FINfacts™ XXIV – No. 184 | September 11, 2019

MARKET RATES
Prime Rate 5.25
1 Month LIBOR 2.04
6 Month LIBOR 2.04
5 Yr Swap 1.52
10 Yr Swap 1.62
5 Yr US Treasury 1.60
10 Yr US Treasury 1.75
30 Yr US Treasury 2.22

RECENT TRANSACTIONS
$25,500,000 Bridge Loan for VACANT Newly Constructed 65 Unit Multifamily Property; 100% LTC; Fixed at 4.95%; Los Angeles, CA
Jonathan Lee Multifamily Financing

Rate: Fixed at 4.95%
Term: 12 months with one 6 month extension option
Amortization: Interest Only
Prepayment Penalty: None (no required minimum interest)
LTC: 100%
LTV: 73%
Stabilized DY: 7.0%
Fees: 1% in/0% out
Guaranty: Non-Recourse: None (no required minimum interest)

Transaction Description:

George Smith Partners secured $25,500,000 in proceeds for the refinance of a construction loan on a newly constructed 65-unit multifamily property located in Los Angeles. The loan represents 100% of project capitalization and is fixed at 4.95%. The Property had recently received Certificate of Occupancy, but was still completely vacant at close. The bridge loan is intended to give the Sponsor time to lease up the property to stabilization. The fixed rate is unusual for a bridge loan; most capital providers offered floating rate financing and required the purchase of a cap.

Because the Property was still vacant, the Sponsor’s proforma rents were not yet proven out by signed leases. This was a challenge because the rents are several hundred dollars higher than those of typical multifamily properties in the submarket. GSP was able to overcome this challenge by pointing out that the brand new units at the Subject Property were considerably larger than those in the comp set. This provided support for the premium rents. Another hurdle was the 90% loan-to-cost constraint imposed by most capital providers. The selected lender allowed for 100% of cost, subject to a 7.0% debt yield on the stabilized cash flow.

Advisors

Jonathan Lee
Principal/Managing Director
Shahin Yazdi
Principal/Managing Director
David Stepanchak
Senior Vice President
Olga Brandeis
Senior Vice President
Matthew Kirisits
Vice President
Paul Monsen
Vice President
Samuel Sarshar
Assistant Vice President

$11,760,000 Construction Financing to Develop a 14 Unit Small Lot Subdivision Project in the Silver Lake Submarket; Los Angeles, CA

Rate: Floating at 1 Month LIBOR + 2.75%
Term: 2 Years with Two (6) Month Extensions
Amortization: Interest Only
LTC: 72.5%
Fees: 1%
Prepayment Penalty: None
Guaranty: Recourse

Transaction Description:

George Smith Partners placed $11,760,000 in ground up construction financing to develop a 14 unit small lot subdivision project in the trendy Silver Lake submarket of Los Angeles, CA. The Project is extremely well located within Silver Lake and is walking distance to Sunset Junction. The per unit exit price is projected to represent a 30%+ discount to the cost of single family residences with similar footprints, offering an affordable alternative in an attractive and supply constrained market. Challenges included a sponsor seeking full leverage but requiring an extremely low interest rate, and many lenders refusing to offer competitive bids (or any bids at all) given the Project’s for-sale exit to homeowners.

GSP secured a capital provider that was comfortable with the Property’s central, urban location and the favorable per unit cost basis relative to both single family homes and the limited number of local competing condominium projects. The loan represents 72.5% of total cost and carries an interest rate of One Month Libor + 2.75%, which is near institutional level pricing for a middle market sponsor. The loan term is 24 months with two six month extensions. It allows for partial release of individual units without a prepayment penalty or exit fee, allowing the Sponsor to sell units at its discretion.

Advisors

Malcolm Davies
Principal/Managing Director
Zachary Streit
Senior Vice President
Evan Kinne
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

$3,155,000 Acquisition and Reposition Financing on 32-Unit Multifamily Property; Salt Lake City, UT

Rate: 4.50%
Term: Seven years fixed (Two years interest only stabilization period converting to five year perm. loan)
Amortization: 24 months interest only, converting to 25 year amortization schedule Max Loan to Purchase Price: 88%
Guaranty: Recourse with burn down at stabilization metrics Lender Fee: 1.00%

Transaction Description:

George Smith Partners arranged the $3,155,000 first mortgage on a 1970’s vintage, 32-unit multifamily light value add property. The national bank lender provided financing at 88% loan to purchase price and 70% loan to stabilized value. The seven year facility was structured as a fixed rate facility with a going in 1.00x DSCR. The loan was structured with two-year’s interest only for the stabilization period then converting to a five year permanent loan. The structure of the loan provided the sponsorship the ability to execute the stabilization of the property while maximizing proceeds and utilizing a fixed rate loan in order to mitigate their interest rate exposure.

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

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HOT MONEY
Non-Recourse Bridge Financing focused on Secondary and Tertiary Markets

George Smith Partners is placing non-recourse bridge debt through a national portfolio lender funding transactions from $5,000,000 to $75,000,000. The Capital Provider offers flexible loan structures with interest only terms between 1 to 5 years and extension options. Floating rate pricing starts from LIBOR + 300. Lender has a strong appetite for manufactured housing, self-storage and hospitality along with four main asset types located in secondary and tertiary markets in addition to primary markets. Opportunities should be cash flowing day one (above 1.0x DSCR) and value-add in nature. Loans can be structured with no lockout and minimum interest of +18 months. Initial loan to cost can go up to 85%, as long as stabilized value and cash flow support 70% takeout level. Future fundings can be structured for capex and TILC costs.

Lender also offers CMBS style loans on all asset types, primarily focused on Manufactured Housing, Self-Storage and Hospitality, loan sizes ranging from $2,000,000 to $25,000,000 with 5-10 year terms and 25-30 year amortization schedules. Typically capping max LTV at 70% for refinances, Lender has ability to structure mezzanine components (as small as $1,000,000) to get up to 80%-85% LTV. Senior Loans currently price in the 4.75% (10-yr loan) area with the Mezzanine components pricing in the 10% – 12% range depending on asset type and LTV of last dollar.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Treasury Yields Rise as “Fear Trade” Subsides

Today’s announcement that the U.S. is delaying the next round of trade tariffs continues a trend of positive global news in September (Brexit, Hong Kong, etc).  Yields are up from their recent lows, the 10 year T is at 1.70%. Tomorrow’s ECB meeting and announcement is highly watched as Draghi nears the end of his term and is expected to announce his final round of Quantitative Easing.  There is some “drama” as mixed messages are being received from different ECB factions.  But with Germany tipping towards recession, some accommodative measures are expected. The markets will react based on how the reality matches the predictions already priced in.  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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