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FINfacts™ XXIV – No. 240 | October 21, 2020
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| Prime Rate |
 3.25% |
| 1 Month LIBOR |
 0.15% |
| 6 Month LIBOR |
0.25% |
| 5 Yr Swap |
0.44% |
| 10 Yr Swap |
0.84% |
| 5 Yr US Treasury |
0.35% |
| 10 Yr US Treasury |
0.82% |
| 30 Yr US Treasury |
1.62% |
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Rate: 3.80%
Term: 10 years
Amortization: Interest Only
Prepayment: Yield Maintenance with last 6 month open
Recourse: Non-recourse except for bad act and environmental
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George Smith Partners successfully placed permanent financing on two Tractor Supply stores in the Southeast. Due to the COVID-19 pandemic, banks required top end recourse and life insurance companies offered lower leverage with a 25-year amortization. GSP secured a capital provider that offered 10 years interest only with nominal reserves. They appreciated the strong tenant financials and sales at each location despite prevailing local economic conditions. On the day of closing, the Capital Provider tightened the spread 7 basis points because the market tightened.
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Rate: Fixed at 5.90%
Term: 12 months, 2,6 month extension options
Amortization: Full Term Interest Only
LTC: 45%
Guaranty: Non-Recourse
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Transaction Description:
GSP secured a $4,200,000 bridge loan for unentitled land in Pasadena, CA. The site is proposed to be developed into 59 luxury townhomes. The loan is fixed at 5.9% for a 12-month term with two 6-month extensions. The proceeds represent 45% of the total cost to purchase the land and entitle it.
Challenges:
The Sponsor acquired the Property in 2015 and has been working with the City to receive entitlements to develop the townhome plot since property acquisition. The land remains unentitled; however, the Sponsor expects to receive Ready-to-Issue (RTI) in 6 months which would provide significant value appreciation. The Sponsor had a loan coming due on the Property and needed to refinance. Given the economic situation due to the COVID-19 pandemic, many lenders were hesitant on providing financing.
Solutions:
GSP demonstrated that the location of the Property and market are very strong, and the specific neighborhood is undergoing a revamp. The Sponsor is an experienced Los Angeles developer who is familiar with the entitlement process and the Property is less than six months away from receiving RTI.
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George Smith Partners is working with a national capital provider funding non-recourse bridge debt to 70% of total cost. The Lender is looking for true proforma based underwriting with a strong appetite for multifamily, industrial and cash-flowing senior living properties. The Lender offers fixed rate pricing starting at 6%, flexible loan prepayment structures with terms up to one year for transactions from $20,000,000 – $100,000,000.
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Stop me if you have heard this before, but stimulus talks have taken on new urgency with a potential agreement in the next few days. The question now is if the votes to approve will take place before or after the election. The talks have taken on new urgency as jobless claims increase, highly publicized layoffs by large companies, an anticipated spike in COVID infections, etc. Equity markets have rallied and treasury yields have spiked based on the expectations of an agreement. The 10 year treasury is at 0.82%, the highest level since June. Note that the 10 year Treasury dropped as low as 0.31% in March during the initial COVID crash. Other factors contributing to the rise in yields are the Federal Reserve’s decision not to implement “yield curve control” (meaning the Fed would buy enough Treasuries to keep long term rates at a certain level) and the huge supply of Treasuries (due to the US budget deficit). Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners
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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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Constellation Place
10250 Constellation Blvd., Ste. 2700
Los Angeles, CA 90067
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© 1999 - 2021 George Smith Partners, Inc. DRE # 00822654 FINfacts is an ePublication of George Smith Partners, Inc. For Promotional Purposes Only. All Rights Reserved.
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