FINfacts™ XXIV – No. 232 | August 26, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.17%
6 Month LIBOR 0.31%
5 Yr Swap 0.37%
10 Yr Swap 0.72%
5 Yr US Treasury 0.29%
10 Yr US Treasury 0.69%
30 Yr US Treasury 1.40%

RECENT TRANSACTIONS
$2,950,000 Permanent Financing for a 12-Unit, Multifamily Property; West Hollywood, CA

Rate: 3.70% Fixed
LTC: 55% LTC
Amortization: 30 Year / 5 Year Fixed Term
Prepayment: Within first 3 years – 1.75%, after that 1%

Transaction Description:

George Smith Partners arranged $2,950,000 in permanent financing for a 12-unit multifamily property located in West Hollywood, California. In July of 2019 GSP arranged the acquisition financing for the Sponsor who now retained us to refinance the 85% bridge loan. Even with the current economic uncertainty, GSP was able to increase the loan size while dramatically decreasing the interest cost. GSP obtained a fixed rate of 3.70% for the first 5 years which allowed the Sponsor to recoup some of the capital invested in the rehab. This was particularly difficult to accomplish in light of the previous high leveraged loan.

With the COVID-19 global pandemic and uncertainty in the market, it was critical to select a capital provider who could provide certainty of execution. Borrowing costs are on the rise as lenders ratchet up their credit standards. With the current crisis, lenders were 100% focused on rent collections and overwhelmed with new financing requests as several other lenders pulled out of the market.

GSP selected a capital provider that we have a strong relationship with and have closed numerous financings with. We knew the loan officer would stay focused on the need to close on time and keep the agreed-upon rate and proceeds through the completion of the loan. Because GSP is in the debt market every day, we were able to ensure that the capital provider was truly closing deals and meeting deadlines. GSP’s experience working with appraisers, inspectors and title/escrow during the COVID-19 pandemic was critical to getting this transaction completed. It is now common during the COVID-19 pandemic that Capital Providers require a 12-month interest reserve. Due to our strong relationship with the selected Capital Provider, we were able to negotiate that those funds be applied to the first 12 months of the loan payments.

Advisors

Bryan Shaffer
Principal/Managing Director
Ruben Bohbot
Vice President
Michael Smilove
Assistant Vice President

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HOT MONEY
High Leverage Construction Loans

George Smith Partners is working with a nationwide capital provider funding 100% LTC for NNN build-to-suit projects. This lender is also funding high leveraged construction loans for pre-leased medical properties and self-storage properties up to $20,000,000. Rates are between 8% – 12% and terms vary by product type. In addition, they provide small balance JV equity for development and value-add properties.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Fed to Unveil New Inflation Policy, Washington Inaction Creating “Multiple Cliff” Deadline

Look for a preview of a major shift in Fed policy regarding inflation at tomorrow’s virtual Jackson Hole symposium. Fed Chair Powell is expected to unveil a policy of an “average inflation” target. Instead of using a 2% inflation figure as a “trigger” to increase rates, the new policy will allow inflation to hover above and below 2%. This means that the Fed is  pushing out the eventual rate increase even farther. The reasoning is to avoid a “trap” of sluggish growth along with producers unable to raise prices effectively. This will allow inflation to “run” a little while, and is another recognition that the old rules don’t apply in the “new normal” of ultra low rates and low growth/inflation. Meanwhile, on the fiscal policy front, nothing is happening with stimulus negotiations between the House, Senate and Administration. The major airlines are announcing massive layoffs for October 1, when their stimulus ends (unless the stimulus is extended). Airlines are a critical part of the USA’s economic infrastructure. With a full government shutdown looming in 35 days (October 1), this creates the “final” deadline for Congress to come to some sort of agreement in a hyper partisan environment close to the election. Critical unemployment benefits, SBA funds for small businesses still suffering from pandemic issues, school aid, and funds for treatment/vaccines are all on hold until then. 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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