FINfacts™ XXIV – No. 173 | June 26, 2019

MARKET RATES
Prime Rate 5.50
1 Month LIBOR 2.40
6 Month LIBOR 2.18
5 Yr Swap 1.77
10 Yr Swap 1.98
5 Yr US Treasury 1.80
10 Yr US Treasury 2.05
30 Yr US Treasury 2.57

RECENT TRANSACTIONS
$18,600,000 Bridge Financing for Purchase of 112 Unit Multifamily Property; 80% LTC; LIBOR+2.55%; 4+1 Term; Seattle, WA

Rate: Floating at 1 Month LIBOR + 2.55%
Term: 4+1
Amortization: Interest Only
Fees: 1% in/0% out
Prepayment Penalty: 24 months minimum interest
LTC: 80%
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners secured $18,600,000 in proceeds for the purchase of a 112-unit multifamily property located in the Seattle metro area. The fully funded loan represents 80% of the project capitalization. The loan provides $15,400,000 at close, with an additional $3,200,000 in future funding for capital expenditures. When discussing the transaction with bridge lenders, GSP found that most capital sources offered a 3+1+1 term with in/out fees of 1%/0.5%. The selected lender provided a unique program featuring a 4+1 term, 1% origination fee, and 0% exit fee. Instead of using boilerplate loan docs, the lender began with pre-negotiated docs from a previous transaction with a similar borrower. This helped to greatly reduce legal fees for the Sponsor. Although the going-in debt yield was about 3%, the Lender did not stipulate a minimum at closing. Rather, GSP structured an Interest Reserve since it was below a 1.0 DCR going in. While all lenders required a cash management account, the selected lender did not have a debt coverage ratio test until the 25th month after closing. The loan closed in just 40 days from the signed application.

Advisors

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

$8,000,000 Cash Out Refinance of a Multifamily Renovation; Los Angeles, CA

Rate: 5.25%
Term: 3 Year
Amortization: 30 Year
LTV: 70% LTV
Guaranty: Recourse
Lender Fee: None

George Smith Partners arranged $8,000,000 in cash out financing for a multifamily property in Los Angeles. The Sponsors’ goal was to quickly purchase, renovate and lease the Property. Due to the competitive market for multifamily in Los Angeles, six months ago, GSP arranged an expensive, quick-close financing to allow our Sponsors to complete the purchase of the subject property faster than their competitors. GSP financed the property at 80% of purchase price with a private debt fund. Now, GSP has refinanced the Property allowing the Sponsor to recover the capital invested in renovation and tenant buy-outs. This financing now reduces the cost of capital and allows the Sponsor to receive cash out to cover all capital expenditures. Most lenders would have required additional seasoning or limited the cash out. Through utilizing GSP’s relationships and the competition GSP created in the market, the Lender was willing to provide the requested capital.

Advisors

Bryan Shaffer
Principal/Managing Director
Max Lehrman
Vice President
Ruben Bohbot
Assistant Vice President

$2,180,000 Spec Single Family Residence Construction Loan to 75% of Cost; Los Angeles, CA

Rate: Prime + 0.75%
Term: 18 Months with one 6 month extension Lender Fees: 0.75%
Amortization: Interest Only
LTC: 75%
Guaranty: Recourse
Prepayment Penalty: None

Transaction Description:

George Smith Partners placed $2,180,000 in construction financing for a spec single family property in the upscale Cheviot Hills submarket of Los Angeles. The Sponsor’s business plan was to expand and redevelop the existing property into a 5,900 square foot spec luxury single family property. The challenges on this transaction included the need for maximum proceeds (75% loan to cost) and a sponsor embarking on its first ground up development project. Most lenders struggled given these challenges. However, after an extensive marketing effort, George Smith Partners sourced a lender that was comfortable with the leverage request. Given the Sponsor’s limited track record, a completion guarantee from the Sponsor’s general contractor was required, which GSP successfully negotiated. Sized to an aggressive 75% of total cost, the interest only loan is freely prepayable and will float at 0.75% over the WSJ Prime for 18 months.

Advisors

Zachary Streit
Senior Vice President

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HOT MONEY
Floating and Fixed Rate Bridge Financing with Future Funding

George Smith Partners is working with a national capital provider that will provide non-recourse floating and fixed rate bridge financing up to 80% of cost for commercial real estate value add opportunities, with future funding for leasing, capital work, interest/carry and earnouts. With terms up to 5 years, the loan sizes range from $3,500,000 to $35,000,000 (and larger for portfolios) and floating pricing from +/-300 bsp over LIBOR and fixed pricing from 4.75%. Program highlights include no interest on unfunded future dollars, no minimum initial cash flow requirement at closing and flexible prepayment.

More Hot Money ›

KIRISITS’ CORNER

Despite conflicting comments this week from Federal Reserve Chairman Jerome Powell and St. Louis Fed President James Bullard, a rate cut of 0.50% by the end of this year is still widely expected by the market. Although weaker U.S. economic data has recently bolstered the case for a rate cut, trade negotiations at this weekend’s G-20 meeting remain a major source of uncertainty. Any good news about a comprehensive trade deal between the U.S. and China could send risk assets and bond yields higher. Alternatively, if talks break down and additional tariffs are imposed, global economic growth will likely remain muted in the near term. For the time being, the low level of interest rates is spurring a great deal of CRE activity. By Matt Kirisits, Vice President

PODCAST

Shahin Yazdi, Principal/Managing Director was a guest on the RealCrowd Podcast, The Art of the Capital Stack.

Click here to listen to a replay of the podcast.

Click here to read the transcript.

 

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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