FINfacts™ XXIV – No 235 | September 16, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.15%
6 Month LIBOR 0.30%
5 Yr Swap 0.34%
10 Yr Swap 0.68%
5 Yr US Treasury 0.28%
10 Yr US Treasury 0.69%
30 Yr US Treasury 1.46%

RECENT TRANSACTIONS
$11,700,000 Construction Loan on Logistics Yard; Southern California

Rate: Confidential
Term: 24 months with options
LTC: 60%
Lender Fee: 1.00%

Transactions Description:

George Smith Partners placed a $11,700,000 construction loan to build a logistics yard that includes trailer parking, auto parking and a maintenance facility. The fenced and secured facility is being built on a speculative basis although there is unmet demand.
The marketing of the asset during the COVID-19 pandemic was difficult given bank resources first went to asset management and then PPP. The lenders in the market wanted “easy” deals such as low leverage multifamily, build to suits and infill industrial. The Sponsor’s expertise, market knowledge and demand for the product created a competitive lending environment. After talking to over 50 capital providers we had three compete for the loan. Structure, pricing, certainty of execution and speed to close narrowed the lender choice. The chosen Capital Provider went to full credit committee before issuing the application given the specialty nature of the asset. The credit committee also approved all terms negotiated/changed in the application before the process began. This gave us confidence that the chosen Capital Provider would execute on the original terms in the application while other Capital Providers have altered terms during the COVID-19 pandemic.

Advisors

Gary E. Mozer
Principal/Co-Founder
Robert Horton
Dorian Aftalion
Vice President
Phillip Mozer
Analyst

$1,500,000 Non-Recourse Rate & Term Office Refinance; Southern California

Rate: 2.77% Fixed
Term: Seven Years
Amortization: 30 Years
LTV: 60%
Recourse: Entity Level Only inclusive of Carve-Outs
Loan Fee: 25 Basis Points

Transaction Description:

George Smith Partners placed the non-recourse refinance of a Southern California single-tenant office and instruction center owned and operated by a 501c3 approved charity. This office is configured for classroom training, instruction and traditional administrative office use. Deemed an essential business, operations were never delayed as a result of the COVID-19 pandemic. Due to the ownership structure, there is no recourse or carve-out guarantees beyond the charity entity. The cash neutral loan financed all closing costs and reduced the Borrowers’ mortgage constant by 190 basis points for significantly improved cash flow.

Advisors

David Stepanchak
Senior Vice President
Kyle Howerton
Senior Vice President
Michael Anderson-Mitterling
Senior Vice President
Olga Brandeis
Senior Vice President

SPEAKERS CORNER

A replay of the webinar, “The Workout of Distressed Properties” is available here: https://www.youtube.com/watch?v=cZieEjm6cz0&t=2029s

In this webinar, you will hear about the remedies and opportunities available to property owners, venture partners, and lenders.

Malcolm Davies | George Smith Partners

Alan Martin | Sheppard Mullin

Doug Wilson | Doug Wilson Companies

Gary London | London Moeder Advisors


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HOT MONEY
Non-Recourse Bridge Financing for All Asset Types

George Smith Partners is currently placing non-recourse financing for multifamily (including MHC and student), office, self-storage, mixed-use and industrial properties nationwide. This lender currently offers up to 75% of total costs and 70% of stabilized value. They focus on middle market transactions offering loan amounts from $10,000,000 to $50,000,000 (will selectively lend on larger transactions) with terms up to five years. The Lender offers competitive LIBOR-based pricing with flexibility on lockout/yield maintenance period. They are a balance sheet lender that does not leverage their positions with CLO’s, warehouse lines, or REPO facilities which ensures certainty of execution and aligned asset management. The lender is capitalized by institutional investors.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Rates Are Going Up, In 2024 At The Earliest

Today’s Fed meeting and subsequent statement from Fed Chair Powell spelled out a major change in Fed Policy that has been discussed this year: allowing inflation to “run” at or above their long stated 2% target without immediately raising rates. The old guidance, first announced in 2012, was that the Fed was targeting inflation rising to 2% or unemployment dropping to 5% and would increase rates if those thresholds were met. The “old normal” of pre-Great Recession economic theory was that crossing those thresholds meant that an overheating economy would spur inflation (see early 80’s Volker era). As the last decade has given way to the “new normal” whereby ultra low unemployment and interest rates has not resulted in inflation. The Fed is now saying that inflation can go to 2% and above for a while. Today’s statement “(The Fed) will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent.” And when does the Fed see inflation running consistently at 2%? According to their forecast released today, it won’t be until well into 2023 at the earliest. Allowing for “run-time”, this puts the next “lift-off” of rates into 2024. Powell indicated that “highly accommodative” policy (zero rates, bond purchases, etc) “until the economy is far along in this recovery”. It begs the question, when will inflation return and what will it look like in this era? Powell also said that a “closely trusted” vaccine is critical to the economic recovery and that the Fed is not “out of ammo” as far as tools to aid the recovery. So, stimulative monetary policy is a given in today’s world. What about the more difficult issue of stimulative fiscal policy, which requires consensus in Washington? Today was the most optimistic day for months in that regard as the Administration and Congress leaders both signaled lots of common ground complete with conciliatory rhetoric, let’s see what tomorrow brings. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners

More Perspectives ›

“Commercial Real Estate: “Parsing The Product Types – Six Months Into The Pandemic”

By: David Pascale

Published in Forbes.com

The Commercial Real Estate ACRE +4.4% capital markets came to a shuddering halt in March of this year as the COVID-19 pandemic shutdowns shocked society and the economy. The sudden halting of businesses, schools and nearly all aspects of life were unprecedented, stock and credit markets crashed worldwide. Commercial real estate fundamentals plummeted, and capital markets froze…

Read the full article here: https://www.forbes.com/sites/dpascale/2020/09/14/commercial-real-estate-parsing-the-product-typessix-months-into–the-pandemic/#81b92242aea1

 

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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