FINfacts™ XXIV – No. 208 | March 11, 2020

MARKET RATES
Prime Rate 4.25
1 Month LIBOR 0.81
6 Month LIBOR 0.77
5 Yr Swap 0.63
10 Yr Swap 0.77
5 Yr US Treasury 0.69
10 Yr US Treasury 0.86
30 Yr US Treasury 1.35

RECENT TRANSACTIONS
$60,100,000 Cash-Out Permanent Financing on a Newly Constructed 235-Unit Mixed-Use Apartment Community; St. Louis City, Missouri

Rate: Blended to 4.89%, Fixed (3.86% on senior debt; 10% on mezzanine debt)
Term: Ten years
Amortization: Ten years interest only
LTV: 82%
Prepayment: Defeasance
Guaranty: Non-recourse
Lender Fee: None

Transaction Description:

George Smith Partners successfully placed $60,100,000 in permanent debt to take out a construction loan and fund the buyout of a major equity partner on a newly built, mixed-use property located in the trendy St. Louis City neighborhood of The Grove. The 82% leverage loan is a combination of a $50,000,000 non-recourse senior loan to 70% loan-to-value and a $10,100,000 non-recourse mezzanine loan to 82% loan-to-value with a blended fixed-rate coupon of 4.89% for the duration of the ten-year term. The financing provided significant cash out to the Borrower that allowed both the buyout of a major equity partner as well as substantial cash-out above what was needed for the partnership buyout. Additionally, the financing structure replaced a recourse construction loan with a non-recourse, fixed-rate permanent loan with full-term interest only to maximize cash flow. GSP leveraged its expertise of the St. Louis market, long-standing lender relationships, and capital markets creativity to achieve the Borrower’s goals.

Advisors

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

$38,585,000 Non-Recourse Cash-Out Refinance for a 260 Unit Multifamily Community; Coachella Valley, CA

Rate: 3.75%
Term: 10 Years
Amortization: Full Term Interest Only
LTV: 65%
Prepayment: Defeasance
Non-Recourse

Transaction Description:

George Smith Partners successfully arranged the cash-out, full-term interest only refinance of a 260-unit multifamily community in the Coachella Valley. The 10-year fixed rate loan priced at 3.75% with 65% of the appraised property value. The Property is a Class-A, apartment community built in 2010 located on 20 acres and consists of 32 buildings. The units are spacious and contemporary and contain a mix of 1,2 and 3-bedroom units. Most of the units include attached garages with direct access. Amenities include three resort style pools, spas, a tennis court and a putting green. The clubhouse features a full chef’s kitchen available for residents, large dining and gathering area and fitness studio. GSP worked with the Capital Provider on the underwriting in order to push maximum loan proceeds and assisted with the defeasance process on the Sponsor’s existing loan which was arranged by GSP in 2013.

Advisors

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

$4,300,000 Non-Recourse Permanent Financing for a Trophy Property in West Hollywood, CA

Rate: 3.92% Fixed
Term: 5 Years
Amortization: 30 Years
LTV: 50%
Prepayment Penalty: Stepdown
Guaranty: Non Recourse

Transaction Description:

George Smith Partners placed $4,300,000 in non-recourse permanent financing for a trophy property in West Hollywood, CA. Bank execution, a non-recourse structure and a sub 4% all-in coupon were all requirements, which eliminated most lenders. However, GSP sourced a bank lender willing to offer a non-recourse structure and a 3.92% fixed interest rate. The 5 year loan carries a step-down prepayment penalty and amortizes over 30 years.

Advisors

Zachary Streit
Senior Vice President

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HOT MONEY
Senior Bridge, Construction and Mezzanine/Preferred Equity Up to 90% LTV

George Smith Partners is working with a national lender offering senior bridge, construction, and mezzanine/preferred equity programs ranging from $10,000,000 to $150,000,000 for all property types across the country. Pricing starts at L+250 for senior bridge loans and L+500 for mezzanine and preferred equity investments, with terms up to five years. On select stretch senior offerings, they can offer the borrower the option to convert a higher leverage, 60-85% LTC piece to preferred equity with up to eight years of duration.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Markets Reel on Coronavirus (COVID19), Crying Out for Fiscal Policy

Stocks, bonds, and credit markets are at peak volatility as the pandemic spreads worldwide.  Massive daily fluctuations have become the norm.  The economy may be in recession now according to many analysts.  The global economy may come to a near halt with increased unemployment, slowdowns in consumer spending and business investment.  Predictions are out the window as the spread of Coronavirus has surpassed precedents such as Ebola, SARS, MERS, etc.  The uncertainty is contributing to the volatility.  The classic “Fed put” whereby the Fed cuts rates and soothes markets is not going to cut it this time.  With treatments or vaccines most likely months or years away, markets are clamoring for the full arsenal of government tools: strong crisis level fiscal and monetary policy from the U.S., a coordinated maximum response.  England did their part yesterday, as the Bank of England cut rates and Parliament committed to fiscal stimulus. This was apparent with markets plummeting after a rare Fed non-meeting emergency rate cut.  Various stimulus plans are being discussed in Washington: President Trump speaks tonight, the House of Representatives is expected to pass a bill tomorrow and the Senate seems to be waiting for guidance.  The Fed is pulling out all the stops.  Meanwhile, next week’s meeting will almost certainly include a 0.50% to 0.75% rate cut (which will bring the Fed Funds rate back to near zero, where it sat from 2008 to 2015). They have increased overnight repo line assistance to a staggering $175 billion (note that a mere $50 billion was enough during last September’s volatility). Other tools could be deployed: a full on return to QE with the Fed buying Treasuries and Mortgage backed securities.  Treasuries: the 10 year hit an all time low of about 0.38% a few days ago.  Today it closed at 0.84%.  The yield increase usually means things are settling down, but in this case it’s “bad”.  Banks are selling Treasuries in order to hoard cash.  Lending: We are hearing the gamut of reactions.  Some lenders are shutting down originations temporarily, some fixed rate lenders are increasingly indicating an all in rate rather than a index and spread. Underwriting standards are being scaled back.  Anticipated slowdowns in consumer spending and business investment will have consequences for real estate. 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


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