FINfacts™ XXIV – No. 206 | February 26, 2020

MARKET RATES
Prime Rate 4.75
1 Month LIBOR 1.61
6 Month LIBOR 1.63
5 Yr Swap 1.17
10 Yr Swap 1.29
5 Yr US Treasury 1.15
10 Yr US Treasury 1.34
30 Yr US Treasury 1.82

RECENT TRANSACTIONS
$43,281,000 Cash-Out Refinance of 360 Secondary Market Rental Units, California

Rate: 3.66% Fixed
Term: 10 Years
Amortization: Five Years Interest Only; 30 Years Thereafter
Loan-to-Value: 65%
DCR: 1.25
Recourse: Carve-Outs Only
Prepayment: Loss of Yield
Loan Fee: 0.425%

Transaction Description:

George Smith Partners placed the $43,281,000 non-recourse cash-out permanent loan for 360 stabilized units in a secondary California market. This represented a substantial return on equity. Loan proceeds were increased post application as the supportable underwritten net cash flow improved during the due diligence process. Occupancy constantly operated at 98% with future increases forecasted at unit turn. Fixed for ten years at 3.66%, the non-recourse loan is interest-only for five years prior to amortizing over 30 years for the balance of the term.

Advisors

David Stepanchak
Senior Vice President
Michael Anderson-Mitterling
Senior Vice President
Kyle Howerton
Senior Vice President
Olga Brandeis
Senior Vice President

$15,250,000 Non-Recourse, Cash-Out Bridge Financing for a 200-Unit Multifamily Property in a Tertiary Market; 80% LTC at 375 over 1-Month Libor; Rexburg, ID

Rate: 1 Month LIBOR + 375
Term: 2 Years + 1 Year Extension
LTC: 80%
Amortization: Interest Only
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners arranged $15,250,000 in non-recourse, cash-out bridge financing for a 200-unit multifamily property in Rexburg, Idaho. While home to BYU-Idaho (with a student population of 25,000), Rexburg is a small town with a non-student, resident population of only 20,000. The Sponsor approached GSP looking to refinance out a recourse construction loan from a local bank and also return capital to investors, while providing the Property time to season prior to selling or refinancing.

By emphasizing the demand driven by BYU-Idaho’s presence, the strong sponsorship with a long history of development and investment in the local market, and the Property’s robust in-place cash flow, GSP ultimately sourced a prominent debt fund capital provider that was comfortable assuming tertiary market risk. The 80% loan to cost, non-recourse execution included a sizeable cash-out, given that the in-place construction loan was sized to 65% loan to cost. The loan floats at a spread of 375 over the 1 Month Libor (5.4% all-in today) and is interest only.

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

$4,500,000 Refinance of Mixed-Use Retail and Office Property; 3.92% Fixed for 5 Years; West Hollywood, CA

Rate: Fixed at 3.92%
Term: 5 years
Amortization: 30 years
LTV: 50%
Guaranty: Recourse

Transaction Description:

George Smith Partners secured a $4,500,000 refinance for a 13,051 SF mixed-use property in West Hollywood. The loan is fixed at a rate of 3.92% for a 5-year term. At close, the Property had four month-to-month leases in place, plus two cell tower leases. This was problematic since some lenders would not include MTM income or cell tower income in their underwritten cash flow. Although several lenders offered a competitive interest rate, they used a high stress rate when applying their debt coverage ratio constraint. As a result, most lenders quoted proceeds of less than 45% LTV.

The selected lender was able to mitigate the impact of these challenges by using a lower stress rate, giving full credit for MTM leases and including the cell tower income. As a result, they were able to provide proceeds of 50% LTV at a fixed rate under 4%.

Advisors

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

Picture
HOT MONEY
Preferred Equity & Mezzanine Financing Up to 90% LTV

George Smith Partners is working with a national lender offering preferred equity programs for office, urban retail and multifamily properties ranging from $5,000,000 to $50,000,000 in primary and secondary markets. With the ability to advance 90% of purchase price for new acquisitions, refinancings, recapitalizations, restructurings, DPOs, workouts and partner buy-outs pricing starts at 8% for terms up to seven years. The lender offers a flexible prepayment structure and future funding.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Bond Yields at All Time Lows on Worldwide Flight to Safety

The coronavirus is causing massive market volatility as the appetite for risky assets is plummeting. The 10 year T is at an all time low closing today at 1.32%. The 30 year is at 1.80%. This is in comparison to 30 day LIBOR at 1.61% (29.9 years of “curve” is 19 bps). This shows a market that is anticipating very low economic growth and inflation for the near future. The market may or may not be overreacting.  The absence of hard data and rampant speculation compounds to create massive uncertainty. The coming months will be telltale as the effects start to be measured in hard data and the spread rate becomes more apparent. We are seeing lenders institute fixed rate floors as risk spreads often widen with indexes plummeting. Some macroeconomic trends to be aware of are: (1) Coronavirus will have an immediate effect on the hospitality sector; (2) The 2020 Tokyo Olympics may be cancelled at a cost of $25B if there is no containment by May; (3) The Chinese economy is slowing and Q1 results of U.S. companies doing business in China will be affected; (4) 2020 GDP growth is expected to be 2.0%. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

More Perspectives ›

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 - 2020 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.