FINfacts™ XXIV – No. 163 | April 17, 2019

MARKET RATES
Prime Rate 5.50
1 Month LIBOR 2.48
6 Month LIBOR 2.63
5 Yr Swap 2.44
10 Yr Swap 2.59
5 Yr US Treasury 2.40
10 Yr US Treasury 2.59
30 Yr US Treasury 2.99

RECENT TRANSACTIONS
$43,500,000 Bridge Financing for Nearly-Vacant Industrial Building in Secondary Market

Rate: One-Month LIBOR + 5.50%
Term: Two years plus two one-year extension options
Loan to Value: 80% (121% of Purchase Price / New Basis is 140% of Purchase Price)
Amortization: Interest only during the loan term
Guarantee: Non-recourse
Lender Fee: 1.00%
Prepayment: 1% for first 12 months; Open thereafter. Waived if lender does take-out.

Transaction Description:

George Smith Partners secured $43,500,000 in bridge financing collateralized by a 95% vacant, 2.2MM square foot industrial building in a secondary Midwestern market. The building was constructed through the 1950s and 1960s by a major retailer and used for many years as a major distribution center. As internet retail ate into the tenant’s business, the building slowly lost its business importance to the prior owner. The Borrower, a well known owner and operator in the area bought the Property off market unoccupied approximately one year ago and has been improving the property and been in leasing talks with an array of strong tenants. The lease that occupies 5% of the building is attributed to a third party logistics subsidiary of the Borrower.

Sized to 80% of stabilized value, proceeds from the bridge loan take out the Borrower’s original acquisition loan and bought out an institutional Preferred Equity investor. The Borrower now owns the property free of all third-party equity investors. Additional loan proceeds will also be used to cover closing costs and fund future work, including CapEx and leasing costs associated with repositioning the 60-year-old building. The financing secured by GSP not only allowed the Borrower to recap out their equity partner and claim exclusive ownership rights to the asset, but also gave them the final renovation dollars required to attract new tenants and eventually bring to Property to stabilization.

Advisors

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

77% of Purchase Price Financing for the Acquisition of a Vacant 75,000 Square Foot Data Center in Northern California

Rate: 8.80% Fixed (Blended)
Term: 12 Months
Amortization: Interest Only
Lender Fee: 1.33% (Blended)
Prepayment: Open Full Term
Guarantee: Non-Recourse (First), Recourse (Second)

Transaction Description:

GSP arranged $5,475,000 in financing, composed of $4,275,000 non-recourse first mortgage from a REIT and $1,200,000 recourse second mortgage from a private-money lender, to acquire a 1980’s-vintage, 100% vacant data center. The 77% of purchase price financing provides 12 months of term to allow the Sponsor to 1) implement capital improvements, and 2) generate positive cash flow, prior to putting permanent financing on the Property. The Lenders did not require an appraisal or other third-party reports, and required only a four-month interest/carry reserve despite no in-place cash flow. The financing is prepayable without penalty throughout the loan term.

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

$4,000,000 Non-Recourse and Cash Out of an Office Building in Beverly Hills, CA

Rate: 4.48%
Term: Fixed for 5 years
Prepayment Penalty: 5,4,3,2,1
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners arranged $4,000,000 of non-recourse and cash-out on a refinance of an office building in Beverly Hills. The non-recourse loan is fixed for the first 5 years at 4.48%. There is no requirement for a reserve account which is typically required for tenant improvements and leasing commissions when there are rollover leases in place. The Capital Provider was able to give the Sponsor credit for actual expenses, instead of historical P&Ls. The most recent P&Ls included many capital expenditures and non-recurring expenses, as the Sponsor has spent a great deal of funds in renovating and re-leasing a large portion of units

Advisors

Reuven Risch
Vice President

SPEAKERS CORNER

Please join Gary Mozer, Principal/Co-Founder of George Smith Partners on Tuesday, April 23rd for the 13th Annual Real Estate Symposium at UCLA. Gary will participate on the Opportunity Zone Panel at 6:00 pm.
For 20% off the registration price, enter the promo code GSP. Click here to register

Please join Loren Bedolla, Senior Vice President of George Smith Partners, and other top-level industry leaders on Thursday, April 25th for RENTV’s Inland Empire Conference located at the Embassy Suites Ontario Airport. Loren will participate on the Retail Panel at 8:50 am. For more information about the conference, click here.


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HOT MONEY
Nationwide Cannabis Financing 75% of Cost

George Smith Partners is working with a capital provider financing cannabis loans up to $40,000,000 nationwide. With terms from 12-36 months, this lender has the ability to advance up to 75% of cost based on underwritten values and can close in under three weeks.  Pricing is from 9% to 12% for retail, distribution centers and bio-science/manufacturing properties in primary and secondary markets.

More Hot Money ›

Will Blockchain be Used in Real Estate Financing?

By: Matthew Kirisits

Henry Elder, a former GSP employee, dropped by our office last month to discuss his new venture as a consultant in the blockchain and tokenized security space.

How does it work?

In a tokenized security sale, fractional equity shares of an asset can be acquired through the purchase of a digital token. Investors can buy the token using cash, Bitcoin, or another digital asset. Ownership of each token is stored on an asset-specific blockchain or distributed ledger. The blockchain is used to track shareholders and verify they are compliant with securities laws. This has the potential to be applied to real estate equity syndications.

What will the future hold?

Despite the promise of the technology, blockchain is still in its infancy and companies have struggled to successfully implement it for the purpose of raising equity. For example, last November startup Harbor launched the tokenized offering of $20MM of equity in a student housing project in South Carolina. Just a few days ago, the equity raise was cancelled when Harbor was unable to come to terms with the senior lender on the property. As such, actual deployment of blockchain solutions is still limited in the real estate industry. However, the potential applications are enormous, as the technology has the potential to disrupt not only fundraising, but brokerage and title as well.

 

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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