FINfacts™ XXIV – No. 181 | August 21, 2019

MARKET RATES
Prime Rate 5.25
1 Month LIBOR 2.17
6 Month LIBOR 2.02
5 Yr Swap 1.41
10 Yr Swap 1.48
5 Yr US Treasury 1.47
10 Yr US Treasury 1.59
30 Yr US Treasury 2.07

RECENT TRANSACTIONS
$22,800,000 JV Opportunity Zone Equity Financing for the Development of a Lifestyle Hotel in Scottsdale, AZ

Transaction Description:

George Smith Partners advised on the $22,800,000 in Joint Venture QOZ (Qualified Opportunity Zone) Equity Financing for the ground-up development of the proposed Scottsdale project, a 169-key high-end lifestyle hotel. It will sit on a highly-trafficked corner of Camelback Road in the heart of Scottsdale, Arizona’s Old Town Entertainment District. The 6-story, 97,058 square foot hotel will feature a subterranean parking garage, restaurant, lounge, an indoor and outdoor fitness center, and an amenity deck complete with a pool and bar for guest entertainment.

Challenges:

Due to of the project’s location in a Qualified Opportunity Zone (QOZ), the sponsor was looking for a QOZ financing partner who would place capital for the required 10 year horizon as per the QOZ guidelines.

Solutions:

George Smith Partners focused on Greater Phoenix’s and specifically Scottsdale’s disparity of comparable lifestyle hotel product, with little to no deliveries over the past decade. The hotel’s location itself was also a major driving point; Old Town Scottsdale, Scottsdale and the Camelback Corridor are part of Phoenix metro’s largest office-employment hubs with approximately 30 million square feet of office space. Additionally, GSP showed that with the location next to the Scottsdale Entertainment District, the hotel would drive tremendous leisure travelers along with a strong F & B offering. Ultimately, an institutional JV Equity financing partner was identified who recognized the Sponsor’s talent and vision for the hospitality development and believed in the sponsor’s ability to execute the phenomenal business plan.

Advisors

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

$10,200,000 Cash-Out Refinance of a Historic All-Brick Building; Los Angeles, CA

Rate: 4.05% fixed for five years
Term: 30 years
Amortization: Interest only
LTV: 75%
Prepayment: 1.75% 1-3 years, 1.00% 3-5 years
Guaranty: Non-Recourse
Lender Fee: 1%

Transaction Description:

George Smith Partners secured a $10,200,000 cash-out refinance of a 1920s-mixed-use brick building located in Los Angeles. In a growing movement to gentrify the area, this Property features both ground floor retail, and multifamily living. The cash-out refinance allowed our Sponsor to recapture the investment they made in upgrading and repositioning the Property. It is challenging for lenders to finance historic brick buildings and they have trouble getting their arms around mixed-use properties because of the potential risk they pose. GSP offered comfort to the Capital Provider by showing the significant improvements the Sponsor made to the Property, quantifying how retail will enhance the Property value as well as the benefits of being fully leased.

Advisors

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

$6,000,000 Non-Recourse Refinance with Significant Cash-Out for 97-Unit Multifamily Property; Bellflower, CA

Rate: 3.96% Fixed
Term: 15 Years
LTV: 35%
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners successfully secured a $6,000,000 non-recourse permanent refinance of a 97-unit, 51,732 square foot multifamily property in Bellflower, CA. Loan proceeds were used to pay off the existing variable, higher interest rate loan into a lower interest, fixed rate loan. There was nearly $4,600,000 cash-out to the Sponsor, who had recently spent over $800,000 to complete full and partial remodeling of 62 units (64% of the total units). Thanks to GSP’s strong lender relationships, the Sponsor’s credentials and longevity of ownership, and extremely low leverage, GSP was able to source a lender that provided an additional $500,000 above the Sponsor’s initial funding ask, assumption rights in the event of a sale and no post-closing financial covenants for future successors.

Advisors

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

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HOT MONEY
5.90% Fixed Rate Non-Recourse Bridge Financing

George Smith Partners is working with a non-recourse capital provider funding bridge loans from $10,000,000 to $50,000,000. With a focus in California, the portfolio lender will fund up to 60% of value with terms up to one year before extension options. Program highlights include no prepayment and interest only. Decision making is flat and seven-business day close is their normal execution.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Fed Minutes Set Up “Big Friday” in Jackson Hole

Today’s Fed phrases of the day is a tie between “midcycle adjustment” and “part of a recalibration” which were descriptions of the recent rate cut contained in today’s release of the Fed minutes. Another sentence indicating the rate cut was not part of a “pre-set course” piled on to the realization that the Fed is still watching the data and has not planned a series of rate cuts. The bond market “spoke” by re-inverting the yield curve (the 2 year and 10 year inverted again), indicating fear that the Fed may not act fast enough to ward off a potential recession. Every word and mannerism of Fed Chair Powell’s speech Friday at the annual Jackson Hole symposium will be parsed and analyzed. The bond and stock markets have priced in a September rate cut. However, the bar may be low: if he doesn’t rule out further rate cuts that may be dovish enough to keep markets “off the edge”. 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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