FINfacts™ XXIV – No.263 | April 14, 2021

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.11%
6 Month LIBOR 0.22%
5 Yr Swap 0.97%
10 Yr Swap 1.64%
5 Yr US Treasury 0.85%
10 Yr US Treasury 1.63%
30 Yr US Treasury 2.32%

RECENT TRANSACTIONS
$44,500,000 Heavy Bridge Construction Financing to Add Several Uses to an Existing Office and Warehouse; Secondary Market; San Luis Obispo, CA

All Terms Confidential

Transaction Description:

George Smith Partners arranged $44,500,000 for heavy bridge financing in San Louis Obispo, CA to recapitalize and fund construction for additional uses on an existing asset. The completed Project will include five uses including multifamily, warehouse, office, self-storage, and a brewery. This is among the largest private projects actively in development in the local market.
The Sponsor has been very creative in obtaining the highest and best use for the asset in a supply constrained market. Despite challenges facing construction projects in today’s volatile commodity market, GSP was able to secure a capital provider to structure high leverage supported by the strong market and underwriting.

Advisors

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

$14,000,000 3-Years Interest Only Permanent Financing for 150,000 SF Shopping Center with Non-Credit Grocer; Tertiary Market, Northern California

Rate: 3.45%
Term: 10 Years
Amortization: 3 Years Interest Only, then a 30-year amortization
Prepay: Yield Maintenance calculated until last 6 Months which are open with no penalty
Guaranty: Non-recourse except for “bad acts” and environmental

Transaction Description:

George Smith Partners successfully placed $14,000,000 in permanent financing on a Northern California non-credit grocery anchored center amidst the COVID-19 pandemic. Capital markets were wary of financing retail in general but were specifically concerned with tertiary markets and the recent bankruptcy of Chuck E. Cheese. Although tenant sales information was not required to be reported, they were anecdotally strong for the diverse arrangement of large tenants including Chuck E. Cheese. They affirmed their lease, even as COVID-19 was at its peak. Two tenants were closed due to the California directives and mandates. Capital providers were uncertain of what the post-pandemic environment would look like and how retail centers would be impacted in the long run.

GSP was able to ensure competitive pricing and proceeds based on having a best-in-class sponsor and strong and diverse anchors. Although interest rates climbed over 60 basis points during the diligence, the Capital Provider did not change loan proceeds.

Advisors

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

$2,450,000 High-Leverage SBA Acquisition Financing for Office Property; North Hollywood, CA

$1,375,000 Senior Loan @ 4.75%
$1,075,000 2nd (SBA) @ 2.58%

Term: 25 Years
Loan-to-Purchase Price: 90%
Prepayment: 5-5-4-4-3-3-2-2-1-1

Transaction Description:

George Smith Partners arranged $2,450,000 in SBA Owner-User Acquisition (90% Loan-to-Purchase Price) financing for an office/industrial flex property located in North Hollywood, CA. The Sponsor approached GSP to assist with the acquisition of the Property to relocate their company headquarters. The Sponsor required a flexible loan with high leverage and a low interest rate. The Sponsor had already entered escrow at the time of approaching GSP and was on a strict timeline with only 60 days to close. GSP quickly and successfully structured a first trust deed from a bank as well as an SBA B-piece to secure 90% of the purchase price. GSP was able to provide the Sponsor with a 25-year term, with the first 10 years fixed at a blended rate of 3.80%. The flexible prepayment structure is equal to 5-5-4-4-3-3-2-2-1-1. The high leverage loan allows the Sponsor to use equity towards the continued growth of their business. Thanks to our long-standing relationship with the SBA Certified Development Company (CDC), GSP was able to meet the Sponsor’s deadline and close this transaction in under 60 days.

Advisors

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

SPEAKERS CORNER

REGISTER HERE for the April 23rd webinar, “2021: Bear Down or Buckle Up?”


Picture
HOT MONEY
Light Bridge Balance Sheet Non- Recourse Financing from L + 150-350 for all Asset Classes

George Smith Partners is working with a national investment bank utilizing their balance sheet for both transitional and stabilized properties. While traditionally used for much larger transactions, they will consider requests from $15,000,000 for non-recourse fixed or floating rates on all property types. Pricing from L + 150-350 for light bridge with flexible prepayment structures. Terms are up to 11-years for all stabilized loans.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Powell 60 Minutes Appearance, Tame Inflation Report Keeps Yields in Check (for Now)

Fed Chair Powell’s appearance on 60 Minutes was well timed, 2 days before a highly watched CPI report. Markets continue to be hyper sensitive to signs of inflation. He struck a familiar theme during the interview as he laid out the conditions for the next rate increase. He reiterated that it will take more than a single monthly report of annual prices increasing above the Fed’s target of 2.0%. Powell gave a very specific answer: “(he would) like to see it on track to move moderately above 2% for some time. When we get that, that’s when we’ll raise rates.” He is well aware that the CPI and PCE figures for the upcoming months may skew above 2.0% due to the “base effect”. The annual increases are based on the 12 months since the depths of the pandemic shutdown last year.

Yesterday’s CPI report provided a test for markets. The annual CPI rose 2.6% aided by a 9.1% in the price of gasoline. However, the core CPI (which strips out the volatile food and energy components) rose only 1.6%. The 10 year T actually went down as inflation fears subsided and markets focused on J&J vaccine issues. The Fed’s preferred inflation gauge, PCE, will be released on April 30. The 10 year Focus on SFR Prices. The Fed’s nonstop purchases of Mortgage Backed Securities is designed to keep rates down for home buyers. But it may be contributing to runaway asset inflation in the single family home market. Home prices were up 11.2% according to the latest S&P Case Shiller index, the largest rise in 15 years (now that’s real inflation!). This is crowding out many potential buyers. In addition, these buyers have further competition. Homebuilders are increasingly renting out homes and selling to funds. DR Horton built 124 homes in suburban Houston and sold the entire subdivision to a fund. Now foreign capital is targeting homes for rent. Some of Europe’s major insurance companies and pension funds are forming multi-billion dollar ventures to purchase new homes in bulk. They are focusing on sun-belt “move to” markets as young families opt for more space and rent homes. Apartments rents: March data from the realtor.com’s survey of apartment rents rose for the first time since the beginning of the pandemic, a 1.1% increase since last month as secondary locations thrive. 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


WWW.GSPARTNERS.COM

Constellation Place
10250 Constellation Blvd., Ste. 2700
Los Angeles, CA 90067
Office 310.557.8336
Fax 310.557.1276
Email finfacts@finfacts.net
© 1999 - 2021 George Smith Partners, Inc. DRE # 00822654 FINfacts is an ePublication of George Smith Partners, Inc. For Promotional Purposes Only. All Rights Reserved.
Hi, just a reminder that you're receiving this email because you have expressed an interest in George Smith Partners. Don't forget to add finfacts@finfacts.net to your address book so we'll be sure to land in your inbox!

You may unsubscribe if you no longer wish to receive our emails.