FINfacts™ XXIV – No. 164 | April 24, 2019

MARKET RATES
Prime Rate 5.50
1 Month LIBOR 2.48
6 Month LIBOR 2.62
5 Yr Swap 2.35
10 Yr Swap 2.50
5 Yr US Treasury 2.31
10 Yr US Treasury 2.52
30 Yr US Treasury 2.94

RECENT TRANSACTIONS
$25,000,000 Bridge Financing for a Recently Completed 150-Room Hotel Located in the Southwest

Rate: One-Month LIBOR + 5.00%
Term: Two years + One, 1-Year Extension
LTC: 59%
LTV: 66%
Guaranty: Non-Recourse

George Smith Partners successfully placed $25,000,000 financing on a 150-room recently completed hotel in the Southwest. Despite ongoing construction arbitration on the Property, GSP sourced a lender who understood the seasonality of the market and the MSA. The Property is the first new-build luxury hotel in this community in over 30 years. Proceeds from the loan were used to pay off the construction financing and provide working capital.

Advisors

Scott Meredith
Senior Vice President
John Thrall
Analyst

$15,000,000 Recapitalization Financing with $5,000,000 Cash-Out; San Francisco, CA

Rate: 5.5% for years 1-10 and 5.85% for years 11-15
Term: 15 Years
Amortization: 30 Years
Guaranty: Non-Recourse
Prepayment: 5,4,3,2,1

Transaction Description:
In 2015 GSP financed a mixed-use retail/SRO-Hotel project in the “SoMa” (South of Market area) of San Francisco for $10,000,000. The Sponsor has continued to improve the Property and create additional value. Over the last several years the Property has doubled in value. The Sponsor was looking to recapitalize the original loan and take out $5,000,000 of cash equity.

Challenges:
The Sponsor did not want to pay prepayment penalties or incur a large refinance expense. The existing Lender did not have a program to allow for recapitalization or additional funding of their current loan.

Solution:
GSP underwrote and proposed a recapitalization program that would allow the Lender, with only a 25 bps increase, to provide a new $15,000,000 loan that provided the Borrower with $5,000,0000 cash-out. This allowed the Borrower to get the proceeds needed without refinancing expenses or prepayment penalties.

Advisors

Bryan Shaffer
Principal/Managing Director
Max Lehrman
Vice President
Ruben Bohbot
Assistant Vice President
Meron M. E. Amar
Analyst

$3,624,000 Multifamily Value-Add Recapitalization for 119 Units in San Antonio, TX

Rate: L+535
Term: 36 Months
LTV: 65%
Extension Options: Two 6-month options
Amortization: Interest Only for the initial term, then 20 year amortization during extensions, if exercised
Prepayment Penalty: None
Guaranty: Non-Recourse

Transaction Description:
George Smith Partners successfully arranged $3,624,000 to finance a value-add reposition of a 119-unit apartment in San Antonio, TX. The Lender funded $3,224,000 upon closing and held back $400,000 for capital expenditures to be invested over the next two years.

Challenge:
The Property had been purchased less than 1 year earlier with a 1-year seller note. There was substantial deferred maintenance that had not yet been completed, so the business plan was just starting. The client’s “go-to” lender was not interested in the financing due to the size and the still required “heavy lift”. Most lenders in this this size category require full recourse, which the Sponsor would not provide.

Solution:
George Smith Partners located a lender who the client didn’t previously know and who is accessed only thru a select group of mortgage brokers who looks for these types of transactions. The Lender agreed to provide an additional $400,000 for the renovations. Some negotiations were required to restructure the recourse provisions to springing recourse in the event of involuntary bankruptcy.

Advisors

Steve Bram
Principal/Co-Founder

SPEAKERS CORNER

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
Mezzanine and Preferred Equity Up to 90% LTV

George Smith Partners is working with a national lender offering preferred equity programs for all property types ranging from $15,000,000 to $50,000,000 in primary and secondary markets. With the ability to advance 90% of purchase price for Mezzanine and Preferred Equity, pricing starts at LIBOR + 600 with floating rates up to five years. The lender offers a flexible prepayment structure and future funding.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Equity and Bond Markets Rally

This week saw a new all time high in the S&P followed by a big drop in Treasury yields. Huh? Are we in “risk-on” or “risk-off” territory? Maybe it’s a case of stocks rallying on earnings reports and the tail end of buybacks stemming from the tax cut. Meanwhile, bonds are rallying on recent news forecasting a potential slowdown in the world’s major economies. The 10 year T is at 2.53%. Today’s bond market rally was fueled by a weaker than expected German sentiment, Australian price index very flat with their central bank poised to cut rates, a moderating of oil prices. US Treasury yields are low partially due to the relative value of other major industrial nations yields (many of which are negative or below 1.00%). Futures markets indicate no rate increases but rate cuts. It feels like a continuation of a “Goldilocks” period where many major developments are multifaceted and not entirely positive or negative. Example: the China-US trade talks. A deal seems likely (positive) but the details will probably lead to continued conflict in years to come as not all of the issues will be settled cleanly. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

More Perspectives ›

Qualified Opportunity Zone Podcast

Zack Streit, Senior Vice President at George Smith Partners participated on a QOZ podcast with Kevin Kim, Partner at Geraci LLP.  Click here for the podcast and video.

The podcast will go into detail about:

  • The rules
  • Fund Structures
  • Waterfall & JV Best Practices

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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