FINfacts™ XXIV – No. 230 | August 12, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.16%
6 Month LIBOR 0.31%
5 Yr Swap 0.36%
10 Yr Swap 0.68%
5 Yr US Treasury 0.30%
10 Yr US Treasury 0.68%
30 Yr US Treasury 1.37%

RECENT TRANSACTIONS
$9,900,000 Multifamily Refinance 5-Year Loan with Full Term Interest-Only Payments; Los Angeles, CA

Rate: 3.85% Fixed
Term: 5 Years
Amortization: 5 Years Interest-Only
LTV: 65%
DSCR: 1.20x
Prepayment: 3,1,0.5
Loan Fee: Par

Transaction Description:

George Smith Partners placed a $9,900,000 loan for the refinance of a 41-unit apartment portfolio in Los Angeles, CA. The loan is fixed at 3.85% for five years with full term interest-only payments. The term sheet was signed shortly before the COVID-19 crisis and ensuing economic volatility. Despite these conditions, the original rate and leverage were kept intact.

GSP previously sourced the acquisition bridge financing two years ago. Although the Sponsor successfully completed their value-add business plan, a number of unique challenges were encountered when closing the refinance. Shortly after the Borrower signed the term sheet, the Lender put their entire pipeline of loans on hold due to the COVID-19 pandemic. When they resumed processing the loan, they initially offered a substantial retrade. GSP was able to leverage our longstanding relationship with the Lender to maintain terms very close to the original application. The Lender also agreed to waive their loan processing fee and the cost of all third party reports. Some of the units at the Property were extremely large and the Sponsor had modified them to create a den space. As a result, a number of these renovated units were able to achieve higher rents, but it was difficult to find market comparable data. GSP obtained the necessary data and the
Lender was able to support their underwritten net cash flow.

The Lender reserved 12 months of interest only payments at loan closing, a standard condition in today’s market. However, the reserve will be used to make the loan payments and released after 6 months if certain financial conditions are met.

Advisors

Shahin Yazdi
Principal/Managing Director
Jonathan Lee
Principal/Managing Director
Matthew Kirisits
Vice President
Jarod King
Senior Vice President
Kyle Redmond
Analyst
Paul Monsen
Vice President

$4,850,000 Non-Recourse Bridge Loan for a 27,343 SF Development Site; Los Angeles, CA

Rate: 5.9%
Term: 12 Months
LTV: 24.5%
Amortization: Interest-Only
Guarantee: Non-Recourse

Transaction Description:

George Smith Partners arranged $4,850,000 in non-recourse bridge debt to refinance the existing loan on a 27,343-square-foot development lot in the Chinatown district of Los Angeles, CA. The Sponsor acquired the site two years ago and has since secured entitlements for its proposed mixed-use development. Demolition of a vacant retail center is needed to conduct ground testing and ready the Project for vertical construction. The current Lender, however, would not allow the demolition.

GSP targeted a capital provider that was comfortable with the proposed project, foreign sponsorship, and current land value. The existing loan, which had also been sourced by GSP, was facing near-term maturity when GSP successfully engaged a lender that could execute within a tight timeframe. The non-recourse facility is sized to 24.5% LTV and fixed at 5.9% on an interest-only basis with an initial term of 12 months.

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
Brandon Asherian
Assistant Vice President

SPEAKERS CORNER

Ed Steffelin, Senior Vice President at GSP will be participating on August 18th at the IMN Single Family Rental Virtual Conference. Register at imn.org/real-estate/conference/Single-Family-Rental-Virtual-Conference/ 

Save the date: Our next episode of Finance Fridays will be on Friday, September 11th at 10:00 PT.

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


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HOT MONEY
CMBS Financing Sub 3% Rates

National fixed rate lender funding all asset types (except hotels) starting at $5,000,000 on a non-recourse basis. Retail appetite is currently limited to grocery anchored centers. Debt yield expectations like pre-COVID levels. Full term interest only is available up to 65% LTV for quality properties. The lender offers sub 3.00% coupon available for low leverage loans (10.5% debt yield or higher).

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Stimulus Talks Collapse, Is Inflation Back or Just Visiting?

The stimulus negotiations ended with no deal and partisan bickering, resulting in limited executive orders that may be challenged in court. With Congress going on recess, the next deadline is a big one! New annual appropriations bills need to be passed by October 1 to avoid a government shutdown. Congress will convene again in September with August economic data possibly providing more context on the urgency or lack thereof. The hyper partisan atmosphere of the election should also make it “interesting”. Meanwhile, today’s surprising jump in CPI indicated inflation is still around. The 0.6% core rate increase (excluding food and energy) was the highest since 1991. This is partially a result of pent up demand for items whose prices were depressed during the March – June pandemic shut down and gradual reopening. One month is not a trend, but the 10 year T jumped to 0.68% (note that it hit a low of 0.50% last Tuesday). That’s a 36% increase in a week. 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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