FINfacts™ XXIV – No. 223 | June 24, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.18%
6 Month LIBOR 0.38%
5 Yr Swap 0.38%
10 Yr Swap 0.69%
5 Yr US Treasury 0.32%
10 Yr US Treasury 0.69%
30 Yr US Treasury 1.44%

RECENT TRANSACTIONS
Cash Out Refinance for 14 Unit Renovated Multifamily Property; 3.5% Fixed; Bank Financing Closed During Covid-19 Pandemic; Los Angeles, CA

Rate: 3.5% fixed for 7 years, then floating at 6M LIBOR + 2.35%
Term: 30 years
Amortization: 5 years Interest Only followed by 30-year amortization
Prepayment Penalty: 4,3,2,1,0
LTV: 55%
DCR: 1.20x
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners secured a first trust deed on an unencumbered 14-unit Los Angeles multifamily property. The loan is fixed at a rate of 3.5% for seven years and has five years of Interest Only payments. The Sponsor acquired the Property in an all-cash transaction 12 months ago and completed a full gut renovation. Unit interiors were updated to a high level of finish with an investment of $27,600/per unit, and the Property was leased up to 100% occupancy. The loan was placed into application with a California based bank about one week before the stay-at-home order was implemented. Despite the resulting economic uncertainty, the Sponsor was able to maintain collections close to 100%. As a result, the Capital Provider made one small change to the original term sheet, adding a twelve-month payment reserve. The payment reserve is based off Interest Only payments and it will be used to make the interest payment on the loan. In order to cover this reserve, the Capital Provider was able to increase loan proceeds from the amount in the original application. As a result, our Sponsor received the same amount of cash out that was originally applied for.

Advisors

Shahin Yazdi
Principal/Managing Director
Jonathan Lee
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, July 10th 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, July 29th.

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


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HOT MONEY
Equity Financing for In-Process Development Projects Impaired By COVID-19

GSP identified an equity provider offering rescue capital for constrained borrowers with refinancing shortfalls and pending loan maturities in primary and select secondary markets nationwide. Starting at $10,000,000, they will consider property facing significant unexpected vacancy from failed tenants for specialty assets exposed to co-working operations as well as assets in markets with significant exposure to tourism and entertainment.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Recovery Shape Speculation Abounds

This week saw Blackstone CEO Stephen Schwarzman forecast a “big V” recovery this summer, easily the best case scenario among the possibilities. Meanwhile, the IMF downgraded its forecast to a 4.9% global contraction in GDP this year, with the U.S. at an 8% contraction. They lowered their 2021 positive global GDP estimate to 5.4%. Schwarzman is optimistic as he predicts treatments or a vaccine will emerge soon, while most predictions are for a longer wait. This week’s data points should offer some clarity. After the recent bigger than expected increase in the May jobs report: will the trend continue on Thursday (Durable Goods) and Friday (consumer spending)? Both of those reports set record lows in April, and positive increases in May could auger well for the recovery. The data will be critical as Congress and the administration contemplate a possible 4th Covid stimulus bill.

Upcoming “cliff” dates to watch:

  • July 31 – end of supplemented unemployment insurance (as vast numbers are still unemployed, the end of these benefits could hinder the recovery).
  • Oct 1 – The first day airlines and other major employers are allowed to lay off employees per the federal assistance guidelines and possible government shutdown.

Capital Markets: The secondary markets (CMBS and CLO) continue to function as pools with the right product type mix are being well received. Spreads are tightening in the fixed rate debt markets. CMBS will compete for strong properties with interest only and sub 4% rates. Bridge lending is coming back with 75% LTC for well underwritten multifamily loans being offered. 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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