FINfacts™ XXIV – No. 191 | October 30, 2019

MARKET RATES
Prime Rate 5.00
1 Month LIBOR 1.79
6 Month LIBOR 1.93
5 Yr Swap 1.60
10 Yr Swap 1.72
5 Yr US Treasury 1.61
10 Yr US Treasury 1.77
30 Yr US Treasury 2.26

RECENT TRANSACTIONS
$25,000,000 Condo Construction Financing; Los Angeles, CA

TERMS CONFIDENTIAL

Transaction Description:

George Smith Partners successfully arranged $25,000,000 in construction financing for a condominium project in an affluent area in Los Angeles County. The Project commenced construction in 2017, however due to construction delays and cost overruns, the Sponsor needed additional money to complete the Project. The existing Lender did not want to upsize their loan. GSP was able to identify two distinct lenders to structure a 1st and 2nd Trust Deed to complete and sell-out the building. The total loan was sized to 75% of the net sell-out value of the Property. The Sponsor has owned the Property for over 10 years so the majority of equity was imputed land equity allowing for loan proceeds of 100% of hard costs.

Advisors

Steve Bram
Principal/Co-Founder
Allison Higgins
Senior Vice President
David R. Pascale, Jr.
Senior Vice President
Patrick O’Donnell
Vice President
Nick Rogers
Vice President

Acquisition of an Apartment Building with One Master Lease in Place; San Diego, CA

Rate: 4.20%
Term: 5 Years Fixed, 15 Year Term
Amortization: 30 Years
Prepayment Penalty: 4,3,2,1
Lender Points: None

Transaction Description:

George Smith Partners arranged permanent financing for the acquisition of a master leased, multifamily property in San Diego, California. The complex is on a month-to-month master lease with a non-profit program that provides treatment and rehabilitation support to individuals and families facing substance abuse and behavioral health challenges. The Sponsor was in favor of this program and liked that it was promoting independent living and mental wellness. The Sponsor decided she wanted to keep the master lease in place instead of terminating it and turning the multifamily property into a traditional apartment building.

Challenge:

The Sponsor was in application with their relationship lender for over 6 weeks before finding out that they denied the loan. The Sponsor approached GSP immediately as their money had already gone hard and the Seller was growing impatient. In addition, the Seller had already identified the upleg of a 1031 Exchange and informed their agent to relist the Property and start fresh with a new buyer.

Solution:

GSP worked quickly to source a lender that allowed the Sponsor to keep the month-to-month master lease in place. GSP collaborated with the listing agent and buyer’s agent on getting an extension that everyone felt comfortable with. GSP closed the loan within the submitted time constraints.

Advisors

Reuven Risch
Vice President

Refinance for a Class C Multi-Tenant Office Building; Santa Monica, CA

Rate: 7-year LIBOR + 2.10% (all-in rate 3.46%), no floor
Term: 7 year fixed
Amortization: 25 years
Loan to Value: 31%
Prepayment: 5%, 4%, 3%, 2%, 1%
Guaranty: Recourse
Lender Fee: Par

Transaction Description:

George Smith Partners successfully arranged $1,500,000 of rate and term refinancing for a multi-tenant office building in Santa Monica, CA. The Property was constructed in 1975, and it has been recently renovated with 6,256 sf net rentable area. The Property is conveniently located near Santa Monica College, Downtown Santa Monica, and it is less than two miles away from Santa Monica State Beach. Santa Monica has been and still is one of the most highly sought-after office locations in the Los Angeles area by tenants and investors. The submarket has very significant supply constraints, though rental rates are lagging the metro average. The purpose of the refinance is to pay off the existing debt and take advantage of the low interest rate environment.

The Sponsor is self-managing the Property. They renovated the units recently and brought the rents up to market rate. The Building was 100% occupied by local and non-credit tenants at closing. All of the leases will roll within the first three years of the loan term.

GSP sourced a lender who is willing to offer a 7-year permanent loan term, without holding back Tenant Improvement and Leasing Commissions reserves. The loan is sized to 31%LTV, it has a fixed coupon of 3.46% with a 25-year amortization schedule.

Advisors

Gilda Rivera
Senior Vice President
Irene Liu
Assistant Vice President

Picture
HOT MONEY
Floating Rate Bridge Financing with Earnout

George Smith Partners is working with a national capital provider that will provide non-recourse fixed rate financing with an earnout up to 80% of cost. With terms up to 5 years, loan sizes range from $3,500,000 to $40,000,000 (larger in certain circumstances) and pricing starting in the high 200 bps over LIBOR for core asset types as well as self-storage, student housing, hospitality, commercial condo and specialty use. Program highlights include no negative arb, flexible prepayment and non-cash flowing assets.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Are We There Yet? Yes, But “There” Has Moved

Today’s Fed announcement and subsequent press conference by Chair Powell was a textbook case of well communicated policy. Basically, the Fed announced a 0.25% rate cut and indicated “that’s it” for this round of cuts. And markets didn’t freak out as they usually do when the punch bowl is being taken away. This “mid cycle adjustment” consisted of 3 rate cuts (July, September, October), the first rate cuts in a decade. Today’s Fed statement removed the key phrase “will act as appropriately to sustain the expansion” That may have roiled markets, but Fed Chair Powell then said the words that soothed markets worldwide: “I think we would need to see a really significant move up in inflation, before we would consider raising rates”. With worldwide inflation basically “stuck” at about 1.0-1.5% (well below the 2% Fed target), this basically provided a “ceiling” at today’s short term rate of 1.5%. It also helped pushed 2 year treasury bonds down to 1.60%, further “un-inverting” the yield curve back to a normal shape. Well done Mr. Powell – the 10 year closed at 1.78%. 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


WWW.GSPARTNERS.COM

Constellation Place
10250 Constellation Blvd., Ste. 2700
Los Angeles, CA 90067
Office 310.557.8336
Fax 310.557.1276
Email finfacts@finfacts.net
© 1999 - 2019 George Smith Partners, Inc. DRE # 00822654 FINfacts is an ePublication of George Smith Partners, Inc. For Promotional Purposes Only. All Rights Reserved.
Hi, just a reminder that you're receiving this email because you have expressed an interest in George Smith Partners. Don't forget to add finfacts@finfacts.net to your address book so we'll be sure to land in your inbox!

You may unsubscribe if you no longer wish to receive our emails.