FINfacts™ XXIV – No. 196 | December 4, 2019

MARKET RATES
Prime Rate 4.75
1 Month LIBOR 1.70
6 Month LIBOR 1.90
5 Yr Swap 1.58
10 Yr Swap 1.71
5 Yr US Treasury 1.60
10 Yr US Treasury 1.77
30 Yr US Treasury 2.17

RECENT TRANSACTIONS
$11,200,000 Ground-Up Construction Financing for a High-End, 5-Unit, Mixed-Use Condominium Project; 75% Loan to Cost; North Laguna Beach, CA

Rate: 8.99% Fixed
Term: 24 Months (with two 3 month extensions)
Amortization: Interest Only
LTC: 75%
Prepayment: None
Guaranty: Recourse

Transaction Description:

George Smith Partners secured an $11,200,000 ground-up construction loan for the development of a high-end, 5-unit, mixed-use condominium project in North Laguna Beach, California. The Sponsor purchased the Property over two years ago and successfully entitled it. The completed project will feature two residential units with expansive ocean views over three ground-floor commercial units and includes 30 subterranean parking spots, critical in parking constrained North Laguna Beach. The Sponsor sought maximum leverage, including land lift, and a lender comfortable with both the project’s high basis per unit ($2,240,000) and the Property’s environmental history. Certainty of execution in a short timeframe was also paramount as the Sponsor’s building permits faced a near term expiration.

After an extensive marketing effort, GSP sourced a construction lender comfortable providing 75% loan to cost financing and valuing the land at market, which considerably exceeded the Sponsor’s cost basis. Significant time was spent gathering sales comps supporting the Project’s profitability despite the units’ high cost basis, and a soil removal plan was put in place to mitigate the site’s environmental history. The financing successfully closed prior to the expiration of the Sponsor’s building permit, allowing for an immediate ground-breaking.

Advisors

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

$5,230,000 Non-Recourse, Multifamily, Cash-Out Refinance; Los Angeles, CA

Rate: Fixed at 3.85% for 5 years then floats at 6 Month LIBOR + 2.35%
Term: 30 years
Amortization: 30 years
Prepayment Penalty: 3,2,1,0
LTV: 65%
DCR: 1.15
Interest Only: 2 Years
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners secured a $5,230,000 non-recourse refinance for a 40-unit multifamily property in Los Angeles. The loan is fixed at a rate of 3.85% for five years and provides two years of interest only payments. Over the past three years, the Sponsors renovated 28 of the 40 units at a very high investment of $28,000 per unit. GSP sourced a bank lender that gave the Borrowers maximum credit for the higher income that resulted from leasing the newly renovated units. The Lender did not require seasoning on the new leases. The Lender did not have a floor on the rate at a time when many banks are applying floors to keep their rates above a certain threshold. The rate was competitive with Agency financing during a period when Freddie Mac was temporarily slowing down new loan originations. The Sponsors were operating the Property very efficiently with below-market expenses, and the third-party appraiser marked those expenses up to market. This resulted in a capitalized property value that did not meet the lender’s 65% LTV constraint. The Lender accommodated the Borrower by raising the LTV threshold so that loan proceeds and the rate would not be affected. The Lender was able to rate lock at application and was ready to close in about 50 days.

Advisors

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

$2,800,000 Land Acquisition Financing for a Self-Storage Project; Santa Clarita Valley, CA

Rate: 7.90% Fixed
Term: 60 Days
Amortization: Interest Only
Loan To Value: 36%
Prepayment: None
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners successfully arranged a $2,800,000 non-recourse, short term acquisition loan for a 4.21-acre parcel near Stevenson Ranch in the Santa Clarita Valley of California. The Sponsor needed financing in a very short timeframe. GSP was able to source a private lender who closed in three business days. The loan offers 60 days of bridge term while the Borrower seeks a construction-to-permanent solution for a fully entitled, six-building, 966-unit, climate controlled, Class-A self-storage facility expected to complete construction in late 2020. The loan is non-recourse and the Lender did not require an appraisal or other third-party reports, thanks to the low leverage and strength of the Sponsor.

Advisors

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

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HOT MONEY
High Leverage Non-Recourse Bridge Financing

George Smith Partners is placing high leverage non-recourse bridge debt up to 80% + of cost through a national portfolio lender. Funding value add transactions from $4,000,000 to $50,000,000 the Capital Provider offers flexible loan structures with terms up to 5 years. Floating rate pricing starts from LIBOR + 290. Lender has a particularly strong appetite for Multifamily product in secondary markets nationwide. Other property types they will finance are: Office, Retail, Industrial and Hospitality.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Data, Headlines and Rumors Move Markets in Volatile Holiday Month

Treasuries will react to the following factors: (1) Economic reports this week: Factory orders on Thursday (manufacturing has been shaky in recent months as the economy is being carried by the ever spending consumer); The unemployment report this Friday, December 6 (watch the wage trends) and December 15 (China/US tariffs are set to go into effect unless the parties reach some type of agreement or an agreement to possibly agree later). Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

More Perspectives ›

PODCAST

Bryan Shaffer discussed Capital Market Trends on the Commercial Real Estate Pro Network Podcast.

Click here to listen.

 

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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