FINfacts™ XXIV – No. 252 | January 27, 2021

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.12%
6 Month LIBOR 0.23%
5 Yr Swap 0.51%
10 Yr Swap 1.06%
5 Yr US Treasury 0.41%
10 Yr US Treasury 1.01%
30 Yr US Treasury 1.80%

RECENT TRANSACTIONS
$40,000,000 Construction Completion Loan at 8.00% Fixed, Interest-Only on a 192-Unit Multifamily; Vancouver, WA

Rate: 8.00% Fixed
Term: 18 Months
Amortization: Interest-Only
LTC: 80%
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners successfully arranged $40,000,000 in construction completion financing for a 192-unit multifamily community in Vancouver, WA less than 12 miles from downtown Portland, OR.
The Property consists of three completed buildings that started leasing in late April of last year and were 15.9% leased at the underwritten rents upon closing. GSP was successful in quickly sourcing multiple term sheets and ultimately closed within weeks of going into application with the Lender. The rapid execution allowed the Sponsor to close on an approximately 90% of purchase price (80% of total cost) in a situation where no further extensions were available, and time was of the essence.

The equity stack was highly structured with multiple tranches of GP and LP equity.

Advisors

Evan Kinne
Senior Vice President
Ed Steffelin
Senior Vice President
Portrait Blair Lewis
Analyst

$11,200,000 Non-Recourse, Cash-Out Bridge Refinance for Two-Story Retail in Koreatown; Los Angeles, CA

All Terms Confidential

Transaction Description:

George Smith Partners secured a $11,200,000 non-recourse bridge refinance with cash-out for a two-story retail plaza in the heart of Koreatown in Los Angeles, CA. Located next to a Metro D (Purple) Line subway station along a very busy stretch of Wilshire Boulevard, the Property is anchored by 7-Eleven and Carl’s Jr. and features a fast-casual food hall on the second floor. However, the food hall has been closed due to COVID.

The Sponsor, a prolific developer and property owner, recently announced plans to replace the plaza with a 17-story, mixed-use apartment tower that includes affordable units and some commercial space. GSP was engaged to source a bridge solution to pay off the existing maturing loan and provide prepayment flexibility once the Project’s entitlements and permits are secured.

GSP focused on the strength of the Sponsor, the bustling and densely populated Koreatown market, home to several large and small-scale projects currently planned or under construction and the Purple Line Extension project which will provide a dependable, high-speed alternative for travel between downtown Los Angeles, Miracle Mile, Beverly Hills and Westwood. The financing closed within 11 days of the term sheet being signed.

Advisors

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

GSP Structured Highly Leveraged, Quick Close Acquisition Capital of $2,695,000 for 16-Unit, Multifamily Property; Koreatown area of Los Angeles, CA

Blended Rate: 7.97%
Term: 12-month Bridge Loan plus a one 6-month extension
Loan-to-purchase: 80%
Prepayment Penalty: None

Transaction Description:

The Sponsor had the opportunity to purchase a well-located property in Koreatown well below the market value because of the sponsor ability to close quickly with the 80% LTC quick-close loan. With the global pandemic, the property had 2 vacancies and a few non-paying residents. Because of the quick timing and the short-term distress in the cashflow, the Property would not qualify for bank or agency financing at this time. The sales broker and the Sponsor approached George Smith Partners for highly leveraged, quick purchase financing. GSP arranged a $2,695,000 non-recourse acquisition loan for the 16-unit apartment project. Despite marketing this deal during the global pandemic with vacancies and unpaying tenants, GSP successfully structured a first trust deed from a debt fund as well as a preferred equity B piece with a different investor to almost 80% of the purchase price. The non-recourse facility was priced at an interest-only fixed rate with a blended rate of 7.97% with a 12-month term plus a 6-month extension option. Thanks to our long-standing relationship with this debt fund and preferred equity investor, GSP was able to close this transaction in less than 10 days from signing the term sheet.

Advisors

Bryan Shaffer
Principal/Managing Director
Ruben Bohbot
Vice President
Michael Smilove
Assistant Vice President

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HOT MONEY
Nationwide Specialty Property Financing

George Smith Partners identified a specialty lender offering bridge financing for a broad spectrum of commercial real estate special situations nationwide up to $45,000,000. Pricing is between 10% and 12% interest only for terms up to 36 months and 80% of cost and 65% of value. Special purpose properties include hospitality, gas stations, senior living, drug rehabilitation facilities, private schools, car dealerships and historic buildings. This lender is comfortable with bankruptcies, discounted payoffs, restructurings, pending foreclosures, environmental issues, and credit issues and can fund in four weeks.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Low Rates, Staying For A While

Today’s Fed meeting was the first of eight for 2021. Fed Chair Powell set the tone for the year as he reiterated many of the 2020 issues that remain. Powell remarked, “We have not won this yet”, in reference to the economic recovery. He tamped down recent comments by Fed governors regarding a pullback in Fed bond purchases. He spoke about the $120 billion in monthly bond purchases that will continue until “substantial further progress” is made on both employment and inflation. The Fed is more concerned about job market weaknesses and less concerned about inflation. The message is that any changes in policy will be telegraphed months in advance and a reappearance of inflation would be allowed to “run” for a while before any policy changes. This should forestall any chances of a 2013 style “taper tantrum” where long term rates spiked quickly in a sell off due to confusing messaging from then Fed Chair Bernanke. This policy combined with the potential of “yield curve control” should give comfort to commercial real estate borrowers that the bedrock index for financing, the 10 year T, is benefiting from the accommodative monetary policy. The 10 year T closed today at 1.02%, after hitting a high of 1.15% earlier in January.

What about spreads? CMBS, Agency and Life Companies are pricing 10 year loans in the 2.75% – 3.75% range generally as a variety of factors are helping spreads stay:
(1) Overall economic recovery and the hoped for “return to more normal”;
(2) Investor appetite for real estate based bonds: CMBS, Fannie, Freddie, (especially in the Covid era); and
(3) Rising oil prices stabilizing the huge corporate bond market as energy companies are large issuers of debt.

This calms volatility in overall credit spreads. Floating Rate: The healthier securitization market is creating more liquidity in the bridge loan market (usually via Collateralized Loan Obligations or CLOs). Well underwritten apartment bridge loans are being funded in the 4.00% all-in range or lower. 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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