FINfacts™ XXIV – No. 234 | September 9, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.16%
6 Month LIBOR 0.30%
5 Yr Swap 0.36%
10 Yr Swap 0.71%
5 Yr US Treasury 0.28%
10 Yr US Treasury 0.70%
30 Yr US Treasury 1.45%

RECENT TRANSACTIONS
$13,898,000 for Two Multifamily Properties; Southern California

Amounts: $6,125,000 & $7,773,000
Rate: 3.33%
Term: 10 Years, Fixed, 5-Years Interest Only
Recourse: Non-Recourse
LTV: 70%

Transaction Description:
George Smith Partners successfully arranged two, 10-Year, fixed rate loans for a total of $13,898,000 on two Southern California multifamily properties.
The first loan was for $6,125,000 and was used to refinance an 18-unit multifamily property built in 1986, located in Hollywood, CA. The second loan was for $7,773,000 and was used to refinance a 26-unit multifamily property built in 1991, located in Culver City, CA.
Both properties had undergone significant renovations and upgrades within the past four years. Despite COVID-19 regulations allowing tenants to suspend rent payments, both properties have stayed fully leased throughout 2020, with all tenants continuing to pay rent
Opportunity:
Although the properties had been previously financed with floating rate debt after undergoing their renovation programs several years ago, GSP demonstrated to the Sponsor that despite the requirement to pay a prepayment penalty on their existing financing, this refinancing would:
1) Reduce the current interest rate by approximately 135 bps
2) Increase the cash flow
3) Eliminate floating rate risk
4) Provide significant net cash-out proceeds
5) The prepayment expense is offset by the interest savings within approximately 18 months.
Both loans are fixed at 3.33% and are interest only for the first five years. The loans are not cross-collateralized, are non-recourse and sized at 70% of appraised value.

Advisors

Gary M. Tenzer
Principal/Co-Founder

90% LTC for Acquisition of 6 Units – Closed in 12 Days; Los Angeles, CA

Senior Loan
Amount: $2,118,000
Rate: 7.50%
Term: 12 Months
Amortization: Interest Only
LTV: 60%
Loan Fee: 1.00%
Prepayment Penalty: None

Mezzanine Loan
Amount: $1,065,000
Rate: 12.00%
Term: 12 Months
Amortization: Interest Only
LTV: Up to 90%
Loan Fee: 3.00%
Prepayment Penalty: None

Transaction Description:

George Smith Partners arranged $3,183,000 of senior and mezzanine financing for the acquisition of a 6-unit multifamily building located in Los Angeles, CA. The combined debt was sized to 90% of purchase price. The Property was purchased with the intention of future development. The proposed project would add more units to the supply-constrained submarket. The senior loan was sized to 60% of purchase and carries a 7.50% fixed interest rate. The mezzanine financing provided the remainder (up to 90%) and is priced at 12.00%. The financings were closed within 12 days of the term sheets being signed.

Advisors

Steve Bram
Principal/Co-Founder
David R. Pascale, Jr.
Senior Vice President
Allison Higgins
Senior Vice President
Patrick O’Donnell
Vice President
Nick Rogers
Vice President

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HOT MONEY
Non-Recourse Construction, Bridge and Land Financing

George Smith Partners is currently placing non-recourse, high-leverage construction bridge and land loans in the Western U.S. This Lender offers rates from 7% -12%, high leverage, terms up to three years and can close in under two weeks for loans up to $35,000,000. They focus on entitlement land plays, adaptive re-use, covered land plays, recaps; Build-to-suits and pre-leased properties. They will also consider property types such as condominiums, flex buildings, mixed-use, R&D/Bioscience, resorts, retail single tenant, NNN and self-storage.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Congress May Fail on Stimulus But Avoid Shutdown, CMBS Update

It looks like Congress will keep the government open with a “clean” continuing resolution punting any shutdown risk until the December “lame duck” session after the election. The bill may be so clean that it won’t include any updated stimulus funding. A vastly stripped down bill in the Senate has little chance of becoming law and serious negotiations have yet to start. Last week’s employment report was positive on the surface with the headline jobless rate falling to 8.4% from 10.2% in July. But the jobs survey is conducted during the week that includes the 12th of the month. During late August some warning signs emerged as job openings plunged on major job recruiter sites. Major employers are set to implement job cuts in September/October (such as airlines and other travel industry employers if the aforementioned stimulus is not approved). Fed Chair Powell spoke in an interview soon after the report was released and reiterated that low interest rates will be in place for “an extended period of time, measured in years”. CMBS spreads continue to tighten as the bond buyers bid aggressively on loans originated in the “2020 normal.” Well underwritten office, industrial, multifamily and self storage loans are pricing in the 3.50% range with some interest only as the 10 year T remains at about 0.70%. 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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