FINfacts™ XXIV – No. 260 | March 24, 2021

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.11%
6 Month LIBOR 0.21%
5 Yr Swap 0.93%
10 Yr Swap 1.64%
5 Yr US Treasury 0.81%
10 Yr US Treasury 1.62%
30 Yr US Treasury 2.34%

INTRODUCTION

Please join us for our Virtual Symposium on April 9, 2021 at 10:00am PT | 1:00pm ET.

REGISTER TODAYhttps://www.gspartners.com/event/


RECENT TRANSACTIONS
97% Financing; $39,650,000 Construction Debt and $18,750,000 Equity for 153-Unit Multifamily Opportunity Zone Development; Downtown Sacramento

All Terms Confidential

Transaction Description:

George Smith Partners successfully placed $39,650,000 in construction debt and $18,750,000 in limited partner equity for the ground up construction of an Opportunity Zone multifamily development with ground floor retail in Downtown Sacramento, at the peak of COVID. The challenges included uncertainty regarding COVID during the pre-vaccine period, political uncertainty, an offshore borrower, and California’s tenant friendly policies. Many investors were too cautious to make a commitment in the middle of COVID with no anticipated end in sight. These risks were offset by exceptional sponsorship, a strong market, and a well margined deal.
The 153-unit Project is the first in a series of planned multifamily developments in the region by Anthem Properties Group of Canada. GSP leveraged its expertise and relationships to find a lender to serve the Sponsor and push through an arduous due diligence process to an expeditious closing. GSP helped structure the partnership agreement to best serve Opportunity Zone taxation rules and ensure the most beneficial long-term returns between the Capital Providers and the Sponsor.

Advisors

Gary E. Mozer
Principal/Co-Founder
Portrait Robert Horton
Portrait Dorian Aftalion
Vice President
Portrait Phillip Mozer
Analyst

Perm Debt – 10-Years Interest Only – Stabilized Multifamily; Los Angeles, CA

Rate: 3.43%
Term: 10 years
Max LTV: 65%
Min DCR: 1.35x
Amortization: None; 10-Years Interest Only
Origination Fee: Par
Prepayment: Yield Maintenance

Transaction Description:

George Smith Partners secured senior permanent financing for a stabilized multifamily property in Los Angeles, CA. The non-recourse debt totaling $12,300,000 was utilized to refinance existing debt and return equity to the Ownership. The loan was structured with a 10-year term and interest only payments for the full duration. The loan was collateralized by a Class-A 34-Unit multifamily building, the Subject was 94% leased at closing and located in a highly desirable West Los Angeles neighborhood.

GSP selected a lender that was able to refinance the Sponsor’s existing debt, cover prepayment penalties and return a significant amount of equity to the Borrower, while simultaneously locking in interest only payments for the next ten years at a very desirable rate. GSP worked with the Lender to minimize debt service reserves while addressing Lender concerns for potential COVID related shortfalls; cash-out proceeds were secured on the loan despite several COVID related delinquencies.

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

$5,376,000 (60% LTC) Bridge Loan for Cash-Out Refinance of Industrial Building; Northern California

Blended Rate: 7.43% Fixed
Term: 12 Months
Amortization: Interest Only
LTV: 60%
Loan Fee: 1.20%
Reserves: None
Prepayment Penalty: None
Guaranty: Non-Recourse for Senior / Recourse for Mezzanine Loan

Transaction Description:

George Smith Partners secured $5,376,000 of bridge financing for the refinance of a two-tenant industrial building in Fairfield, CA. The Property is favorably located within a mile of three major freeways and is only a 45-minute drive to both San Francisco and Sacramento. The building is currently 100% occupied, but there were cash-out proceeds required to reposition the Property to make it more attractive to potential buyers. The 26,000 SF building also has 95,000 SF of improved yard space adjacent, which is a major draw for the current tenants. GSP was able to secure a lender that could get comfortable with a majority of the income being derived from the yard space. The financing was comprised of a senior and a mezzanine loan. The blended terms provided a 60% LTC priced at 7.43% with a 1.20% origination fee. The 12-month terms provide the Sponsor the ability to execute his business plan.

Advisors

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

SPEAKERS CORNER

Leasing: 2021 & Beyond – Century City Chamber of Commerce
What Will It Take to Successfully Come Out on the Other Side of the Pandemic?

Insights from: Gary MozerGeorge Smith Partners, Robert Held – Held Properties, Andrew Kirsh – Sklar Kirsh, Brad Gross – Cushman & Wakefield and Gina Guarino – Held Properties

Date: Tuesday, March 30th
Time: 11:30am – 1:00pm
Register: https://centurycitycc.chambermaster.com/eventregistration/register/1818

7th Annual Real Estate Private Equity Summit

Join Evan Kinne, Senior Vice President at George Smith Partners on Thursday, April 8th at 10:00am PT | 1:00pm ET
The conference will feature a special keynote conversation with David M. Rubenstein, Co-Founder and Co-Chairman of Carlyle, as well as a fireside chat with David Gilbert, CEO & CIO of Clarion Partners.

Date: April 5-9, 2021
Register: grnpl.com/GS

 


Pascale's Portrait
PASCALE'S PERSPECTIVE
Treasury Yields Fall, Supply Chain Issues Cloud Data, Hotel Financing Thaws

Yesterday’s testimony from Fed Chair Powell and Treasury Secretary Yellin included further assurances that ultra accommodative policies will continue. His most resonant comments were regarding the economic recovery which he described as “far from complete” and that sectors of the economy “remain weak”. He again reiterated his belief that the official unemployment rate undercounts actual joblessness. He pegs the actual rate is close to 10% (the official announcement this month was 6.2%). Fed Governor Lael Brainerd chimed in yesterday with a speech. She indicated that the Fed decisions will be results based and they need to see employment on solid ground before making any policy moves. Treasuries rallied on the patient messaging and also on a “flight to quality” amid worries of a “third wave” Covid resurgence in Europe (Germany and the Netherlands imposing new lockdowns). The 10 year T is at 1.61%, down 15 bps from last week’s high.

The February durable goods orders report indicated a 1.1% decrease after 9 consecutive months of gains. This is being blamed on supply chain issues combined with winter storm disruptions. The manufacturing sentiment remains very strong. The next few months of reports should be very telling as some level of normalcy returns. The blocking of the Suez Canal may be significant. 10% of the world’s trade runs through this key passage which now has a distressed cargo ship turned sideways.

As the lockdowns took hold last year, financing for hotel properties froze up across the board. As usual, CMBS is the bellwether to watch. The bridge/construction lenders and equity providers all need to underwrite to the permanent loan market. The general guidance from originators and rating agencies is as follows: take 2019 stabilized income, discount it by 20% and then size the loan to a 12-13% debt yield. It’s a start and hopefully as the anticipated pent up demand for travel ramps up, underwriting standards should improve from there. 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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