FINfacts™ XXIV – No. 242 | November 4, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.14%
6 Month LIBOR 0.24%
5 Yr Swap 0.41%
10 Yr Swap 0.81%
5 Yr US Treasury 0.32%
10 Yr US Treasury 0.78%
30 Yr US Treasury 1.55%

RECENT TRANSACTIONS
$27,350,000 ($337,655/unit) Cash-Out Permanent Financing for an 81-Unit, Two-Property Multifamily Portfolio; Los Feliz and Burbank, CA

Rate: 3.75% (fixed) for seven years
Term: 30 years
Amortization: Five years interest only; 30-year amortization thereafter
LTV: 65%
DSCR: Sized to a 1.15x DSCR with an initial funding sized to a 1.20x DSCR
Lender Fee: Par
Prepayment: 5,4,3,2,1% step-down prepayment
Guarantee: Non-Recourse

Transaction Description:

George Smith Partners successfully placed $27,350,000 ($337,655/unit) in a cash-out, uncrossed (two loans) refinance of two multifamily properties totaling 81 units in Los Angeles communities, Los Feliz and Burbank, during the COVID-19 pandemic. While in application with accretive terms in February 2020 prior to California’s “stay-at-home” order, the Lender subsequently paused all new loan originations, including its in-process pipeline, mid-way through this transaction. Despite the economic uncertainty during the transaction, as well as the Lender halting all in-process and new loan originations, GSP leveraged the Firm’s collective production and relationship with the Lender to close the loans during the COVID-19 pandemic with loan terms as originally structured. GSP worked diligently to ensure the final economic loan terms matched the agreed-upon LOI terms, including an additional advance to be funded after the eviction moratorium is lifted. Both properties had undergone extensive renovations and upgrades since acquisition and have maintained 95% occupancy throughout 2020 despite COVID-19 regulations in California allowing tenants to defer rent payments.

Advisors

Gary E. Mozer
Principal/Co-Founder
Kyle Howerton
Senior Vice President

$4,700,000 Refinance with Cash-Out for Single-Tenant Manufacturing Industrial; El Cajon, CA

Rate: 4.65%
Term: 7 Years
LTV: 51%
DSCR: 1.30x
Prepayment: None

Transaction Description:
George Smith Partners placed a $4,700,000 refinance loan with cash-out for a single-tenant industrial property in El Cajon, San Diego County. This highly specialized facility is one of only two locations in the US that is approved to manufacture key components and assemblies for military and commercial aircraft currently in service.

The Sponsor acquired the Property in 2018 with a bridge acquisition loan. In March 2020, GSP was engaged to refinance the maturing bridge loan with permanent financing including cash-out proceeds. However, the California “stay-at-home” order was issued soon thereafter resulting in a challenging lending market for the Property.

GSP helped the lenders become comfortable by focusing on the low leverage, the strength of the Sponsor and the Tenant, and the fact that the Property continued to operate at full capacity without interruption due to be a critical Department of Defense supplier. In addition, the Tenant recently exercised its third extension option to the existing lease with an increased cash flow closer to market rents, thereby continuing its long-term commitment to the Facility.

While holdback reserves are increasingly common in the current environment, GSP negotiated to have reserve payments deferred until the fourth year of the loan and on a monthly schedule instead of the typical lump sum holdback at closing.

Advisors

Antonio Hachem
Principal
John Choi
Vice President
Wendy Wang
Vice President
Cornelius Baliukonis
Analyst

SPEAKERS CORNER

Sign up today for the Post-Election Economic Outlook on Friday, November 6, 2020 at 10:00am PT | 11:00am MT | 1:00pm ET.

Register here: https://zoom.us/webinar/register/WN_fzyrK0FwQsGAZFcvV6Ah9Q


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HOT MONEY
Seven Year Non-Recourse Bridge Financing

George Smith Partners has secured financing with a national capital provider lending on transactions from $50,000,000 to $350,000,000 on a non-recourse basis. With a focus on Office, Multifamily, Industrial, Life Science and Self-Storage, this lender can provide up to seven years of bridge financing for senior loans up to 70% of capitalization. Subordinate leverage is available behind their senior for top MSAs. Pricing for senior loans start at LIBOR+300 bps and mezzanine loans start at LIBOR+675 bps.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Markets Swing On Election Night Drama

Note to our readers: This column is not an endorsement of any candidate but is meant to discuss the capital market reactions to the post-election outcome.

Much like 2016, yesterday’s US election and the continuing aftermath have led to market volatility as investors struggle to understand the results. Once again, the polls failed to predict the actual results. As votes were being cast yesterday, investors were assuming a potential “blue wave” with Democrats in control of the Presidency, Senate and House. Equity markets staged a “relief rally” on the certainty of a definitive result. Treasuries sold off. The 10 year Treasury yield spiked to 0.96% after hours as investors assumed passage of another big stimulus package and potentially other major federal spending such as infrastructure. This bet on big fiscal policy meant lots of new treasury issuance so a sell off occurred. As the results came in during the evening, it became clear that the House and Senate were going to be split and the Presidential result would be uncertain for a few days at least. This scenario put stimulus and infrastructure expectations in reverse. Combined with the uncertainty of the Presidential result, a flight to quality was underway. This increased appetite for treasuries and the yield dropped 20 bps to about 0.75% this morning. Wall Street traditionally likes a divided government as that provides certainty of no major policy changes. But this hope is complicated by the need for some stimulus to avoid a long drawn out recovery from COVID-19 pandemic. The anticipated lack of fiscal policy will now put added pressure on the Fed to provide continuing accommodative monetary policy. I would expect that Fed chair Powell will address this tomorrow at his press conference for the November meeting. 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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