FINfacts™ XXIV – No. 215 | April 29, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.40%
6 Month LIBOR 0.99%
5 Yr Swap 0.41%
10 Yr Swap 0.62%
5 Yr US Treasury 0.36%
10 Yr US Treasury 0.62%
30 Yr US Treasury 1.20%

RECENT TRANSACTIONS
$7,025,000 Non-Recourse 77% LTC Adaptive Re-Use Construction to Perm; 3.50% Fixed for 10-Years; Southern California

Rate: 3.50% Fixed
Term: 10-Years
Amortization: 3-Years Interest Only, 30-year amortization thereafter
LTC: 77%
Prepayment: 4%, 3%, 2%, 1%, 0%
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners arranged $7,025,000 in non-recourse construction to permanent financing for the adaptive re-use of an existing vacant bank branch building to a medical office building. Located in a prime Southern California submarket and sized to 77% loan to cost, the construction facility consists of an initial funding of $4,825,000 with future draws of $2,200,000 to complete the reposition of the Property. The non-recourse loan is fixed for 10-years at a rate of 3.50% with three years of interest only then converting to a 30-year amortization schedule for the remaining loan term. The loan is structured with a step-down pre-payment schedule of 4%,3%,2%,1% and open thereafter with no pre-payment penalty for added flexibility.

Advisors

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

$4,410,000 Non-Recourse Acquisition Bridge Financing up to 90% of Purchase Price; Glendale, CA

1st TD:
Rate: 7.10%
Term: 1 year
LTV: 60%
Fees: 1% in/0% out
Guaranty: Non-Recourse

2nd TD:
Rate: 12%
Term: 1 Year
LTV: 90%
Fees: 2% in/0% out
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners arranged $4,410,000 in quick-close, acquisition bridge financing for a 17-unit, 1960s built, value-add multifamily project in Glendale, California. The Sponsor approached GSP with an extremely tight closing time frame due to a reverse 1031 exchange. He valued certainty of execution above all else so he could close on the Property in short order. The Sponsor will use his own equity to renovate the Property. GSP identified two, non-bank lenders with a long history of providing quick close, bridge execution. The first trust deed is sized to 60% of purchase with no hold back requirement for interest reserve or capital expenditures. GSP also sourced a second trust deed up to 90% of purchase price. Both loans were non-recourse, interest only, and do not carry prepayment penalties. The Sponsor plans to take out the two loans within 12 months with agency or long-term fixed rate debt.

Advisors

Gary E. Mozer
Principal/Co-Founder
Kyle Howerton
Senior Vice President
Michael Anderson-Mitterling
Senior Vice President
Akash Rohera
Assistant Vice President

Pascale's Portrait
PASCALE'S PERSPECTIVE
Fed is Deploying It’s “Full Range of Tools” and Challenges Washington To Follow Suit

Today’s Fed meeting and subsequent press conference by Fed Chair Powell was like no other in history. First off, Powell said, “We are going to see economic data for the 2nd quarter that is worse than any data we have ever seen”, this after the 1 quarter GDP contracted at a 4.8% annualized rate, the worst reading since 2008.  Also, Powell’s speech and Q&A was virtual, with reporter questions being asked via a webinar. He expressed some hope for a significant bounce back in the 3rd quarter as stay at home measures are gradually rolled back. Of course, so much is dependent on the virus. Markets rallied significantly today on positive news regarding a potential treatment.

Full Range of Tools: The Fed Funds rate will remain at near zero for a while (possibly for 2-3 years) and the Fed continues to purchase about $10-15 billion per day in Treasuries and $8 billion in mortgage bonds, daily injections of capital into the repo markets.

Up next: A Main Street Lending Program will provide 4 year loans to businesses too large to benefit from the PPP program and more purchases of corporate debt. But, Powell noted that the Fed is authorized to “provide loans not grants” and the most vulnerable American individuals and businesses are not in a position to pay back loans as they have been hit so hard by this crisis. “This is the time to use the great fiscal power of the United States to do what we can to support the economy and try to get through this with as little damage to the longer-run productive capacity of the economy as possible”.  Powell declared in a direct message to Congress to provide this aid. He is implying that the fiscal policy so far is good but not enough and he is continuing to push monetary policy to the limit. Focus on central banks continues tomorrow with the ECB’s policy announcement. Bank of Japan opened the week on Monday pledging unlimited bond buying, as the international adoption of Modern Monetary Theory continues. 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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