FINfacts™ XXIV – No. 177 | July 24, 2019

MARKET RATES
Prime Rate 5.50
1 Month LIBOR 2.27
6 Month LIBOR 2.18
5 Yr Swap 1.79
10 Yr Swap 1.97
5 Yr US Treasury 1.81
10 Yr US Treasury 2.05
30 Yr US Treasury 2.58

RECENT TRANSACTIONS
$460,000,000 Non-Recourse Senior Construction Financing for the Ground Up Development of Block 216, a 35-Story Mixed-Use High-Rise Anchored by a 251-Key Ritz Carlton Hotel; Portland, OR

All terms confidential

Transaction Description:

George Smith Partners structured and placed a $460,000,000 non-recourse senior construction loan for the ground up development of Block 216, a landmark 1.1 million square-foot ground-up high-rise development in the heart of Portland, Oregon’s central business district. The 35-story luxury high-rise will be anchored by a 251-key five-star Ritz-Carlton hotel, the first five-star hotel in Portland. The development also features Ritz-Carlton branded residences, 140,000 square feet of Class A office space, and 7,800 square feet of ground floor retail, which will open up to a pedestrian “festival street.” Located at the intersection of the Central Business and Pearl Districts, Block 216 spans a full city block. This is extremely rare in Portland. Upon completion in 2023 Block 216, will be the fourth tallest high rise in Portland and the largest tower in Portland based on square footage.

Challenges:

Block 216 represents the first luxury, five star hotel and branded residential project in Oregon. It is also the first project with amenities common to luxury properties but absent in Portland thus far. This ground up development is also a true mixed used project with four different uses (hotel, residential, office and retail) in a single building.

Solutions:

GSP focused on Portland’s incredibly strong underlying fundamentals, including: its population of 2.5 million; its unemployment rate 50 basis points lower than the national average; its 1,200 tech companies (hence the name “Silicon Forest”); the impressive number of blue chip companies with presences in the market; and, the considerable number of institutional investors active in the market. GSP also stressed the Project’s unparalleled location and walkability to every major amenity in Downtown Portland as well as the 30 new conferences booked at the Portland Convention Center as a significant demand driver for five star accommodations.

GSP executed significant and high profile marketing to ensure the Project was appropriately received in the capital markets. These efforts resulted in a highly structured, non-recourse execution in less than six months from engagement.

 

Advisors

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

GSP Increases Financing to $11,200,000 to Cover Renovation Cost Overruns in Five Days; Orange County, CA

Rate: 8.4%
Term: 1 Year and 1 Year extension
Amortization: Interest only
LTV: 80% Cost
Prepayment: None
Guaranty: Non-Recourse
Lender Fee: 1%

Transaction Description:

After securing an initial loan of $9,700,000 for a well-located Orange County, California retail center, George Smith Partners arranged an additional $1,500,000 in construction/renovation mezzanine capital. This brought the total debt capitalization to $11,200,000. The Sponsor has been renovating the center over the last year but went over-budget due to increasing construction costs.

Challenges:

The Sponsor had used a debt-fund loan to renovate the aging shopping center and make it more vibrant. However, due to rising construction costs, the Sponsor went over budget with the property renovations. Most lenders are not comfortable financing a project that already has expensive debt and is also experiencing cost overruns.

Solutions:

GSP ultimately demonstrated the lender’s last dollar basis was very conservative compared to the as-stabilized value of the property following renovations. GSP utilized one of our relationship lenders to provide the emergency capital and was able to close the transaction within just five days. This allowed the Sponsor to complete construction and focus on leasing the center.

Advisors

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

$3,744,000 of Acquisition Financing for 3 Single Tenant Starbucks’ across Middle America

Rate: Fixed at 4.75% for 5 Years
Term: 10 Years
Amortization: 30 years
Prepay: None
LTV: 62%
DCR: 1.25
Guaranty: Recourse

Transaction Description:

George Smith Partners secured $3,744,000 of permanent financing for the acquisition of 3 single-tenant Starbucks. The drive-thru locations all have new leases with at least 8 years of term left and tenant options to extend. Each property is located in a different state across the middle of the country (Texas, Louisiana, Illinois). The Sponsor wanted to have a single capital source finance all three properties for ease of closing and ongoing servicing. GSP was able to find a lender that could accommodate the variety of locations and provide the same terms for each acquisition. All of the loans are fixed at 4.75% for 5 years and have a 30-year amortization schedule. Loan amounts were sized to a 1.25x DSCR, which resulted in an average LTV of 62%. The recourse financings do not have any prepayment penalties and can be refinanced at any time.

Advisors

Steve Bram
Principal/Co-Founder
Patrick O’Donnell
Vice President

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HOT MONEY
Permanent & Construction-to-Perm Financing for Spec or Pre-Leased Properties

George Smith Partners is working with a national portfolio lender offering permanent and construction-to-perm loans for Industrial Warehouse product ranging from $10,000,000 to $65,000,000. With the ability to advance up to 75% for existing construction/permanent properties, pricing starts at 4% for existing assets and 5% for construction. Spec deals without preleasing are considered. The lender offers a flexible prepayment structure, with I/O during construction and lease up. Additional flexibility available on pricing on a case by case basis.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Debt Ceiling Agreement Pushes Reckoning Out To?

Washington is not known for making tough financial decisions and this week was no exception. The 2 year suspension of the debt ceiling definitely will increase the supply of Treasuries in coming years. The lack of fiscal discipline seems like a de facto embrace of Modern Monetary Theory. So, are Treasury yields spiking? Not yet. Global growth worries remain, along with more extraordinarily accommodative central bank stimulus. Today’s alarm signal was German manufacturing PMI at a 7 year low, prompting the ECB to most likely cut rates again tomorrow. Negative yielding bonds in Japan and Europe make a 2.00% 10 year T look good. Next week should be interesting with the senate vote on the debt ceiling on Tuesday (assuming the House passes this week), followed by the most telegraphed rate cut in recent history next Wednesday, July 31. 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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