FINfacts™ XXIV – No. 243 | November 11, 2020

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.14%
6 Month LIBOR 0.24%
5 Yr Swap 0.52%
10 Yr Swap 0.98%
5 Yr US Treasury 0.45%
10 Yr US Treasury 0.98%
30 Yr US Treasury 1.75%

RECENT TRANSACTIONS
$23,500,000 Bridge Loan for New Mixed-Use Project; Santa Clarita, CA

Rate: 5.75% Fixed
Term: 1 Year
Amortization: Interest Only
Extensions: Two 6-Month Options
Recourse: Non-recourse
Prepayment: Open

Transaction Description:

George Smith Partners secured a $23,500,000 bridge loan for a brand-new mixed-use project located in Santa Clarita, CA. The non-recourse loan will be utilized to refinance the Project’s construction debt and capitalize outstanding TI/LC’s. The loan represents 80% loan to value and is structured with a 1-year initial term with interest only payments. The loan allows for open prepayment and carries two 6-month extension options.

The loan is secured by a recently constructed mixed-use development comprised of 47 Class-A apartment units situated above 20,918 SF of street level retail. This transformative project is a focal point for the continued modernization of the City of Newhall. The Project’s design is indicative of the times where enhancements to public transit connects renters in search of larger amenity filled accommodations with the further suburban pockets of the greater LA Metro. The Subject is shadow anchored by the highly anticipated seven-screen Laemmle Theater and a newly built 372 stall public parking structure which serves the popular Downtown Newhall district.

The loan was placed with many COVID related shutdowns in effect. GSP was able to secure a lender that underwrote to the stabilized NOI, closed with no debt service reserve, no recourse, and funded while several retail tenants were completing their buildouts. GSP selected a lender than could move quickly. The Lender did not require an appraisal and funded within three weeks after issuing an application.

Advisors

Jonathan Lee
Principal/Managing Director
Shahin Yazdi
Principal/Managing Director
Jarod King
Senior Vice President
Matthew Kirisits
Vice President
Paul Monsen
Vice President
Kyle Redmond
Assistant Vice President

$8,152,500 Conversion to Co-Living, 68% LTC, Heavy-Lift Bridge-to Perm Loan; San Francisco, CA

Construction Loan:

Rate: Prime plus 1% with 5% floor
Term: 18 Months
LTC: 68%
LTV: 65%

Mini-perm Loan:

Rate: CMT + 2.25% with 3.75% floor
Term: 5 Years
Amortization: 30 years
Prepayment: 5, 4, 3, 2, 1 open

Transaction Description:
George Smith Partners placed the $8,152,500 bridge-to-mini perm loan for the conversion of an existing 12-unit multi-family community into a 17-unit 44-bed co-living community. The 68% LTC bridge loan converts to a 5-year mini-perm loan fixed at CMT + 2.5% with a 3.75% floor.

Challenge/Solution:
The Project came to GSP half-way through construction and was being funded by a lender that had filed bankruptcy with proceeds that were insufficient to complete the new business plan. GSP put the loan under application pre-COVID with a new business plan that included (as a condition in closing) approvals for a 4th floor penthouse/useable roof top level. While in application, the construction and the penthouse level approval process came to a halt due to COVID causing stress on both the existing loan (nearing maturity) as well as the new loan underwriting. The challenges associated with co-living as a new asset class resulted in additional scrutinization from the new lender as well as the appraisal which had a negative impact on value. GSP was able to resolve the valuation issues by successfully arguing the merits of the Project as well as successfully negotiating a waiver of the exit fee on the previous loan which resulted in zero impact to the loan proceeds and the Borrower’s out of pocket cash required at closing.

Advisors

Alina Mardesich
Senior Vice President

SPEAKERS CORNER
  • A replay is available for the Post-Election Economic Outlook with Bryan Shaffer, Principal/Co-Founder at GSP and Jay Rollins, Co-Founder at JCR Capital. Click here for the video.

 

 


We are thrilled to announce that GSP has won one of  Multi-Housing News’ Excellence Awards in the Brokerage Office category!


Pascale's Portrait
PASCALE'S PERSPECTIVE
Vaccine Hopes Rally Markets, What’s Next for Real Estate?

Monday’s announcement of positive Phase 3 results from Pfizer’s vaccine trials caused one of the largest stock market rallies ever, which has continued throughout the week. The anticipated timeline for approval is this month. December – vaccinations for most vulnerable. January – vaccinations for first responders/health care workers. March/April – should be widely available. Experts such as Dr. Fauci and Sir John Bell are predicting life “returning to normal” by Spring 2021. Stay at home stocks such as Zoom saw values drop. Sectors including “return to normal” stocks such as tourism, airlines, movie theaters, theme parks rallied. Interest rates moved as the 10 year treasury jumped from 0.80% (Monday morning) to 0.98% as of today (look for 1.00% as a key technical level). The prospect of an “endgame” to the COVID crisis should theoretically return yields to their pre-COVID levels (10 year at about 1.50%). It will be interesting to see how this affects capital markets and lending criteria on the different sectors. Will next summer see consumers back to pre-COVID “normal”, ie. returning to indoor restaurants, movie theaters, gyms and traveling to crowded conventions? Lots of variables remain. For example, no one expects office occupancy to snap back to 2019 levels. The switch to work from home, either part time or full time, will remain for many workers. Lenders will be scrutinizing these trends when determining underwriting standards going forward. It’s definitely a game changer for hotels and retail. Owners in distress can now see their way to a better day. This may stave off the feared bloodbath of properties and loans being sold at bargain prices. Lenders typically reluctant to foreclose on properties will hopefully help existing borrowers get to a mid 2021 recovery. Of course, this brings the spotlight back to fiscal and monetary policy. Will there be a help for small businesses, tenants, homeowners, commercial real estate owners, etc? Congress is again sending signals that a stimulus will pass. Now the anticipated timing is before year end during the lame duck session. December 11 is the deadline to avoid a government shutdown. Stimulus could be baked into that. Hard to predict in today’s environment. 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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