FINfacts™ XXIV – No. 222 | June 17, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.19%
6 Month LIBOR 0.43%
5 Yr Swap 0.41%
10 Yr Swap 0.74%
5 Yr US Treasury 0.35%
10 Yr US Treasury 0.76%
30 Yr US Treasury 1.56%

RECENT TRANSACTIONS
$13,500,000 Non-Recourse Bridge-to-Bridge Loan with a Cannabis User at 6.90%; Echo Park, CA

Rate: 6.90%
Term: 12-month term with one 12-month extension option
LTV: 60%
Guaranty: Non-recourse

Transaction Description:

George Smith Partners arranged $13,500,000 in quick-close, cash out, bridge-to-bridge financing for a multi-tenant retail center in Echo Park, California. The Sponsor approached GSP with intentions of taking out their existing lender due to an issue with lease approval for a cannabis tenant. In order to purchase an out-parcel on the Property, the cannabis user needed a lease in place so it could obtain a license from the local jurisdiction. If approvals were not granted, the Sponsor would have the ability to break the lease. GSP identified a non-bank lender who was comfortable approving a lease on a space which may never be occupied. The Lender’s flexible prepayment structure allowed the Sponsor to execute their business plan as the cannabis tenant planned to acquire an out-parcel on the Property after receiving approvals from the City. The first trust deed was sized to 60% of value with no hold back requirement for interest reserve or capital expenditures. The non-recourse, interest only loan does not carry any prepayment penalties. The Sponsor plans to take out the loan within 12 months with long-term fixed rate debt.

Advisors

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

$2,800,000 Two Week Close Bridge Deal; Los Angeles, CA

Rate: 7.9%
Term: 12 months Interest Only

Transaction Description:

George Smith Partners demonstrated our ability to provide full-service financing for a repeat client who is a prolific developer in the Los Angeles area. The quick close $2,800,000 financing was a bridge loan which took out a senior construction loan that was placed by GSP in 2018. The 12-month loan will allow for the Developer to execute on their business plan to market and sell the remaining homes in the Small Lot SFR development. The Project is in the heart of Los Angeles minutes from major job centers and consists of 11 high end fully constructed homes. The development opportunity was purchased in 2015 and the construction was completed in middle of 2019. GSP provided our expertise throughout the entire process, working with our client throughout the acquisition, entitlement, construction, and the for-sale process.

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

SPEAKERS CORNER

Save the date for Friday, June 26th at 10:00 am PT for the next webinar in our “Finance Fridays” series, moderated by Michael Anderson-Mitterling and Olga Brandeis. An invite will be sent out on Monday, June 22nd.

If you missed any of our webinars/podcasts/short videos, below are links to the recordings.


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HOT MONEY
Non-Recourse Bridge Financing up to 80% LTC

George Smith Partners has begun placing non-recourse bridge financing structures for multi-family, flagged hospitality and best in class retail. The lender is specifically focused on properties located in both major and secondary Western States MSA’s. Loans are up to 80% leverage with 2-3 year terms, interest only. Pricing is based on LIBOR and blends to the mid to high 5.00% range depending on asset type and last dollar.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Return of CLO Market? Fed Buying Corporates

Fed Chair Powell’s testimony to Congress this week was more highly anticipated than usual. The big news for financial markets was his pledge for the Fed to purchase corporate bonds for individual companies. This is part of the unprecedented massive bond purchases by the Fed in the wake of the COVID crisis. Powell’s reason was also very interesting. Many noted that the corporate bond market is very liquid today with spreads almost back down to their pre-COVID levels. Part of this was due to the Fed’s promise to purchase corporates on March 23 during the worldwide panic. Powell stated that the Fed’s duty was to follow through on that promise and make the purchases. The takeaway is that the immense influence of the Federal Reserve is based on its integrity. As corporate bond spreads tighten, look for real estate credit spreads to follow suit in the fixed rate markets.

CLO Update: Collateralized Loan Obligations in the commercial real estate market are pools of floating rate loans sold in the secondary market. It’s a major underpinning of the bridge loan sector. It has been virtually shut down since early March as no bond buyers were active. Activity has started up again in the past few weeks as some pools of selected pre-COVID originated loans are being successfully securitized. Spreads are wider, for example: pre-COVID pricing for AAAs was approximately LIBOR + 100. Those bonds are now selling at about L + 235 with oversubscribed buyer interest. Look for bridge loan programs offering 80% LTC loans at L + 275-300 pre-COVID to now offer 60-70% LTC at L + 450 – 550. And the now familiar stratification of product types will be in effect: multifamily and industrial in favor, with office needing a good story, retail very selective and no hotels. 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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