FINfacts™ XXIV – No. 249 | January 6, 2021

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.13%
6 Month LIBOR 0.25%
5 Yr Swap 0.51%
10 Yr Swap 1.04%
5 Yr US Treasury 0.43%
10 Yr US Treasury 1.04%
30 Yr US Treasury 1.81%

RECENT TRANSACTIONS
$39,500,000 Non-Recourse Bridge Financing for a 148-Unit Multifamily Acquisition, Mid-Conversion from Office to Multifamily; Santa Ana, CA

Rate: LIBOR + 7.00%
Term: 18 Months
LTV: 77%
LTC: 74%
Amortization: Full Term Interest Only
Prepayment: 10-month Make-Whole
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners arranged $39,500,000 in non-recourse financing for the acquisition of a vacant 10-story office building, currently mid-conversion to a 148-unit, Class-A multifamily building. The Property is the only high-rise apartment building in Downtown Santa Ana. The financing allows the Sponsor to complete the conversion, stabilize the Property, and refinance into long-term permanent debt. While the apartment market is very strong in Downtown Santa Ana, there are no other high-rise apartment buildings and no direct comparable properties. Not only did the Lender have to get comfortable with the construction completion, they also had to get comfortable with a new product type in this market.

GSP identified a local lender that not only understood the market and demand for multifamily but was comfortable with the Sponsor’s ability to step-in and complete the conversion.

Advisors

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

Bozeman, MT Land Development Loan for 400 Unit Project

Rate: 5.5%
LTV: 60%
LTC: 65%
Term: 12 months
Recourse: Full Recourse

Transaction Description: George Smith Partners secured an $8,150,000 pre-entitlement land development loan for a proposed 400-unit project in Montana. The 65% loan to cost financing is priced at 5.00% over LIBOR (with a 50-bps floor) interest only. The loan will allow the Sponsorship to build out the necessary infrastructure to obtain the plat map and secure full entitlements in 2021. The Project will be one of the largest in the state of Montana and this crucial financing is essential to meet the growing housing shortage in these markets which have accelerated during the COVID-19 pandemic.

Challenge: The large, pre-entitlement project is situated on the outskirts of a tertiary market that was officially classified as a Micropolitan Statistical Area (according to the 2010 Census). Moreover, despite the Institutional Sponsorship, the small market is not a target focus for many regional or national lending institutions traditionally capable of handling loans of this nature. The size of the loan also precluded many local/state banks from obtaining the necessary leverage for the Project.

Solution: GSP secured a regional bank with headquarters near the Project which could understand the growth metrics of the projected Metropolitan Statistical Area (based on the 2020 Census) and how the Project will be vital to the long-term development of the City. The bank relied on the financial strength of the Sponsorship to advance 65% LTC and become comfortable with the pre-entitlement status of the Project. The loan which closed in 45 days from application also included a necessary bank provided, letter of credit to the City which guarantees the necessary capital to be invested into the Project to obtain entitlements.

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

$4,400,000 Permanent Refinance of Two Flex Buildings, Jacksonville, FL

Rate: 3.75% Fixed; Adjusts every 10th year
Term: 25 Years
Amortization: 25 Years
LTV: 66%
Guaranty: Recourse

Transaction Description:

George Smith Partners successfully arranged a $4,400,000 refinance of two flex buildings, totaling 68,169 SF, in Jacksonville, FL. This was a permanent, recourse loan at 3.75%, fixed for the first 10 years with a rate reset at every 10 years thereafter. This is a fully amortizing 25-year loan. The two buildings are adjacent to each other and offer a mix of flex, office and retail space. Both buildings are currently 100% occupied with minimal impact of COVID-19 on its tenants. The Sponsor, a repeat client, acquired the Property just a month prior and engaged GSP to capitalize on the low interest rate environment.

Advisors

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

Pascale's Portrait
PASCALE'S PERSPECTIVE
10 Year T Breaks 1.00% Level on Stimulus, Inflation Expectations

A sell-off in treasuries today spiked the yield on the 10 year Treasury to 1.03%, the highest level since the March 2020 Covid meltdown. After the Georgia run off results became apparent, expectations are for more stimulus, further expansion of the Fed balance sheet, and (possibly) inflation. After hitting 1.00%, the next key levels are in the 1.25% to 1.50% range. The most recent “normal” treasury levels from late 2019 (pre-Covid) were about 1.75%. US Dollar value indices are dropping as the supply of our currency increases significantly each month. 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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