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FINfacts™ XXIV – No. 189 | October 16, 2019
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| Prime Rate |
 5.00 |
| 1 Month LIBOR |
 1.89
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| 6 Month LIBOR |
1.98 |
| 5 Yr Swap |
1.56
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| 10 Yr Swap |
1.67
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| 5 Yr US Treasury |
1.57
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| 10 Yr US Treasury |
1.75
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| 30 Yr US Treasury |
2.23 |
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Rate: 4.40%
Term: 7 Years Fixed / 30 year Term
Amortization: 30 Years
LTV: 75.0%
Guaranty: Recourse
Prepayment: None
Lender Origination: None
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Transaction Description:
George Smith Partners secured $7,800,000 for the cash-out, refinance of a newly renovated, class B, 246-unit multifamily building located in Indianapolis. The structure allowed the Sponsor to pull out over $2,000,000 in cash and leave in place an affordable grant loan that was awarded to the Property for maintaining a certain number of affordable units.
The Sponsor is a regional multifamily owner who has a strong relationship with an international bank. The in-place loan was originated by the Sponsor’s relationship bank. There were only three months of results after renovations. Due to the lack of results, the current Lender’s proposed offer to refinance the Property did not give the Sponsor credit for the upgrades and increased rents. It also would have required the payoff of an attractive loan from the City.
GSP identified a national balance sheet lender that understood the strength of the asset, improvements and experience of the Sponsor. Using our vast experience in understanding this type of asset and proving out the large future increases in cash flow, GSP was able to secure financing that was far superior and allowed for cash-out to the Sponsor. The financing also allowed for the affordable grant loan to remain in place. GSP was able to negotiate no lender fees or prepayment. The loan GSP secured allowed for higher proceeds, cash out, longer term, and an overall lower cost.
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Rate: Floating at 1 Month LIBOR + 3.65%
Term: 2+1+1
Amortization: Interest Only
Fees: 1.0% in/0.5% out
Prepayment Penalty: None
LTC: 70%
LTV: 75%
DY: None
Guaranty: Non-Recourse
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Transaction Description:
George Smith Partners secured $3,350,000 in proceeds for the purchase of a 13-unit multifamily property located in an infill area of Los Angeles. The loan is structured as $1,963,000 at closing and $1,387,000 in holdbacks for capital expenditures and interest reserves. Six of the thirteen units were vacant at close. The fully funded loan represents 70% of the project capitalization.
The Sponsor requested a loan with both low pricing and non-recourse execution. Several challenges were encountered in meeting both goals. The small size of the loan ruled out almost all debt fund lenders, who typically seek financings larger than $10,000,000. While banks offered rates in the 5% range, they required the Sponsor to sign full recourse. Private money lenders quoted the deal with prohibitive interest rates above 8.0%.
The selected Capital Provider was the only one to provide non-recourse execution with a rate in the 5’s. The loan did not stipulate a required debt yield based on the stabilized cash flow. Additionally, the Lender released additional money at closing for expenses the Buyer incurred while in escrow. This amount totaled $260,000 in reimbursements for soft costs. The loan closed about 45 days from the signed application.
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Rate: Prime + 0.5%
Term: 2 Years
Amortization: Interest Only
LTC: 72.5%, including 100% of future funding
Prepayment Penalty: None
Recourse: Full Recourse
Lender Fee: 0.5%
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Transaction Description:
George Smith Partners arranged acquisition bridge financing for a value-add multifamily property in the Arlington Heights Neighborhood of Los Angeles, California. The 11-unit, 1960’s vintage property had significant deferred maintenance and below market rents. The Sponsor’s business plan was to reposition the Property, buyout tenants and release the units at market rents. Sized to 72.5% of total project cost, the loan includes 100% of future funding for tenant buyouts, a full gut renovation of unit interiors and an exterior upgrade.
The two-year bridge loan is interest only and floats at a rate of Prime plus 0.50% (5.75% today) with no floor rate, which is important in a declining interest rate environment. The loan carries no prepayment penalty, and interest is not charged on the holdback until funds are drawn. The lender fee was negotiated down to 0.5%.
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George Smith Partners is working with an equity investor funding transactions from $4,000,000 – $20,000,000 for Multifamily, Hospitality, Office, Retail, Mixed-Use and Specialty Properties. Non-Recourse pricing starts at LIBOR+ 8% with terms up to five years and 85% of cost for developments and transitional properties in primary and secondary markets. The Lender offers interest only amortization and future advances for lease-up costs and capital expenditures.
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Special Announcement |
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Congratulations to Ruben Bohbot on his recent engagement to Shani Gilboa.
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Both Brexit and US/China trade talks have been sources of uncertainty all year. The news on each has fluctuated between positive and negative which has caused market volatility. This has weighed on bond markets and the Federal Reserve’s outlook (as evidenced by the recent Fed minutes). A case in point was last Friday’s high level US/China meeting and the subsequent announcement of progress towards a trade agreement. This optimism caused the 10 year T to spike about 10 bps and Fed futures rate cut probability dropped from 90% to 70%. This week, the US/China trade talk is less positive (more work needs to be done), while Brexit negotiations seem to be going well in advance of a critical deadline. The 10 year T is at 1.73% (after hitting a high of 1.79% this week), the futures market likelihood of a rate cut is back up to 90%. Inflation: Today’s NY Fed survey of the public’s expectation of long run inflation is at an all time low. It seems that people expect the “new normal” to last a while longer. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners
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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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Constellation Place
10250 Constellation Blvd., Ste. 2700
Los Angeles, CA 90067
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© 1999 - 2019 George Smith Partners, Inc. DRE # 00822654 FINfacts is an ePublication of George Smith Partners, Inc. For Promotional Purposes Only. All Rights Reserved.
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