FINfacts™ XXIV – No. 161 | April 3, 2019

MARKET RATES
Prime Rate 5.50
1 Month LIBOR 2.48
6 Month LIBOR 2.65
5 Yr Swap 2.37
10 Yr Swap 2.51
5 Yr US Treasury 2.33
10 Yr US Treasury 2.53
30 Yr US Treasury 2.94

RECENT TRANSACTIONS
$42,000,000 Construction Loan for a 252-Unit Mixed-Use Multifamily Project in Downtown Salt Lake City, Utah

Terms: Confidential

Transaction Description:

George Smith Partners arranged a $42,000,000 senior construction loan for the ground-up development of a 252-unit mixed-use luxury apartment community in the Marmalade District of Downtown Salt Lake City, Utah. The mixed-use project will include ground floor retail and features Class A apartments with modern design.

GSP was able to identify several competitive lenders that recognized the Sponsor’s ability to execute large-scale multifamily projects, based on the successful delivery of a similar project they built in the MSA. GSP was able to leverage various lenders in order to help procure the most competitive terms available with a three-year term and two, one-year extension options.

Advisors

Malcolm Davies
Principal/Managing Director
Zachary Streit
Senior Vice President
Evan Kinne
Senior Vice President
Alexander Rossinsky
Vice President
Rachael Lewis
Vice President
Aiden Moran
Assistant Vice President

$28,000,000 Paper Lot Inventory – Land Loan, CA

Terms: Confidential

Transaction Description:
George Smith Partners successfully financed a 50% LTV, $28,000,000 “paper lot inventory” land loan on a 59.5 acre property with 334 fully entitled lots in the city of Ventura, California. The financing was designed to provide the Sponsor flexibility in structuring the sales of phases of raw land to public homebuilders. Proceeds from the loan were also used to refinance the maturing entitlement loan and to receive a partial refund of predevelopment expenses.

Challenges:
Lenders have a long memory of huge losses taken on loans made on residential land prior to the Financial Crisis. Many have decided not to make new land loans, particularly for residential development, in this economic cycle; those that are lending are doing so very conservatively. With mortgage rate increases and property tax non-deductibility affecting home-ownership affordability, absorption rates and the rate of price increases have slowed, as well, in some markets which also feed lenders’ concerns.

Solution:
GSP approached many traditional and non-traditional sources for financing on residential land. Terms that were proposed by commercial banks and others either supplied insufficient proceeds or had troublesome covenants. GSP arranged the financing with a lending group which included a family office and a debt fund.

Advisors

Gary M. Tenzer
Principal/Co-Founder

$15,880,000, 70% Loan-to-Cost Financing at LIBOR + 1.95% on an 82% Occupied Suburban Office Building with Near-Term Tenant Roll

Rate: 30-Day LIBOR + 1.95%
Term: Three years plus two 12-month extensions
Amortization: Interest Only (initial term)
Prepayment: 0.5% months 1-6; open thereafter
Lender Fee: 0.5%

Transaction Description:

GSP arranged the $15,880,000 partial-recourse first mortgage from a national commercial bank on a 1980’s-vintage multitenant office building in the Dallas/Fort Worth market. The Property was 82% occupied at loan closing, with an additional 10% of space likely to be vacated by a major tenant approximately six months after closing and an additional 35% of the leased square footage rolling within the three year loan term. The loan is structured as an initial $11,860,000 advance, with a further $4,020,000 to be funded for tenant improvements and leasing commissions tied to future leases. The loan requires no additional leasing reserves, and interest is not paid on the $4,020,000 until drawn.

The 70% of cost first mortgage priced at one-month LIBOR plus 1.95% and required interest rate protection to hedge no less than 75% of the loan amount for the first two years of the term, to be renewed for 100% of the loan amount prior to year three.

Advisors

Gary E. Mozer
Principal/Co-Founder
Katie H. Rodd
Senior Vice President
Michael Anderson-Mitterling
Senior Vice President
Kyle Howerton
Senior Vice President
Akash Rohera
Assistant Vice President

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HOT MONEY
National Portfolio Financing for Stabilized Assets w/Bank Charges Waived

George Smith Partners has placed several hundred million dollars of performing real estate loans with a national portfolio capital provider structured with no pre-payment penalty. Transactions in primary and secondary markets from $1,000,000 to $10,000,000 fixed for five or seven year terms. This recourse lender will advance to 75% of appraised value assuming a 1.25 DSCR on in-place cash flow. Most loans close within 60 days. Application fees and bank closing costs (excludes 3rd party charges) are waived on new opportunities for the next three months.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Fiscal Stimulus Fades, Monetary Policy is Taken For Granted, Time for a Trade Deal?

After Treasuries hit a recent low last week due to Fed and ECB committing to low rates for the time being, markets jumped on Monday as the US and China both exceeded expectations with robust manufacturing reports. The China report was especially well received as it helped assuage global growth concerns. However, today’s ADP employment report indicated that US companies added the fewest workers since March 2017, steepest drop in construction jobs since 2012. It could be an anomaly (seasonal, weather) or a sign that the long hiring boom is slowing as the effects of the tax cuts wear off. So if the big fiscal policy effects are waning and interest rates seem to be low but static, what is the next jolt for the economy? It may be that 2 long simmering issues may be “solved” soon: US – China trade agreement and a softer Brexit. Treasury yields increased today after the disappointing jobs report. Either traders are waiting for Friday’s major employment report or were looking ahead to the trade deal? The 10 year is at 2.52% with all in 10 year loan rates in the 4.00% – 4.50% range. 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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