FINfacts™ XXIV – No. 231 | August 19, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.16%
6 Month LIBOR 0.34%
5 Yr Swap 0.33%
10 Yr Swap 0.66%
5 Yr US Treasury 0.29%
10 Yr US Treasury 0.69%
30 Yr US Treasury 1.40%

RECENT TRANSACTIONS
$26,000,000 Bridge Loan for a 65-unit New Multifamily Property, 100% LTC, No DCR Test; Los Angeles, CA

Rate: L+5.45% with a 1.0% LIBOR floor = 6.45%
Term: 24 months + one 6-month extension
LTV: 75%
DCR: none
Fees: 0.5% in/0.5% out
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners secured $26,000,000 in proceeds for a bridge loan refinance of a 65-unit multifamily property located in Los Angeles, CA. The loan is floating at LIBOR + 5.45% with a 1.0% LIBOR floor. The Lender provided proceeds of 75% of appraised value, 100% of cost, and did not require any Debt Coverage Ratio test on underwritten cash flow.

The Property was newly constructed and began lease-up towards the end of last year. In early 2020, the COVID-19 pandemic began, and the State issued a safer-at-home directive. As a result, leasing halted for several months with the Property at 60% occupancy. Since the in-place loan was coming due, the Borrower required a bridge loan to provide additional time to reach stabilization.

When initially discussing the transaction with lenders in April, many capital providers were out of the market entirely. Those that quoted the deal provided proceeds of 65% LTV and interest rates around 8%, but these terms did not make economic sense for the Borrower. As the capital markets improved, GSP continued to discuss the transaction with lenders. In June, the selected lender entered the market with a new market-leading bridge loan program. The team quickly signed up the transaction and the loan closed in just 35 days.

Advisors

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

$20,000,000 Non-Recourse 10-year loan on Specialty Storage

Rate: 3.54%
Term: 10 Years
Amortization: 5 years interest Only
LTV: 65%
DSCR: 1.25%
Loan Fee: Par

Transaction Description:

George Smith Partners placed a $20,000,000 refinance for a 30-year-old specialty storage facility in California. The high security, temperature and humidity-controlled facility is used for specialty uses, and other high value items. The COVID-19 pandemic made the Sponsor’s request more challenging as it consisted of non-recourse financing for a specialty asset. George Smith Partners reached out to several dozen Capital Providers to find a relationship lender that would meet the Sponsor’s needs. The Property has performed well historically and continues to perform very well during the COVID-19 pandemic.

Advisors

Gary E. Mozer
Principal/Co-Founder
Dorian Aftalion
Vice President

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HOT MONEY
Floating Rate Non-Recourse SFR/Condo/Multifamily Portfolio Financing Starting at 4.25%

George Smith Partners identified a national capital provider of non-recourse term, bridge and construction financing for 1-4 family rental portfolios and Build-to-Rent projects. Rental portfolio term loans start at $1,000,000 with rates starting at 4.25% for 5 and 10-year term options. Bridge loans (lines of credit) facilitate acquisition, rehab and aggregation strategies with financing options at 80% LTC and rates between 6.5% and 9.0% (depending on strategy). The lender will also go up to 75% LTC on Build-to-Rent projects and can close within 30-45 days from an executed term sheet.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Fed Notes Indicate Aggressive Monetary Policy May Be Needed Longer

The market reaction to today’s release of notes from the Fed’s July meeting was “on one hand, but on the other hand”.    The policymakers noted that the rapid rebound in employment in May and June may not last as COVID spikes continue to affect the economic activity in July and August.  They noted future path of the recovery is highly dependent on the path of the virus, the timing of treatments and vaccines.  Future labor market growth is dependent on “broad and sustained” re-openings of businesses and normalized consumer behavior.  Therefore, the Fed indicated that aggressive stimulus may be needed longer than previously assumed.  Usually the market reacts positively to this type of news. Any indications from central banks that the “punch bowl is being removed” often results in a sell off in equity markets.  Today the initial reaction indicated a nervous market digesting the Fed’s downbeat look at the economic picture.  Last week’s spike in CPI had not yet occurred at the time of the meeting but it seems that the Fed continues to believe that inflation is not an issue. 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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