FINfacts™ XXIV – No. 226 | July 15, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.18%
6 Month LIBOR 0.34%
5 Yr Swap 0.34%
10 Yr Swap 0.62%
5 Yr US Treasury 0.29%
10 Yr US Treasury 0.63%
30 Yr US Treasury 1.34%

RECENT TRANSACTIONS
Permanent Multifamily Financing Secured During COVID-19 Pandemic, 3.07% Fixed for 5 Years; Los Angeles, CA

Rate: 3.07%
Term: 5 Years Fixed
Amortization: 30 Years
Prepayment Penalty: 2, 1, 0
LTV: 60%
DCR: 1.25
Lender Fee: None
Reserve Account: None
Deposits Required: None

Transaction Description:

George Smith Partners arranged $2,600,000 in permanent financing for the refinance of a stabilized 8-unit, multifamily property in Los Angeles, California. The Sponsor acquired the Property a few years ago and was looking to lower their rate as they finished completion of a light renovation. As the environment was changing drastically day to day with the COVID-19 pandemic, GSP identified a Capital Provider offering fantastic terms. There were no holdbacks, no deposits were required to be held at their branch and provided a flexible prepayment penalty structure that allowed the Sponsor plenty of options during these challenging times.

Advisors

Reuven Risch
Vice President

SPEAKERS CORNER

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


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HOT MONEY
Pref Equity and Mezzanine Rescue Capital for Hospitality Assets

George Smith Partners identified an equity provider offering rescue capital for nationwide full-service hospitality and mixed-use assets. With financing starting at $5,000,000 and going to approximately $20,000,000, they can provide Pref Equity and Mezzanine capital with rates starting at 12%. Locations of interest are in strong markets with high barriers to entry and development sites with the potential to build strong hotel assets from the ground up.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Virus Spikes Threaten The Recovery and Critical Dates Loom, Fed and Congress Seem Ready to Act

All eyes on Washington as positive June data cannot be considered “forward guidance” as July’s numbers will most likely be shaky. Congress reconvenes next Monday for a 3 week session before recessing until Labor Day. Elements of the “final” COVID stimulus bill are taking shape. For example, a 5-year liability shield (2019-2014) for businesses and governments relating to COVID claims, some “targeted” aid to state and local governments and an extension of $600/per week of Federal unemployment benefits that are now set to expire July 31. Note that about 33 million Americans are receiving the Federal unemployment benefits. All of these measures are controversial and contentious. If the unemployment benefit is replaced with a “return to work bonus” from the government, is that putting workers into danger? Ben Bernanke (who knows a thing or two about a financial crisis) strongly urged billions of aid to state and local governments, indicating that there should have been more stimulus to states and cities following the Great Recession.

The Fed is “all in” based on speeches from Fed officials this week. To summarize: “No” on negative interest rates in the U.S. Officials cited, “structural issues”. Possible “Yes” on Yield Curve Control (now being practiced by the Bank of Japan) whereby the Fed buys enough short term treasuries to set a ceiling on the yield. A big “YES” on further asset purchases across the board (Treasuries, Mortgage Backed Securities, and Corporates). There is room for this as the Fed’s balance sheet is actually declining due to lower utilization of its swap lines with foreign banks (a very good sign because that means markets are less stressed). And also, “Yes” to the end of LIBOR remaining on schedule for Jan 1, 2021. Fed Governor Williams issued a robust defense of the replacement index (SOFR) during a speech on Monday to regulators. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

More Perspectives ›

Straight to The Point – Bridge Lender Demand Ramping for Multifamily Assets
By: Malcolm Davies and Zack Streit

Bridge lender demand has ramped up notably over the past 60 to 90 days for multifamily assets coming off of construction loans and in lease-up. This has been fueled by government purchase of agency MBS through TALF that began in April and has now driven down agency rates on fixed rate loans to sub 3.00%. In the past four months, we have seen strong multifamily collections (April through July) and continued optimism about the next stimulus bill expected to pass before Labor Day which will extend or continue to supplement unemployment benefits.

Debt funds with access to unlevered or balance sheet capital that was previously on the sidelines have re-emerged in the last 60 days, adding to the supply of available lenders (now estimated at about 50% of pre-COVID levels). Spreads for non-recourse bridge financings have compressed between 450 and 500 basis points over 1 month Libor (equivalent to all in rates of 5.00% to 6.00% given a 100 basis point Libor floor, which has become a standard ask) for leverage levels as high as 80% LTC for Class-A assets in major markets.

While this pricing is still 150 to 200 basis points higher than pre-COVID levels, it is significantly lower than the high single digit “hard money” rates that were prevalent in April and May. 80% LTC financing currently feels like pre-COVID era leverage and has exceeded market expectations. If the trend of increased lender demand continues, expect increased competition to further compress pricing to 400 basis points over Libor or perhaps lower?

 

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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