FINfacts™ XXIV – No. 227 | July 22, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.18%
6 Month LIBOR 0.34%
5 Yr Swap 0.32%
10 Yr Swap 0.59%
5 Yr US Treasury 0.27%
10 Yr US Treasury 0.60%
30 Yr US Treasury 1.30%

RECENT TRANSACTIONS
$62,750,000 Non-Recourse, Bridge Financing for a New 253-Unit, Class A, Mixed-Use Development; Longmont, CO

Rate: L+500 (1.00% LIBOR Floor)
Term: 3+1+1
LTV: 75%
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners arranged $62,750,000 in non-recourse, bridge financing on a new construction, mixed-use property with 253 apartment units above 10,000 SF of retail in Longmont, CO—approximately 20 minutes northeast of Boulder. Despite delivering in the early stages of a global pandemic and statewide stay-at-home order, the building has maintained relatively robust lease-up velocity through unconventional marketing methods such as virtual touring. Amid such unprecedented market uncertainty, GSP successfully engaged a newly established debt fund to facilitate a cash-neutral, non-recourse refinance of the project’s maturing high-leverage construction debt, which could not be extended. The 75% loan-to-value bridge facility is priced at L+500 with a 36-month term and two 12-month extension options.

Advisors

Malcolm Davies
Principal/Managing Director
Zachary Streit
Senior Vice President
Alexander Rossinsky
Senior Vice President
Annah Blanton
Vice President
Aiden Moran
Assistant Vice President
Maxwell Shedlosky
Assistant Vice President
Brandon Asherian
Assistant Vice President

SPEAKERS CORNER

Save the date – Friday, July 31st at 10:00 am PT for the next episode of Finance Fridays. Malcolm Davies and Zack Streit will moderate a discussion on, How Deals Will Be Capitalized in a Post-COVID World: Crowdfunding, Family Offices, Private Equity.  The registration email will be sent out on Monday, July 27th.

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 – Rescue Capital Funding During COVID

George Smith Partners identified an equity provider offering rescue capital for all asset types in major MSA’s. With a focus on recapitalization and repositioning assets, equity starting at $10,000,000 and going to approximately $30,000,000, they can provide Pref Equity with rates starting at 14%.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
More Stimulus in the US and Europe, Vaccine Hopes, Spikes Dampen Economic Growth

Headlines this week:

  1. Washington DC: Congress and the White House struggle to create yet another COVID stimulus package costing about $1.5 Trillion.
  2. European leaders agree on a nearly $900 billion stimulus package after difficult negotiations.
  3. U.S. Dept of HHS makes a deal to purchase 100 million doses of a promising vaccine from Pfizer with an option for 500 million more doses(to be distributed free of charge).
  4. Negative economic trends continue in July as virus spikes cause re-closing of many small businesses, predictive statistic trends start to trend downward after rising in May/June (airline and hotel bookings, Apple map searches, etc).

Upcoming deadlines:

  1. Businesses that received PPP funds can soon layoff workers without having to pay back the loans. National Federation of Independent Businesses survey showed 653,000 businesses plan to lay off workers near end of July without further assistance (70,000 businesses said they plan on laying off 10 or more workers).
  2. Federal unemployment benefits expire next Friday.
  3. As commercial flight passenger volume decreases, speculation mounts that the major airlines will lay off huge chunks of their workforce on October 1. That’s the first day they are allowed to layoff workers and keep the billions of dollars of aid they received in an early Covid stimulus bill.
  4. Home loans with FHA guaranteed mortgages are in a foreclosure and eviction moratorium that was extended from June 30 to August 31. This could hurt landlords, homeowners and tenants. Eviction moratoriums put huge pressure on landlords. Note that the CRE Council is working on a $400 billion proposal to allow the Federal Reserve to take a preferred equity stake in commercial properties by advancing troubled borrowers of hotels, malls, etc one year of debt service, taxes, and operating expenses.

All of these deadlines or “cliffs” expiring during a rough patch for the economy could result in a wave of evictions, layoffs and foreclosures. Federal Government aid and/or legislation will be necessary to extend these deadlines. When will the economy be able to function without these extraordinary measures?

It seems that the calculus is as follows: the virus is proving difficult to control until an effective vaccine is widely available and the fall/winter flu season is only 2 months away. “Normal” consumer behavior (movie theaters, malls, conventions, normal business travel, hotel occupancy) is most likely completely dependent on said vaccine. The question in Washington this week and next is how much and how long? Will it be enough to carry the water until the vaccine? And even after the vaccine comes, there are long term and permanent effects that will affect commercial real estate for years to come. 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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