FINfacts™ XXIV – No. 180 | August 14, 2019

MARKET RATES
Prime Rate 5.25
1 Month LIBOR 2.20
6 Month LIBOR 2.03
5 Yr Swap 1.42
10 Yr Swap 1.48
5 Yr US Treasury 1.49
10 Yr US Treasury 1.58
30 Yr US Treasury 2.02

RECENT TRANSACTIONS
$15,400,000 Non-Recourse Acquisition Financing for Office Tower; 3.68%; 70% LTV; 10 Year Interest Only; San Fernando Valley, CA

Rate: Fixed at 3.68%
Term: 10 years
Amortization: Full Term Interest Only
LTV: 70%
DCR: 1.4
Guaranty: Non-Recourse: Fixed at 3.68%

Transaction Description:
George Smith Partners secured $15,400,000 in non-recourse acquisition financing for an office tower located in the San Fernando Valley. The loan is fixed at 3.68% for 10 years with full term interest only payments. The proceeds represent 70% of the acquisition price.

Challenges:
The Property has over 40 tenants and many leases will roll within the next 2-3 years. Shortly before the PSA was signed, a major tenant moved out resulting in vacancy of 10%. The Property receives income both from cell tower leases and excess parking capacity, but many lenders do not give credit for these types of revenue. The seller included both regular operating expenses and capital expenditures in the historical P&Ls.

Solutions:
GSP demonstrated that the Property had historically high occupancy above 95% and provided data that demonstrated the strength of the local office market. This made the Lender comfortable with the short term leases and the temporary increase in vacancy. Additionally, while the loan was in application, the Sponsors signed a new lease to bring occupancy back up. The Lender did not require seasoning on this new lease. The Lender was able to include cell tower and parking income based on the historical P&Ls. Finally, GSP obtained the Seller’s general ledgers and was able to separate out major capital expenditures from the P&Ls. The Lender was ready to move quickly and close in about 30 days, but the Seller requested an extension and the loan closed about 50 days from application.

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

75% Loan-to-Value Non-Recourse Financing for a Newly Redeveloped Two-Tenant Retail Property; Utah

Rate: 4.60% Fixed; coupon reflects 10-year Swap index as of December 2018
Term: 10 Years
Amortization: 30 Years
Loan to Value: 75%
Prepayment: Yield Maintenance
Lender Fee: None

Transaction Description:

George Smith Partners successfully placed $6,750,000 of non-recourse, ten-year fixed-rate first mortgage debt collateralized by a 3.36-acre parcel partially encumbered by a ground lease and improved with a 43,500 square foot retail box formerly occupied by a grocery store. The improvements are newly demised into two spaces 100% leased to a national crafts retailer and regional clothing store, and the collateral also includes two small pads ground leased to a local coffee shop and ice cream parlor. GSP sourced a lender comfortable with providing a 75% leverage permanent loan despite the absence of tenant sales history. Additionally, the Sponsor executed the ice cream parlor ground lease during financing diligence, and GSP worked with the Lender to increase loan proceeds (subject to a lender holdback until tenant opens for business) commensurate with the income attributable to this new lease even though the tenant had not yet built its premises at the time of loan closing.

Advisors

Gary E. Mozer
Principal/Co-Founder
Katie H. Rodd
Senior Vice President
Michael Anderson-Mitterling
Senior Vice President
Kyle Howerton
Senior Vice President
Akash Rohera
Assistant Vice President

$3,700,000 Bridge Financing for a Recently Completed Mixed-Use Development Office & Retail; Temecula, CA

TERMS CONFIDENTIAL

Transaction Description:

George Smith Partners secured a $3,700,000 bridge loan to refinance an existing construction loan for a recently completed mixed-use development in Temecula, CA. The Property is a 14,939 square foot, 3-story office and retail commercial building located in the Old Town Temecula District. The spec development included the use of EB-5 equity in a tertiary market and required a lender who understood the Property’s unique location and ownership characteristics.

Advisors

Scott Meredith
Senior Vice President
John Thrall
Assistant Vice President

SPEAKERS CORNER

Please join Zack Streit, Senior Vice President on Thursday, August 15th for the Seattle Interface Multifamily Conference at the Hyatt at Olive 8 from 7:30 – 11:30 am. Zack will moderate the discussion, “Who’s Lending, What Terms and What is the Outlook for 2020?” Register here.

Please join Antonio Hachem, Principal at GSP and other industry leaders on Tuesday, August 20th from 8:00 – 11:00 am at the L.A. Grand Hotel Downtown for the Bisnow – Southern California Industrial & Logistics Summit. Antonio will be a panelist for Infill Intuition & Development Trends discussion. Register here.


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HOT MONEY
Non-Recourse Bridge Financing at 4.99% Pay Rate

George Smith Partners is working with a private bridge lender providing non-recourse short-term loans secured by first trust deeds on commercial and non-owner-occupied residential real estate in prime California markets. The loan product offers “Pay Rate Protection,” which reduces borrowers’ monthly payment to 4.99% per annum for the entire loan term and defers the remaining interest until loan pay-off without compounding interest. Leverage for Multifamily, Office, Retail, Industrial, Mixed-Use, Covered Land, and Non-Owner Occupied Residential up to 65% of As-Is value for transactions up to $10,000,000 with fixed interest rates between 7.99% and 8.99%. Transactions can be completed within two weeks and there are no prepayment penalties.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Yield Curve Inverts and “Un-Inverts”, Inflation is Ignored (For Now)

The classic and most watched measure of yield curve inversion (the 2 year T higher than the 10 year T) occurred this week for the first time since 2005. The 10 year was at 1.623%, the 2 year at 1.634%. Worldwide stock markets plummeted and investors rushed into bonds, sending yields lower and actually bringing the 10 year slightly above the 2 year as of tonight. The 10 year T dropped to 1.58% as of today (note this is only 22 bps above it’s all time low). Markets seem to be painting central banks into a corner – forcing further rate cuts.  The expectation that the Fed will cut 0.25% at its September meeting is now being superseded by thoughts of a 0.50% cut or a “surprise” cut before the next meeting. Interestingly, no one seems to be concerned that CPI posted its strongest 2 month gain since early 2006. This inflationary news should have sent bond bulls running for the exits and dampening Fed rate cut expectations. But scenes of social unrest in Hong Kong (a critical bond trading city) and Argentina are fueling bond rallies in a very “risk off” market. 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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