FINfacts™ XXIV – No. 225 | July 8, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.18%
6 Month LIBOR 0.36%
5 Yr Swap 0.34%
10 Yr Swap 0.64%
5 Yr US Treasury 0.30%
10 Yr US Treasury 0.66%
30 Yr US Treasury 1.40%

RECENT TRANSACTIONS
$8,600,000 Cash-Out Refinance of a 2-Property Multifamily Portfolio During the COVID Pandemic; Los Angeles, CA

Rate: 3.95%
Term: 30 years with 5 years Interest Only Period Rate, fixed for first 5 years, resets every 5 years
LTV: 70%
DCR: 1.15
Prepayment: 3,2,1,1,1
Guaranty: Recourse
12 Month Reserve account that pays first 12 Months

Transaction Description:
George Smith Partners was retained to develop and implement a strategy to refinance a 5-Property $50,000,000 multifamily portfolio. GSP divided the properties between two capital providers in order to provide maximum flexibility to the Sponsor. The second part of the portfolio involved obtaining a 70% LTV permanent loan of $8,600,000 to provide the Sponsor with over $1,500,000 in cash-out capital to purchase additional properties during a changing market and maintain a strong cash position. GSP obtained a fixed interest only rate of 3.95% for the first 5 years.

Challenge:
With the COVID-19 global pandemic and uncertainty in the market, it was critical to select a capital provider who could successfully close. Borrowing costs are on the rise as lenders ratchet up their credit standards. The proceeds for this transaction were targeted for the acquisition of an additional asset which had a firm closing date and a large non-refundable deposit. Any delays would have been very costly. With the current crisis, lenders were 100% focused on rent collections and overwhelmed with new financing requests as several other lenders pulled out of the market as well as forbearance requests from their current borrowers. In addition to the usual due diligence requirements, the Lender required much more information. There were complex issues around appraisals and inspections that required lots of hand-holding.

Solution:
GSP selected a capital provider that we have a strong relationship with and has closed numerous loans for us. We knew the loan officer would stay focused on the need to close on time and keep the agreed to rate and proceeds throughout the loan process. Because GSP is in the debt market every day, we were able to ensure that the capital provider was truly closing deals and meeting deadlines. Because of the market disruption, borrowing rates jumped by over 100 basis points overnight. We were able to lock the 5-year interest only rate at 3.95%, the following day, rates jumped to 4.75%. It was clear that the Lender was mindful of their reputation with GSP and didn’t want to get a reputation of crazy rate increases or abandoning their customers when they are needed the most. GSP’s experience working with appraisers, inspectors and title/escrow during the COVID period was critical to getting this transaction completed. The loan closed on time and the Sponsor was able to utilize the cash-out to purchase another project. As is now common during the COVID crisis, the Capital Provider required a 12-month interest reserve. We were able to convince the Capital Provider to apply those funds to the first 12 months of the loan payments.

Advisors

Bryan Shaffer
Principal/Managing Director
Ruben Bohbot
Vice President
Michael Smilove
Assistant Vice President

SPEAKERS CORNER

WEBINAR

Finance Fridays: Active Lenders In Today’s Market | Friday, July 10, 2020 | 10:00 am PDT 1:00 pm EDT

REGISTER HERE


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HOT MONEY
Institutional Portfolio Lender Funding During COVID; Construction and Perm

George Smith Partners is currently originating and closing fixed and floating rate loans for permanent, bridge and ground-up development with an institutional portfolio lender. With a strong appetite for multifamily, the capital provider offers rates starting at 4% for transactions from $2,000,000 to $50,000,000 for CRE loans and to $35,000,000 for ground-up construction. For stabilized and cash flowing assets, non-recourse and interest-only options are available along with aggressive underwriting down to a 1.15x DSCR.

More Hot Money ›

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


WWW.GSPARTNERS.COM

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10250 Constellation Blvd., Ste. 2700
Los Angeles, CA 90067
Office 310.557.8336
Fax 310.557.1276
Email finfacts@finfacts.net
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