the signed leases, without requiring any seasoning. Fixed at 4.4% for 7 years, the loan provides three years of interest only payments before rolling into a 30 year amortization schedule. Proceeds were maximized by using a 1.15x Debt Coverage Ratio on the actual mortgage constant.

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

80% LTC Financing at 7.99% Fixed for the Reposition of a 100% Vacant Apartment Building in Los Angeles

Rate: 7.99%
Term: 15 month initial term
Amortization: Interest Only
Max Loan to Cost: 80%
Prepayment: None
Lender Fee: 1.5%
Exit Fee: 0.5%
Guaranty: Non-Recourse

Transaction Description:

GSP arranged the non-recourse first mortgage from a regional balance sheet lender. Due to the Sponsors and Sellers requirement for a quick close, the Lender was able to close and fund the loan in under three weeks. The Property was acquired 100% vacant at loan closing. The loan is structured as an initial 80% advance based on the purchase price and past tenant buyouts, with a further 80% ($280,000) to be future funded for the reposition and lease-up of the Property. Interest is not paid on the future funding until drawn. Furthermore, there is no lockout period providing the Sponsor with unlimited flexibility to refinance or sell the Property without a burdensome prepayment penalty.


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HOT MONEY
Non-Recourse Permanent Loan Program

George Smith Partners is currently placing non-recourse permanent financing from $1,000,000 to $25,000,000+ for industrial, office, retail or mixed-use stabilized properties located in top MSAs. Lender has the ability to advance up to 50 – 55% of purchase price. The pricing is based on Treasury rates + 200 points and terms are 3, 5, 7 and 10 years with step down prepayment that is waived after 2nd year if refinanced again with Lender. There is no cost to the borrower for appraisal, legal, title, escrow or recording. An additional $500 credit at escrow if Borrower provides all due diligence within 7 days from signing LOI.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
ECB Joins Fed, Not Quite Ready to Remove Accomodation

The 10 year Treasury hit 2.34% today, representing its lowest level since December 2017, as “capitulation” seems to be contagious amongst the major central banks. Last week our Fed and this week the ECB. Draghi comments sound familiar: not worried about inflation, sees growth risks and”substantial accommodation” was still needed to get inflation to their target levels (if ever?). Worldwide sovereign debt yields have plummeted. We are likely in a period of relative inaction by the central banks as they monitor the data. Interestingly, the 10 year Treasury (2.35%) is lower than 30 day LIBOR (2.49%) Regional bank stocks are being hammered due to the inversion of the yield curve, they can’t borrow short and lend long at a profit. But credit spreads are narrowing (corporates, CMBS, etc.), with lots of equity (funds, etc.) sitting on the sidelines. Even with debt costs at such a low level, deals need to pencil, income needs to increase in a low inflation environment. The news/data cycle suggests there is reason to believe in both safety (Negative news in Europe, fears of the slowing global economy) or risk (optimism about trade talks with China, full employment, wage increases) 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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