FINfacts™ XXIV – No. 228 | July 29, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.17%
6 Month LIBOR 0.34%
5 Yr Swap 0.31%
10 Yr Swap 0.59%
5 Yr US Treasury 0.25%
10 Yr US Treasury 0.57%
30 Yr US Treasury 1.24%

RECENT TRANSACTIONS
$5,891,700 Value-Add, Bridge, Refinance for a Multifamily Property; Santa Barbara, CA

Rate: Prime + 0.75% with a 4% Floor
Term: 18 months
Recourse: Full Recourse
Amortization: Interest only
Fees: 0.5%
Prepayment: None during construction period

Transaction Description:

George Smith Partners placed a $5,891,700 recourse loan for the refinance and recapitalization of an approved mixed-use conversion back to 100% multifamily use. The Sponsor acquired the mixed-use office and multifamily project in early 2019. They negotiated the early termination of several long-term office leases and obtained approvals to convert the entire Property back to multifamily. The Sponsor will add kitchens to the office units and converted a large multi-story penthouse unit with ocean views into smaller units increasing the unit count to 23. Soft demolition began in early 2020 with insufficient funds available in the existing acquisition/bridge loan to complete the revised business plan.

GSP placed the original acquisition/bridge loan. Even though the current loan went under application at the start of the COVID-19 pandemic, the only delay was as a result of the appraisal process. The value and the loan were not negatively impacted by the change in market conditions due to the COVID-19 pandemic. GSP identified a bank lender who underwrote to the new business plan and was able to provide capital at less than half of the previous loan cost while providing an additional 40% in proceeds. The bridge loan has an 18-month term at Prime + 0.75%, interest only, with the ability to convert to a 5-year term.

Advisors

Alina Mardesich
Senior Vice President

SPEAKERS CORNER

WEBINAR

How Equity Deals Will Be Capitalized in a Post COVID World: Crowdfunding, Family Offices, Private Equity

Friday, July 31, 2020 | 10:00 AM PDT

REGISTER HERE


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HOT MONEY
Short-Term Bridge Financing for California Properties 100% LTC

George Smith Partners is currently placing recourse and non-recourse, small balance financing up to $15,000,000 and up to 100% LTC. With a focus on ground up construction, renovation and repositioning in California the lender offers rates ranging from 6% to 10% and terms from 6-12 months with extension options. The lender favors the industrial and multi-family sector, but they will also consider retail, office and small multi-residential for sale.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
“We are not thinking about thinking about raising rates”.

Comments from Fed Chair Powell today reiterating the Fed’s commitment to accommodative policy for as long as it takes. The Fed policy statement held few surprises, extending commitments on swap lines (through March 2021), bond buying ($120 billion a month in Treasuries and Fannie/Freddie), corporate bond buying, emergency lending programs (extended to Dec 31). Unprecedented programs to purchase municipal and corporate bonds also will continue. Powell noted the recent “leveling off” in the economy after May/June job gains were “sooner and stronger” than expected. But subsequent surges in COVID cases around the country have partially derailed that recovery. He noted debit and credit card spending, hotel occupancy and other consumer metrics are slowing, and future trends are unknown due to the unpredictability of the virus.

Interesting comment: “The two things are not in conflict. Social distancing measures and a fast reopening of the economy actually go together. They’re not in competition.” Spoken like a true analytic banker. He sees no danger of inflation and actually seemed to warn of deflation as he indicated that the pandemic is lowering prices (except for the notable exception of food prices). Watch the data: tomorrow’s 2nd quarter GDP announcement will be unprecedented, predicted to be minus 35% (!) Remember this is annualized, so it will show about a 10% drop in the 2nd quarter, still very significant. 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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