FINfacts™ XXIV – No.165 | May 1, 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 2.30
10 Yr US Treasury 2.50
30 Yr US Treasury 2.94

RECENT TRANSACTIONS
$25,250,000 Cash-Out Refinance, Non-Recourse, Full Term Interest Only in Los Angeles, CA

Rate: 3.96% Fixed for 10 years
Term: 10 years
Amortization: Interest Only
Prepayment Penalty: Yield Maintenance
DCR: 1.55x
Guaranty: Non-Recourse
Origination Fees: Par

Transaction Description:
George Smith Partners secured $25,250,000 for the non-recourse cash-out refinance of a newly constructed, ultra-luxury 49-unit multifamily building located in Los Angeles (Brentwood). The Building is situated in one of the most sought after areas and is in close proximity to popular restaurants, bars and entertainment. The construction take-out permanent loan is fixed at 3.96% for ten years with full term interest only and has a yield maintenance prepayment penalty structure.

Challenges:
The Building was in the final lease up stage when the financing process started and final Certificate of Occupancy had not yet been delivered. The Building also contains four affordable units, which were the last units to be leased up, due to the City’s application certification process. Thus the owner did not have any seasoning on the newly leased units nor any historical operating expenses.

Solution:
GSP identified a capital source that understood the strength of the asset, location and the experience of the Sponsor (Developer). Based on these strengths, the Lender was able to underwrite to in-place income without seasoning and proforma operating expenses, which maximized loan proceeds. The Lender was able to fund once the Property was 95% leased and final Certificate of Occupancy issued. The Sponsor locked a full term interest only structure, which is advantageous to the Property’s cash flow as the new leases begin to season.

Advisors

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

$8,740,000 Acquisition Financing at 91% LTC on an SBA 504 Loan in Los Angeles, CA

Rate: 4.57% fixed
Term: 10 years
Amortization: 25 years
Loan to Cost: 91.1%
Guaranty: Recourse
Lender Origination Fee: None

Transaction Description:

George Smith Partners arranged $8,740,000 of acquisition financing for an owner user retail property in Los Angeles. The Sponsor had been introduced to GSP after they received a loan cancellation from their direct bank. GSP jumped into the loan process right away and worked with the Sponsor, their CDC and the new Lender in order to ensure closing in a timely matter.  The selected Lender that GSP brought in was able to give the Sponsor a much more aggressive interest rate than their direct lender had promised in their LOI. This ended up saving the Sponsor 67 bps on the interest rate and over $240,000 in interest during the first 10 years of the loan.

Advisors

Reuven Risch
Vice President

$6,500,000 Bridge Refinance of Vacant Apartment Building with No Cash-Flow in Los Angeles, CA

Rate: 5.05 % – 30 Day Libor+ 255bps – No Rate CAP Required
Term:
2 Years
Prepayment Penalty:
None
Lender Origination Fee:
1%

Transaction Description:

GSP recently arranged a $6,500,000 bridge loan on a vacant 30-unit apartment community near the Los Angeles CBD. The Property had structural issues and was red tagged by the City. The owner took the 1913 building down to the studs and completely rebuilt the Property. In order to reduce cost and finalize construction, the ownership requested bridge financing.

With no cash flow and no signed leases several lenders were concerned about repayment. Using GSP’s relationships and market expertise we were able to place a Libor floating rate bridge loan. This financing provided the Sponsor the ability to payoff of the current loan. In addition, there was enough capital left over for completion construction and an interest reserve for lease-up.

This take-out financing replaced more expensive financing and provided the Sponsor with the capital needed to finalize the renovation and move to permanent financing. With no prepayment premium and no interest rate cap, it was a very affordable way to bridge between the loans.

Advisors

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

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HOT MONEY
Non-Recourse Permanent Financing Starting at 4.30%

George Smith Partners is currently placing non-recourse small balance financing for commercial and multifamily properties with loan balances up to $10,000,000 in California. Lender has the ability to advance up to 70% of purchase price. The pricing is 4.30% and terms are 5 or 7 years with up to 3 years of interest only payments. The Lender can rate lock at application for 60 days.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
“Transitory” Inflation Shuts Down Rate Cut Talk

Today’s Fed announcement and press conference came in the wake of the latest Personal Consumption Expenditure report indicated a slowing rate of inflation (1.6% vs the 2.0% target). Which begs the “macro” question: Is the long standing (pre-crash) relationship between “full” employment and inflation broken? And if so, is it appropriate for the Fed to cut rates during a period of full employment? The Fed is in the spotlight with recent speculation and high profile pressure on them to do just that. The Fed did not cut rates today and Chairman Powell mentioned “transitory” factors artificially lowering the inflation stats. He cited anomalies in the calculation such as apparel prices (new methodology and unusually low prices) and financial services/portfolio management. This is reminiscent of Fed Chair Yellen’s discussion of “temporary” low cell phone fees dragging down inflation in early 2017. Powell also indicated “no reason to raise or lower the rate”, he may feel that we are at the long sought “neutral” rate and we are finally “there”(not everyone in Washington agrees). 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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