FINfacts™ XXIV – No. 219 | May 27, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.17%
6 Month LIBOR 0.59%
5 Yr Swap 0.38%
10 Yr Swap 0.67%
5 Yr US Treasury 0.35%
10 Yr US Treasury 0.69%
30 Yr US Treasury 1.43%

RECENT TRANSACTIONS
$16,300,000 Permanent Multifamily Financing, Seven Years IO, 65% LTV; Boise, ID

Rate: 3.20%
Term: 10 Year
Interest Only: 7 years
Amortization: 30 years
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners placed $16,300,000 in cash out refinancing for a recently stabilized for-rent SFR development. The financing includes seven years of interest only, which will maximize cash flow for an asset located in one of the fastest growing markets in the United States. The Project is a key asset for the Sponsorship group which operates over 2,500 units throughout the mountain states and securing a low rate, higher leverage, take-out loan was an essential part of the long-term strategy of the company. GSP utilized our relationships to close the transaction in three weeks from a signed application.

During the COVID-19 era we have seen significant changes to underwriting standards in comparison to 2019. These new requirements presented an underwriting challenge for the recently stabilized project as collections were increasing throughout 2020. GSP was able to demonstrate the Sponsors overall portfolio performance and three months stabilized occupancy to achieve maximum proceeds.

Advisors

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

$13,000,000 Acquisition and Reposition Financing on a 47-Unit Student Housing Property; Adjacent to a Major Southern California University

Rate: 30-Day LIBOR + 3.35%
Term: Three years plus two 12-month extensions
Amortization: 36 months interest only
Max Loan to Cost: 70%
Prepayment: 21-month minimum interest period
Guaranty: Non-recourse
Lender Fee: 1.00%

Transaction Description:

George Smith Partners arranged the $13,000,000 first mortgage on a 1960’s vintage, 102-bed student housing property in Los Angeles. The national balance sheet lender provided the Sponsor non-recourse financing at 70% of total project cost including 100% of future CapEx funds totaling $42,500/per unit to complete extensive interior and exterior renovations. Interest expense is not incurred on CapEx funds until drawn. The Sponsor’s cash flow was maximized as the loan is interest only during the initial three-year term. The 30-Day LIBOR plus 3.35% coupon required interest rate risk protection and in order to minimize associated sponsor cost the Capital Provider structured the interest rate cap with a two-year duration at closing plus an obligation to renew for the third year of the initial term. Due to a lack of cash flow for 12 months, the Capital Provider structured an interest reserve to cover debt service during the peak reposition period.

Advisors

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

SPEAKERS CORNER

Sign up today for the webinar, “F&B Town Hall with SBE CEO Sam Nazarian and Malcolm Davies” on Wednesday, June 3rd at 12:00 pm PT. Register Here

Mark your calendar for Friday, June 5th for the webinar, “Identifying and Executing on Value in Today’s Environment”. The registration will be sent out next week.

If you missed any of our webinars, below are links to the recordings.


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HOT MONEY
JV Equity From $1,000,000 for Multifamily Properties up to 90% LTC

George Smith Partners identified a national joint venture equity provider seeking to invest in multifamily properties with strong current cash flows in partnership with strong sponsors. With the ability to go up to 90% of the total capital stack, the equity provider will fund equity contributions from $1,000,000 to $20,000,000 inclusive of secondary and tertiary locations. The Sponsor will receive a promote structure based on each transaction’s merits.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Fed Looks to Implement Rarely Used Tool as it Battles Unprecedented Economic Damage

Today’s remarks by New York Fed President John Williams were illuminating as he discussed the possibility of “yield curve control” to aid the economy. This will involve the Fed buying and selling long-term bonds in order to “set” long term rates. This has not been implemented since WW II. Other countries have attempted this strategy recently, most notably Japan in setting long-term rates at 0%. The Fed continues to search for stimulative tools as they have already dropped rates to 0% for an extended period. Meanwhile, the Fed is rolling out four new previously approved facilities this week: $600 Billion Main Street Lending Program, Primary Market Corporate Credit Facility, Municipal Liquidity Facility, and Term Asset Backed Securities Loan Facility. This will place the Fed in the center of the corporate, municipal and MBS bond markets as buyer of last resort. The Main Street Lending Facility is highly anticipated, and will allow the Fed to lend (at approximately 300 over LIBOR) to companies with employees of 15,000 or less, hoping that this access to capital can help act as a springboard back to “normality”. Secretary Mnuchin indicated last week that the Treasury expected to “take losses” on these programs, implying they are almost like grants. The issue will be whether these capitalized businesses will be able to attract customers and thrive in the the present economic environment. Will customers (corporate or individual) still spend? The Treasury is “fully prepared to take losses in certain scenarios” on these programs implying that they are almost like grants. This gets back to solvency issues and whether more government grants are in order, ie. another stimulus package. After lots of hemming and hawing about “wait and see” it seems there is some new sense of urgency to pass another bill in early June. 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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