FINfacts™ XXIV – No. 268 | May 19, 2021

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.10%
6 Month LIBOR 0.18%
5 Yr Swap 0.91%
10 Yr Swap 1.61%
5 Yr US Treasury 0.86%
10 Yr US Treasury 1.67%
30 Yr US Treasury 2.37%

RECENT TRANSACTIONS
$56,500,000 Construction Financing for a Coastal Infill Mixed-Use Asset; Solana Beach, CA

All Terms Confidential

Transaction Description:

George Smith Partners arranged $56,500,000 in construction financing for the development of a mixed-use coastal infill project in Solana Beach, CA. The mixed-use development features 55,000 square feet of office space, 9,000 square feet of retail and 25 apartment units.

Located just one block from the beach and the Cedros Avenue Design District, the two-story development focused on sustainability will be the largest mixed-use project along Highway 101 in the past three decades. The dearth of comparable projects, especially ones with large office floorplates, presented a unique opportunity.
Amidst a time of market volatility and economic uncertainty, GSP was able to identify capital who not only understood the value of all three components and the subsequent demand but also the ability of the Sponsor to execute on the intended business plan.

Advisors

Malcolm Davies
Principal/Managing Director
Zachary Streit
Senior Vice President
Portrait Drew Sandler
Vice President
Alexander Rossinsky
Senior Vice President
Aiden Moran
Vice President
Brandon Asherian
Assistant Vice President
Ben Tracy
Analyst

$8,400,000 Non-Recourse Acquisition/Bridge Loan for a 50% Occupied Apartment Building; Hayward, CA

Rate: LIBOR + 4.25%
Term: 3 Years, with two 1-year extensions
Amortization: Interest Only
Loan-to-Cost: 76%
Repayment: Carve-Outs Only
Prepayment: 18 months
Loan Fee: 1.0% in / 0.25% exit

Transaction Description:

George Smith Partners identified a national balance sheet lender with an intimate knowledge of the Hayward submarket and arranged $8,400,000 in acquisition and bridge financing for the purchase and reposition of a currently 50% occupied, 1960’s-built apartment complex located in Hayward, CA. The Sponsor placed the portfolio under contract during the COVID-19 pandemic.

The loan includes $1,350,000 of future funding for extensive renovations of unit interiors and exterior upgrades, including an earthquake retrofit. Interest is not charged on the holdback until funds are drawn. This Capital Provider also structured and capitalized an interest reserve to cover the shortfall of cash flow during repositions. Sized to 76% of the total capitalization, the three-year bridge loan is interest only for 36 months and carries a floating rate of LIBOR + 4.25% and include two extension options for up to a term of five-years.

Advisors

Kyle Howerton
Senior Vice President
Portrait Michael Anderson-Mitterling
Senior Vice President
David Stepanchak
Senior Vice President
Portrait Saman Yazdi
Analyst
Portrait Robert Gallagher
Analyst

$5,220,000 Refinance for Retail Center; Fixed at 3.50%; Bank Financing Closed During Covid-19 Pandemic; Los Angeles, CA

Rate: 3.50% fixed
Term: 5 yrs
Reserve: None
Amortization: 30 years
Prepayment Penalty: 3,2,1,1,1
LTV: 65%
DCR: 1.25x

Transaction Description:

George Smith Partners secured a $5,220,000 refinance loan for a five-tenant retail center located on a major commercial avenue in Los Angeles. The loan is fixed at a rate of 3.50% for 5 years and does not require any holdbacks. The transaction went into application and was closed during the COVID-19 pandemic.

Retail property values have been under scrutiny over the past year and declined in some markets. To substantiate property value, GSP emphasized the Property’s infill location and credit tenants. All 5 of the tenants were considered essential businesses and remained open. The Borrower provided three months of collections data to show that the tenants were consistently paying rent. During the site inspection, significant foot traffic was observed. These factors helped support the appraised value and maintain the proceeds in the loan application.

Advisors

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

SPEAKERS CORNER

A replay is available for the “The Road to Recovery” webinar featuring Bryan Shaffer and David Pascale.

Click here to watch the video: https://www.youtube.com/watch?v=X0j1WbphXv0&t=220s


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HOT MONEY
National Non-Recourse Multi-Family Bridge Financing Starting at 3.15%, 85% LTV

George Smith Partners is working with a national balance sheet lender funding non-recourse bridge debt up to 85% of value. Rates start at 3.15% for multifamily, healthcare, student housing and manufactured housing projects for 3-year terms plus extensions. The lender has an appetite for transactions starting at $10,000,000. In-place cash flow at funding is required as low as a 4.5% debt yield (net cash flow divided by the loan amount) assuming an “as stabilized” 7.75% debt yield upon exit.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Shades of the Taper Tantrum?

Today’s release of the April Fed meeting notes quoted officials saying that “if the economy continued to make rapid progress it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases”. That’s Fed speak for, “we are thinking about it but don’t worry yet”. Remember, the Fed’s path is the following: prepare markets for reduced monthly bond purchases (now $120B a month), actually reduce bond purchases, then start raising rates. This release is significant as it’s the first hint. Markets didn’t fully throw a tantrum today. The 10 year jumped from 1.62% to 1.69% this afternoon, settling at 1.67%.

Focus on Retail

The pandemic upended the retail sector hard but the comeback is happening. (But, not for all properties). Trends already in place were greatly accelerated by the pandemic: ecommerce, grocery delivery, and mega stores such as Target/Walmart acting as fulfillment centers for customers picking up or returning merchandise. Last year at this time, we saw shopping center owners dealing with closed tenants, some paying partial rent or no rent and requesting rent deferrals and/or abatements.

The recent CBRE Q1 2021 US Retail report has some eye popping statistics. Total retail sales increased 14% year over year. Q1, March 2021 sales growth of 28% was the highest monthly year over year ever recorded by the US Census stat bureau. Consumer sentiment improved to its highest post-Covid level, total net absorption has been positive for 2 consecutive quarters. Demand is high for freestanding single tenant properties as drug stores, grocery stores and fast food have thrived during the pandemic. On the other hand, the road to obsolescence grows for many of America’s large shopping malls. TreppWire reported on a flurry of malls with CMBS loans being handed back to the lender/servicers. The Prizm Outlets Mall in Primm, NV has been liquidated at a great loss to the bondholders. Brookfield is cooperating in friendly foreclosures of the Florence Mall (Kentucky), Bayshore Mall (California) and the Pierre Bossier Mall in Louisiana. Interestingly, the Prizm and Florence properties were part of the infamous “CMBX 6” grouping of bonds. CMBS 6 is a traded index of CMBS bonds originated in 2012, which had a large percentage of malls that rushed to refi as the CMBS “2.0” era began after the Great Recession. Legendary investor Carl Icahn has netted billions of dollars in profits by shorting the CMBX 6, these losses add to his gains. 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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