FINfacts™ XXIV – No. 176 | July 17, 2019

MARKET RATES
Prime Rate 5.50
1 Month LIBOR 2.30
6 Month LIBOR 2.21
5 Yr Swap 1.82
10 Yr Swap 2.00
5 Yr US Treasury 1.81
10 Yr US Treasury 2.04
30 Yr US Treasury 2.56

RECENT TRANSACTIONS
$67,250,000 of Non-Recourse High-Leverage Senior Construction Financing for the Ground Up Development of a 254-unit Multifamily Tower in Phoenix, AZ

Terms Confidential

Transaction Description:

George Smith Partners arranged $67,250,000 in non-recourse senior construction financing for the ground-up development of a market rate 254-unit, 17 story, multifamily tower in Phoenix, Arizona. The Property is in the Roosevelt arts district of downtown Phoenix near the Valley Metro Rail, Arizona State University graduate schools of journalism and law, as well as the University of Arizona Cancer Center. The Property will feature amenities such as a roof top pool overlooking the downtown skyline and beyond. Sized to 80% of total project cost, the interest only loan will strike a desired balance of debt to equity for the local developer. The Borrower was sensitive to standard bank underwriting decision making and asset management structures. GSP sourced non-recourse construction financing from a non-bank lender with a streamlined and flexible decision-making structure. The capital provider and their asset management team will act more like a partner than a lender from closing through development and payoff.

Advisors

Scott Meredith
Senior Vice President
John Thrall
Assistant Vice President

$41,000,000 in Permanent Financing for 187,000 SF, Shopping Center in Lakewood, CA

Rate: 3.97% Fixed for Entire Term
Term: 10 Years
Amortization: Full-Term Interest Only
Loan-to-Value: 65%
Guarantee: Non-Recourse
Lender Fee: Par
Prepayment: Defeasance

Transaction Description:

George Smith Partners secured $41,000,000 in non-recourse debt to refinance an existing senior and mezzanine loan for a regional Southern California shopping center. The Property is 187,000 square foot center; 100% occupied, with anchor tenants Hobby Lobby and Michaels. GSP worked with the lender to assuage B-Piece buyer concerns of the anchor tenant’s termination risk. Loan proceeds repaid the existing senior and mezzanine loans, covered closing costs, and provided a return of equity to the Sponsor. The financing is a 10 year full term interest only loan that maximizes cash flow for the Sponsor. The non-recourse fixed-rate loan priced at 1.57% over the 10-year Treasury that had a floor of 2.40% at application.

Advisors

Steve Bram
Principal/Co-Founder
David R. Pascale, Jr.
Senior Vice President
Patrick O’Donnell
Vice President
Nick Rogers
Vice President

$9,300,000 Non-Recourse Cash Out Refinance For Los Angeles Multifamily Property

Rate: Fixed at 4.04% for 7 years then floats at 6 Month LIBOR + 2.25%
Term: 30 years
Amortization: 30 years
Prepay: 4,3,2,1,0
LTV: 65%
DCR: 1.15
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners secured a $9,300,000 Non-Recourse refinance loan for a 35 unit multifamily property in Los Angeles. The loan provides 65% leverage and is fixed at a rate of 4.04% for seven years. Over the past 3 years, the Sponsors renovated 27 of the 35 units with a heavy lift that neared $50K per unit. GSP sourced a lender that gave the Borrowers maximum credit for the higher income that resulted from leasing the newly renovated units. The Lender did not require seasoning on the new leases. In order to maximize underwritten cash flow, GSP provided data that demonstrated the very low vacancy percentage in the submarket. This allowed the Lender to use a slightly lower vacancy factor than that of a typical apartment transaction. Additionally, the Lender used market rate expenses despite some variation in the historical P&Ls. The Lender was able to rate lock at application and close in about 55 days.

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
Paul Monsen
Vice President

SPEAKERS CORNER

Please join GSP’s Antonio Hachem and Paul Monsen, as well as other industry leaders on Thursday, July 18, 2019 for the Connect Bay Area Conference at the Grand Hyatt San Francisco. Antonio Hachem will participate on the panel, “Deal Flow Across the Capital Stack” and Paul Monsen will participate on the panel, “Focusing on Opportunity Zones in the Bay Area”. Click here to register.  Enter GSP20 for 20% off the registration.


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HOT MONEY
Preferred Equity & Mezzanine Financing Up to 90% LTV

George Smith Partners is working with a national lender offering preferred equity programs for office, urban retail and multifamily properties ranging from $5,000,000 to $50,000,000 in primary and secondary markets. With the ability to advance 90% of purchase price for new acquisitions, refinancings, recapitalizations, restructurings, DPOs, workouts and partner buy-outs pricing starts at 8% for terms up to seven years. The lender offers a flexible prepayment structure and future funding.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Promises Kept? Markets Hope So

The Fed has spent the last six weeks telegraphing a rate cut to occur at the July 30-31 meeting. The markets have priced in the expected cut; the “Powell put” is in effect. The rationale is the usual: prevent slowing growth and stimulate inflation closer to the 2.0% target. The 10 year treasury has traded in the 2.00% range since Powell and other Fed officials described the cut as “insurance” against further slowdowns and trade uncertainty. The problem with the Fed’s timing is that the latest economic data indicates strong growth (manufacturing output, retail sales, employment) and signs of inflation (CPI, PPI). It’s part of the contrarian news cycle: A vote of confidence by the Fed (no rate cut) will create market volatility. Debt Ceiling Update: The news last week that the Treasury will reach its debt limit in early September without an increase has created the usual Washington drama with very little time to spare (the House of Representatives recesses on July 26). This has started to disrupt the treasury market with a selloff in short term treasury notes (3-6 months), spiking those yields and creating some inversion. 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 at (310) 867-2995 or taugust@gspartners.com


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