FINfacts™ XXIV – No. 205 | February 19, 2020

MARKET RATES
Prime Rate 4.75
1 Month LIBOR 1.65
6 Month LIBOR 1.71
5 Yr Swap 1.40
10 Yr Swap 1.51
5 Yr US Treasury 1.41
10 Yr US Treasury 1.56
30 Yr US Treasury 2.01

RECENT TRANSACTIONS
$30,000,000 Development Loan for Institutional Sponsor, Boise, ID

Rate: L + 235
Term: 3 years + 1 + 1
Loan-to-Cost: 60%
Guarantee: Top 50% only

Transaction Description:

George Smith Partners secured a $30,000,000 loan for the construction of a 161-unit, Class A mixed use development in downtown Boise, Idaho. The Project is positioned to become the premiere development site in Boise and will serve the continued growth of the greater Treasure Valley. As one of the fastest growing MSA’s in the U.S., Boise has seen an increased demand for more housing to meet its population growth.

Due to the location, architecture, and amenities, the 8-story project was underwritten to a valuation which included rents 20% above market. This provided a challenge when marketing the transaction as the market, despite the rapid expansion, is less than 750,000 people and only recently started to see an influx of institutional capital. Sized to 60% LTC and 50% LTV the asset ultimately received best-in-class pricing over a three-year term with two, one-year extensions. The high net worth sponsorship was comfortable with recourse in order to obtain a loan from a national institution with flexible capital.

Advisors

Jonathan Lee
Principal/Managing Director
Shahin Yazdi
Principal/Managing Director
Matthew Kirisits
Vice President
Paul Monsen
Vice President
Kyle Redmond
Analyst

$5,400,000 Land Acquisition and Predevelopment Financing Facility for a To-Be-Built, 150 Bed Co-Living Community; Highland Park, CA

Rate: 8.50%
Term: 15 Months with One 6-Month Extension
Amortization: Interest Only
LTC: 70% (including predevelopment costs to take the project to RTI)
Guaranty: Recourse

Transaction Description:

George Smith Partners arranged a $5,400,000 financing facility for the acquisition of a 29,930 square foot vacant parking lot in the trendy Highland Park submarket of Los Angeles, CA. In addition to purchase financing, the financing facility offers good news money for predevelopment costs related to the Sponsors planned 150-unit co-living community on the site, which will be a by-right development and will take advantage of TOC Tier 1 incentives.

Co-living has emerged as a remedy to address the acute shortage of affordable housing across the country by offering tenants fully furnished, highly amenitized units with the cost of utilities, common area maintenance, and other traditional living spaces bundled into the rent. The Property is within a 5-minute walk from Highland Park’s main amenity-rich thoroughfares lined with shopping and dining destinations.

By focusing attention on land lenders who are active in the local area, GSP identified a capital provider who is familiar with the local market and also understands the importance that the co-living space will serve in the greater rental market going forward. The loan was uniquely structured to disburse approximately the balance of the down payment in addition to sponsor equity at closing, with the remaining proceeds to be reserved in a holdback feature that will cover the predevelopment soft costs in order to bring the Project to permit-ready status. The interest-only predevelopment land loan was priced at 8.50%, with a 15-month term and one 6-month extension option. The loan closed in less than 30 days from application.

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

$4,650,000 Multifamily Acquisition Financing, 5-Day Close,82% LTV; Los Angeles, CA

Blended Rate: 8.69% Fixed
Term: 12 Months
Amortization: Interest Only
Loan-to-Value: 80%
Prepayment: None

Transaction Description:

George Smith Partners secured $4,650,000 in financing for the acquisition of a 28-unit multifamily property in the Highland Park area of Los Angeles. The transaction closed in just five days. The new debt on the Property is interest only and does not include prepayment penalties.

GSP was able to secure a high leverage, value-add multifamily acquisition program for our client. He now has the ability to purchase properties at a discount due to the quick close and small equity requirement. The Sponsor has the opportunity to quickly resell the Property or refinance with a rate of sub-3.75%.

The Sponsor has been able to achieve investment IRRs in excess of 200% by quickly renovating the Property and selling to long-term investors due to the high leverage and short closing.

Advisors

Bryan Shaffer
Principal/Managing Director
Ruben Bohbot
Vice President
Michael Smilove
Assistant Vice President

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HOT MONEY
Non-Recourse Construction Financing Rates Starting at 7%, Up to 95% LTV

George Smith Partners is working with a national lender providing non-recourse construction financing for spec office, industrial and for-sale condo projects up to $100,000,000. Completion guarantees will still be required. With the ability to advance 95% of development value, pricing starts at 7% for terms up to three years. The lender can close quickly.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Bond Market Does Not Blink at Inflation, What is Wrong?

For many years, inflation has been the “boy who cried wolf”, sometimes glimpsed, but never fully materializing. Bond markets have been sensitive to inflationary data, often selling off when CPI, PPI or PCE data comes in “hotter” than expected. Today’s Producer Price Index was expected to rise 0.1% in January, instead it jumped 0.5%. Did the bond market sell off and yields jump 5-10 bps? No. The bond market brushed off the news and instead focused on Fed comments warning of uncertainty due to coronavirus. Now that China/U.S. trade tensions have eased (and China is engaging in massive stimulus), global growth was expected to soar in 2020. It seems we have traded one uncertainty for a more nebulous and unknown danger. 10 year Treasury yield rose 1 bsp to 1.56%.  Stay tuned.  By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

More Perspectives ›

How Quality Sponsors Can Access High-Leverage Loans

Multifamily developers and investors enjoy favored status from high-leverage financiers, according to Zachary Streit of George Smith Partners.

By Zachary Streit

A healthy economy and a growing roster of capital providers looking for returns means high-leverage non-recourse financing is not only available, it’s a thriving sub-sector within the capital markets. After nearly vanishing during the recession and the early years of the recovery, demand from high-leverage finance providers for multifamily projects that include either ground-up development or transitional, value-added business plans is strong.

Of late, deals we have solicited and closed have seen loan-to-cost ratios regularly hit or exceed 80 percent and have received multiple bids. These deals include both traditional multifamily and non-traditional deals, such as ground-up co-living requests and also single-family build-to-rent requests.  For example, recent closings include an 80 percent loan-to-cost, non-recourse, cash-out bridge financing on a 200-unit multifamily property, and an 80 percent loan-to-cost, non-recourse, ground-up construction loan for a 270-unit student housing development with nearly 900 beds. Notably, both closings were in secondary, non-core markets.

Read the full article here: https://www.multihousingnews.com/post/how-quality-sponsors-can-access-high-leverage-loans/

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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