FINfacts™ XXIV – No. 167 | May 15, 2019

MARKET RATES
Prime Rate 5.50
1 Month LIBOR 2.44
6 Month LIBOR 2.59
5 Yr Swap 2.17
10 Yr Swap 2.33
5 Yr US Treasury 2.15
10 Yr US Treasury 2.38
30 Yr US Treasury 2.82

RECENT TRANSACTIONS
$17,600,000 Bridge Financing for a Portfolio in Los Angeles, CA

Rate: 10%
Term: 12 months + 6 month extensions
Amortization: I/O
LTC: 100%
Guaranty: Full Recourse
Prepayment: 6 months minimum interest on DTLA and San Fernando. Open prepay on South LA
Lender Fee: 3 points

Transaction Description:
George Smith Partners secured a $17,600,000 bridge loan for the acquisition and renovation of three separate commercial and retail buildings in the Los Angeles area. The first building is located in DTLA. Proceeds from the financing will be used for the purchase and adaptive reuse of this 43,000 SF mixed-use building. The second and third buildings are located in the San Fernando Valley and South LA, respectively. Proceeds from the financing will be used for major remodels on both buildings. The building in the San Fernando Valley will undergo a full repositioning of a flower shop into a new state-of-the-art, standalone coin-laundromat. The South LA mixed use asset is 75% complete. It is comprised of a two-story commercial building containing a 9,000 sf laundromat on the ground level with two residential units on the second floor. The entire Property was taken down to the studs, and a portion of this financing will cover the remaining cost of completion.

Challenges:
Despite the strength and experience of the Sponsor, we faced four major issues in obtaining financing for our Sponsor. The first challenge was unresolved past title issues. The second challenge we were up against were maturing interim loans. Next, due to the high volume of projects in the City of LA, power connection to one of our sites was delayed. Lastly, the initial financing request was for 85% LTC. After GSP’s full analysis, we discovered that the financing needed to payoff existing liens and provide the working capital needed for a successful execution was closer to 100% LTC.

Solutions:
GSP worked with a private balance sheet lender that provided a tailored bridge loan for the full capital stack. The initial term is for 12 months plus extensions. Because of GSP’s past experiences with this lender, we were confident in their ability to navigate such a complicated structure and their certainty of execution.

Advisors

Antonio Hachem
Principal
Loren Bedolla
Senior Vice President
Wendy Wang
Vice President
Michael Leahey
Vice President
John Choi
Assistant Vice President

Non-Recourse Cash Out Refinance of Retail Strip Center in Los Angeles

Rate: Fixed for 10 years at 4.85%, followed by floating at 6 month LIBOR plus 2.5%
Term: 30 years
Amortization: 30 years
Prepayment Penalty: 3,3,2,2,1,1,1
LTV: 65% maximum
DCR: 1.35x
Origination Fees: Par
Guaranty: Non-Recourse

George Smith Partners secured a non-recourse cash out refinance loan for a 12,695 SF retail strip center located in Los Angeles. The loan is fixed at a rate of 4.85% for 10 years and is sized to 65% LTV. The majority of the lenders that were surveyed used a 25 year amortization, but the selected lender was able to use a 30 year amortization. This resulted in a lower monthly payment and greater loan proceeds. The property has one vacancy comprising 11% of the space, which resulted in several lenders limiting their proceeds to the in-place loan amount. GSP pointed out that the space has only been vacant for a few months, and provided historical data showing that the center has consistent high occupancy and long-term tenants. As a result, the selected lender was comfortable providing a non-recourse, cash out refinance loan.

Advisors

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

$4,700,000, 75% LTC Loan-to-Cost Financing Fixed for the Acquisition/Reposition of a Rent Controlled Apartment Building in Los Angeles

Rate: L + 4.15%
Term: 36 month initial term; Two 1- Year Extensions
Amortization: Interest Only
Max Loan to Cost: 75%
Lender Fee: 1.0%
Exit Fee: 1.0%
Guaranty: Non-Recourse

George Smith Partners arranged the $4,700,000 non-recourse first mortgage for the acquisition and reposition of a value-add multifamily asset located within a rent controlled market of Los Angeles. The national balance sheet lender provided a non-recourse loan up to 75% of total project cost which includes $1,925,000 of capital expenditures for property improvements and 100% of the tenant buy-out expenses. Interest on future proceeds is not incurred until funds are drawn. A short spread maintenance schedule provides maximum flexibility to allow the Borrower to quickly execute its value-add strategy, prior to taking out financing with permanent debt or a sale. Cash flow is maximized as the loan is interest only during the initial three-year term and priced at 4.15% over 30-Day LIBOR. Due to low going-in cash flow, the Lender structured an interest reserve to cover debt service during the reposition period.

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

SPEAKERS CORNER

Please join Gary Tenzer, Principal/Co-Founder of George Smith Partners and other top industry professionals at the Bisnow – Los Angeles State of the Market event.  Gary will moderate the 9:40 am discussion, “Where Does Investor & Tenant Demand Lie in the Market”?  The event will take place at The Trust Building located at 433 South Spring Street on Wednesday, May 29th at 7:30 am.  For more information, please click here. For 20% off the ticket price, enter the coupon code GSP20.


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HOT MONEY
Non-Recourse Bridge Financing focused on Secondary and Tertiary Markets

George Smith Partners is placing non-recourse bridge debt through a national portfolio lender funding transactions from $5,000,000 to $75,000,000. The Capital Provider offers flexible loan structures with interest only terms between 1 to 5 years and extension options. Floating rate pricing starts from LIBOR + 300. Lender has a strong appetite for manufactured housing, self-storage and hospitality along with four main asset types located in secondary and tertiary markets in addition to primary markets. Opportunities should be cash flowing day one (above 1.0x DSCR) and value-add in nature. Loans can be structured with no lockout and minimum interest of +18 months. Initial loan to cost can go up to 85%, as long as stabilized value and cash flow support 70% takeout level. Future fundings can be structured for capex and TILC costs.

Lender also offers CMBS style loans on all asset types, primarily focused on Manufactured Housing, Self-Storage and Hospitality, loan sizes ranging from $2,000,000 to $25,000,000 with 5-10 year terms and 25-30 year amortization schedules. Typically capping max LTV at 70% for refinances, Lender has ability to structure mezzanine components (as small as $1,000,000) to get up to 80%-85% LTV. Senior Loans currently price in the 4.75% (10-yr loan) area with the Mezzanine components pricing in the 10% – 12% range depending on asset type and LTV of last dollar.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Tarriffs Dominate the Economic Landscape

Up until last week, markets had priced in some kind of US-China trade agreement boosting the economy. The recent breakdown in talks, renewed tariff threats and potential escalation has caused major market volatility. Daily updates from both sides on the status of negotiations are drowning out the regular economic reports that typically set the agenda (unemployment, CPI, manufacturing indices, etc). The 10 year T dropped to 2.36% yesterday, it is testing a key technical lower level. Today’s report that China’s economic data has weakened before the implementation of tariffs reignited the “global slowdown” narrative as Europe also is stagnating. The Fed Funds market indicates a 70% chance of a rate cut this year.
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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