FINfacts™ XXIV – No. 214 | April 22, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.62%
6 Month LIBOR 1.18%
5 Yr Swap 0.48%
10 Yr Swap 0.68%
5 Yr US Treasury 0.62%
10 Yr US Treasury 0.62%
30 Yr US Treasury 1.22%

RECENT TRANSACTIONS
$12,933,000 Permanent Loan to Refinance Existing Construction Debt for a Recently Completed 21-Unit Multifamily Property; 65% LTV; 2.92% Fixed, 1.35 DSCR; Los Angeles, CA

Rate: 2.92% Fixed
Term: 10 Years
Amortization: 10 Years Interest Only
LTV: 56%
DSCR: 1.35x
Recourse: Non-Recourse
Prepayment: Yield Maintenance
Loan Fee: Par

Transaction Description:

George Smith Partners secured $12,933,000 in proceeds for a recently stabilized 21-unit multifamily building located in the Pico Robertson neighborhood of Los Angeles, CA. The non-recourse, par, permanent Fannie Mae loan was utilized to refinance the existing bank construction debt in the amount of ~$9.45M and return equity to the ownership. The loan represented 88% of cost and carries a 10-year term with 10-years of interest only payments. The loan is secured by a Class A five-story mid-rise multifamily building comprised of four 2-bedroom units and seventeen 3-bedroom units. Amenities at the Subject Property include controlled access entry and parking, an elevator, rooftop deck, and private balconies. The loan was placed into application prior to major Covid-19 concerns thus no index floor was contemplated. GSP worked with the Lender to underwrite revenue to a trailing one month of actual collections carefully navigating the waiver process so as not to trigger new business which would have resulted in an index significantly wider than the actual 10-year Treasury rate. Lastly, a six-month reserve for principal, interest, taxes, insurance, and reserves was held back at closing in the event of a shortfall, enabling the Lender to fund during the global pandemic. The reserve will be released within one year if the Subject Property maintains the minimum 1.35x DSCR for the same period.

Advisors

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

Trophy Gas Station; 3.1% Interest Rate for 10 Years; Orange County, CA

Rate: 3.10% Interest Rate
Term: 10 Year Term
LTV: 40% LTV
Amortization: 20 Years
Lender Fee: Par
Guaranty: Full Recourse

George Smith Partners secured $5,000,000 of senior financing for a gas station located at a premier Orange County intersection. The loan is fixed at 3.10% for the entirety of the 10-year term. This is one of the lowest fixed rate financings ever placed by GSP even though gas stations are typically priced with an interest rate premium.

The asset class presented a unique challenge when marketing the Project. GSP was able to arrange the loan with a money center bank by highlighting the strong cash flow, extensive experience in management and operations, and irreplaceable site location. The Lender did not require a depository relationship from the Sponsor, even though she was not an existing client.

The Sponsor showed concerns about having a large loan balance towards the end of the loan term, believing that the continuing growth of electric vehicles could diminish the value of gas stations in the future. GSP negotiated to allow the Sponsor to pay down up to 15% of the outstanding loan balance every year. The amortization was also reduced to 20 years to accelerate the principal paydown.

Advisors

Patrick O’Donnell
Vice President
Paul Monsen
Vice President

SPEAKERS CORNER

WEBINAR

Finance Fridays with GSP: Market Update By Sector – Retail, Multifamily, Office, Industrial

REGISTER HERE


Pascale's Portrait
PASCALE'S PERSPECTIVE
April Rent Collections Suffer, Secondary Markets Thawing, More Stimulus?

Recently released statistics on approximate April rent collection by product type from NAREIT and NMHC: Apartments (93% but increases in late and partial payments), Industrial (99%), Grocery Anchored Retail shopping centers (46%), Retail Malls (approx.20%), Office (89%).  April collections are benefiting from tenants spending reserves/savings and following March’s partial shutdown. May collections are anticipated to be lower in the wake of April’s near total shutdown, especially for apartments and retail. The upcoming months are full of anticipation and uncertainty as society begins to reopen. The strength of the economy is based on consumer confidence which will be highly dependent on safety, both actual and perceived. Lending: The secondary market is so critical for overall CRE liquidity and is showing signs of life as some CMBS originators are considering new originations (typically 65% LTV, no hotels, limited retail, multi tenant). The industry continues to lobby the Fed and Congress to allow floating rate CLO paper to be purchased by the Fed. Life companies are still very cautious, but we are seeing more of them emerge from the initial market shock and start originating, albeit at low leverage. We are seeing the local banks continue to lend cautiously mostly on apartments. Rates/Inflation: Treasuries remain ultra low, negative oil prices are another signal that inflation is not anywhere on the horizon. The Treasury rate remains low even after the Fed cut its volume of Treasury purchases to “only” $15 billion (down from $30 billion). Stimulus: Congress passed a $480 billion bill to replenish SBA PPP program. These days that’s a relatively “small” bill. The next big multi trillion dollar package is being discussed for May (CARES2 or Stimulus 4). Infrastructure, tax incentives (restaurants, entertainment, sports, etc according to the President), and aid to state and local governments are the most discussed elements. The Mortgage Bankers Association would like to see forbearance policies codified by law and liquidity provided for loan servicers, allowing them to keep bondholders current. This would be another critical element towards restarting the securitized loan marketplace. 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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