FINfacts™ XXIV – No. 179 | August 7, 2019

MARKET RATES
Prime Rate 5.25
1 Month LIBOR 2.21
6 Month LIBOR 2.05
5 Yr Swap 1.41
10 Yr Swap 1.54
5 Yr US Treasury 1.54
10 Yr US Treasury 1.72
30 Yr US Treasury 2.24

RECENT TRANSACTIONS
$19,900,000 Acquisition Financing for Burbank Collection Retail Condominium

Rate: 3.85%
LTPP (Loan-to-Purchase Price): 76.5%
Term: 10 Years
Amortization: 30 Years
Interest-Only: 3 Years
Guaranty: Non-Recourse
Lender Fee: Par
Open Prepayment: Last 6 Months

Transaction Description:

George Smith Partners arranged a $19,900,000 CMBS acquisition loan for the purchase of the Burbank Collection, a 39,000SF retail condominium located in Burbank, CA. The Burbank Collection houses well-known food concepts such as Yard House, Panera Bread, Pinkberry, and Boiling Crab along with Barney’s Beanery and Steak ‘N Shake. The Class-A ground floor retail space underlies 118 residential condominium units, is situated on a pedestrian promenade and is shadow-anchored by the AMC Burbank 16 movie theater, one of the highest grossing AMC theaters in the country.

GSP’s extensive lender relationships allowed for the marketing of this financing to many different banks and life insurance companies as well as CMBS lenders. The most challenging hurdle at the outset with each lender was to make them comfortable with the condominium structure. Prior to the signing of the lender’s loan application, GSP requested that the Lender’s legal counsel engage in a full review of condominium documents to ensure that the Lender would be comfortable with the intricacies of condominium ownership.

After the loan was in application the 10-Year Treasury and Swap indices dropped approximately 40 bps below the rate floor set in the loan application. GSP’s long-term relationship and track record with the Lender gave GSP the negotiating leverage to convince themto drop the rate floor. This effectively split the benefit of the rate decrease with our Sponsor.

GSP obtained maximum proceeds as the loan was sized to 76.5% of purchase price and 75% of value. The all-in interest rate was priced at 157 bps over 10 Yr Swaps and includes three years of interest-only payments.

Advisors

Gary M. Tenzer
Principal/Co-Founder
Drew Freeman
Assistant Vice President

$15,050,000 CMBS Non-Recourse Permanent Financing for the Acquisition of a 130-Key Marriott Branded Select-Service Hotel; Corona, CA

Rate: 10 year Swap + 2.78%
Term: 10 year fixed rate loan
Amortization: 30 years
LTV: 72%
Debt Yield: 10.9%
Debt Coverage Ratio: 1.70x
Prepayment: Defeasance
Guaranty: Non-Recourse
Lender Fee: Par

Transaction Description:

George Smith Partners successfully arranged $15,050,000 in non-recourse permanent financing secured by a 130-room Marriott branded select-service hotel in Corona, CA. The hotel is located at the gateway of the Inland Empire, close to the freeways. The loan is sized to 72% LTV fixed for 10 years at 4.79% with 30 year amortization.

The Sponsor acquired this hotel as an expansion of their current hospitality portfolios. They were looking for high leverage financing to minimize the cash down payment required at closing.

GSP sourced a lender willing to provide higher LTV than most other hotel lenders on a non-recourse basis which minimized the Sponsor’s cash equity contribution at closing. The Lender understood the potential of the Inland Empire lodging market and was able to navigate through the complexities of the transaction and loan process. GSP facilitated and expedited the closing in order to meet the deadline of the purchase contract. Additionally, GSP pre-negotiated with the Lender to waive their $7,500 application fee and capped their legal fees at $35,000.

Advisors

Gilda Rivera
Senior Vice President
Irene Liu
Assistant Vice President

$3,500,000 Cash-Out Financing for Land on Melrose Ave and La Brea Blvd; Los Angeles, CA

Rate: LIBOR + 460 with 7% Floor
Term: 2 Years
LTV: 50%
Amortization: Interest Only
Yield Maintenance: None
Guaranty: Full Recourse

Transaction Description:

George Smith Partners secured financing for a $3,500,000 loan on a former gas station at the corner of Melrose and LaBrea. The challenge was finding a bridge lender willing to lend on vacant land entitlement by-right for multi-family residential that will not commence construction for at least 18 months while also providing $500,000,000 in cash-out proceeds.

GSP was able to exceed the Sponsors expectation with respect to cash-out proceeds basing the loan on an updated appraisal which recognizes the site’s receipt of a Transit Oriented Communities (TOC)Tier 2 “up zoning” which occurred in 2017 after the land was acquired by the Sponsor and doubled the number of units that can be developed on the site. The 2 Year floating rate execution is a full recourse loan with a rate of L + 460 (7% floor) cash-out proceeds and a holdback for interest carry during the term of the loan.

Advisors

Alina Mardesich
Senior Vice President
Michael Smilove
Assistant Vice President

SPEAKERS CORNER

Please join Bryan Shaffer, Principal/Managing Director at George Smith Partners, and other industry leaders on Tuesday, August 13th for the Bisnow Opportunity Zone Conference at the L.A. Grand Hotel Downtown. Mr. Shaffer will moderate the Strategic Implementation & Community Development panel at 9:10 am. The discussion will cover how OZs will benefit everyone. For 20% off your registration, enter the code, OZAHERELA20. Register here.


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HOT MONEY
Preferred Equity Bridge Financing for Acquisition/Renovation and Construction; up to 85% LTC

George Smith Partners is working with a nationwide lender and equity investor. Funding transactions from $2,000,000 – $20,000,000 for hospitality, industrial, office, retail, self-storage, single-tenant, assisted living and multifamily. The lender offers bridge financing starting at 8% with terms up to three years and 85% of cost. Value add, distressed and opportunistic opportunities are 90% of total equity for 12-60 months for a joint venture, preferred equity, mezzanine or GP co-invest structure.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
The New Normal has Devolved Into A “Race to the Bottom” For Rates and Currencies

Worldwide bond yields are plummeting as fear grips the market.  The 10 year T is at 1.71%, after dropping to a 3 year low of 1.60% today.  Last Tuesday it was at 2.08%, the day before the confusing and market disappointing Fed announcement.  That seems like ages ago after a tumultuous week featuring one of the market’s worst fears: trade disputes both actual and threatened.  A pillar of the post Cold War world economic order has been free trade and unmanipulated.  Interestingly, the last time the 10 year was below today’s yield was in the aftermath of the Brexit vote.  The specter of major economies manipulating currencies was triggered this week as China allowed the yuan to drift beyond a key level in relation to the US dollar.  Today, 3 significant central banks (Thailand, India, New Zealand) cut rates significantly ranging from 0.25% to 0.50%.  This will devalue those currencies as smaller countries feel they need to keep up with China and the US.  Will a worldwide devaluation of currency finally trigger inflation? 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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