FINfacts™ XXIV – No. 175 | July 10, 2019

MARKET RATES
Prime Rate 5.50
1 Month LIBOR 2.37
6 Month LIBOR 2.26
5 Yr Swap 1.88
10 Yr Swap 2.05
5 Yr US Treasury 1.83
10 Yr US Treasury 2.06
30 Yr US Treasury 2.57

RECENT TRANSACTIONS
$27,000,000 Non-Recourse Financing – 163 Single Family For Rent Portfolio; Humble, TX

Rate: Prime + 0
Term: 3 years
Amortization: IO
LTC: 65%
LTV: 60%
Guaranty: Non recourse
Lender Fee: 1 point

Transaction Description:

George Smith advised on $27,000,000 of debt and equity financing for 163 purpose built, single family homes for rent in Humble, Texas. Bank debt of $16,700,000 was secured on a non-recourse basis. The homes will range from 1,200 sf to 1,500 sf and will each have a two car garage. Amenities are expected to include greenspaces, a neighborhood lodge, a fitness room, a children’s playroom, and a playground for both children and adults. Infrastructure development will commence immediately, and home construction is expected to commence in the second quarter of 2020. Initial occupancy is expected for late in the second quarter of 2020. The Property will include on-site leasing and management. The location of the Property is in close proximity to growing employment hubs including George Bush Intercontinental Airport, Generation Park, and the Port of Houston. The Community is situated in the award-winning Humble Independent School District and residents are zoned to the recently built Groves Elementary School and Westlake Middle School in The Groves master-planned community, as well as Summer Creek High School.

Advisors

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

$10,200,000 Refinance of a Multi-Tenant 100% Occupied Office Building; San Diego, CA

Rate: 3.68%
Term: 10 Years
LTV: 56%
Guaranty: Recourse

Transaction Description:
George Smith Partners successfully arranged a $10,200,000 refinance of a 69,552 square foot, multi-tenant office building in San Diego. The permanent recourse financing is fixed at 3.68% for the first five years with a rate reset for the remaining five years. The loan amortizes for 25 years with a declining step down prepay penalty.

Challenges:
There is rollover risk of approximately 53% of the square footage from the largest tenant, with their lease expiring in three years. Because of this, other lenders proposed limited loan terms of five years or less or simply declined the financing request. Lender’s willing to finance required reserves to mitigate the rollover risk which was unappealing to our Sponsor.

Solutions:
George Smith Partners worked with a new banking relationship who was able to get comfortable with the rollover risk given the conservative 56% loan to value request. The strength of the Sponsor and longevity of ownership helped the Lender meet the Sponsor’s financing requests.

Advisors

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

$3,400,000 Covered Loan for New Hotel Development 80% LTC; Los Angeles, CA

Rate: 8.3%
Term: 1 Year
Amortization: Interest only
LTV: 80% of Purchase Price
Prepayment: None
Guaranty: Non-Recourse
Lender Fee: 1%

George Smith Partners secured financing for a non-recourse $3,400,000 covered land loan for a hotel development in Los Angeles. There is currently an existing building on the Property which allowed GSP to structure a highly leveraged land loan. Usually land loans are limited to 50% of the purchase price, but GSP’s strong relationships and experience allowed for the value of the current improvements to achieve much higher leverage.

Advisors

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

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HOT MONEY
High Leverage Non-Recourse Bridge Financing

George Smith Partners is placing high leverage non-recourse bridge debt up to 80% + of cost through a national portfolio lender. Funding value add transactions from $4,000,000 to $50,000,000 the Capital Provider offers flexible loan structures with terms up to 5 years. Floating rate pricing starts from LIBOR + 290. Lender has a particularly strong appetite for Multifamily product in secondary markets nationwide. Other property types they will finance are: Office, Retail, Industrial and Hospitality.

More Hot Money ›

SPECIAL ANNOUNCEMENT

We are excited to announce that Shahin Yazdi and his wife Shiva give birth to a healthy baby boy!



Pascale's Portrait
PASCALE'S PERSPECTIVE
Gloomy Fed Outlook Rallies Markets

Today the world’s most influential banker (Fed Chair Powell) testified to Congress about global economic uncertainties including trade tensions, tariffs, and overall weakness in the global economy. Market reaction? The S&P index rallied to 3,000, it’s all time high. Why? We are back to the contrarian new cycle as bad news equals the return of the punchbowl (rate cuts). Powell’s testimony along with St Louis Fed President Bullard’s recent comments regarding a half point “insurance” move against global growth slowing means markets have priced in at least a half point decrease in the 2nd half of 2019. As oil prices spiked on global tensions (US/Iran) and weather (storms off the coast of Mexico), Powell expressed concern over “persistent weak inflation”. He also waved off last week’s positive US jobs report. For our borrowers, the news is good for now: indices (Treasuries and LIBOR) continue to drop, spreads are steady and lots of liquidity.

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 at (310) 867-2995 or taugust@gspartners.com


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