FINfacts™ XXIV – No. 269 | May 26, 2021

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.09%
6 Month LIBOR 0.18%
5 Yr Swap 0.86%
10 Yr Swap 1.52%
5 Yr US Treasury 0.78%
10 Yr US Treasury 1.58%
30 Yr US Treasury 2.26%

RECENT TRANSACTIONS
$40,000,000 Non-Recourse Bridge Financing for a 330-Bed, Student Housing Property; Orange County, CA

Rate: LIBOR + 3.40%
Term: 36 Months, Two 1-year Extensions
LTC: 70%
Guaranty: Non-Recourse except for standard carve outs, bad acts, and environmental. Completion guaranty
Fee: 1.0% Origination

Transaction Description:

George Smith Partners successfully placed a non-recourse $40,000,000 bridge loan to fund the acquisition and repositioning of a 330-bed student housing project in Orange County, California during the COVID-19 pandemic. Directly adjacent to a non-power five campus, the University’s decision to not hold in-person classes due to COVID-19 severely impacted the Property’s occupancy levels at the time of acquisition. Additionally, the Project was undergoing renovations when the pandemic struck.

GSP leveraged its diverse lender relationships to attain 70% of project cost, including an extensive CapEx budget to be used for existing unit renovations and the construction of additional residential density. GSP ensured no negative arbitrage by structuring a draw schedule accretive to the Sponsor’s business plan. Despite the economic uncertainty during the transaction, GSP worked with the Lender to maximize proceeds while addressing Lender concerns of potential COVID related shortfalls.

Advisors

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

$14,750,000 Cash-Out Construction Loan for an 80% completed Single Family Residence; Los Angeles, CA

Rate: 6%
Term: 19 months + two six-month extension options
Amortization: Interest Only
LTC: 50%
Guaranty: Full recourse
Banking Relationship/Deposits: None

Transaction Description:

George Smith Partners successfully placed $14,750,000 in a cash-out construction loan for the completion of a high-end luxury home in Los Angeles, California. The loan retired a higher interest rate, funded an interest reserve account, and provided additional proceeds to fund the remaining budget of the development. The nineteen-month loan term was structured to provide the Sponsor with time to finish construction, obtain certificate of occupancy and sell the asset. Many lenders were on the fence about lending to the high-end luxury market or did not want to take on the risk of financing a mid-construction project. GSP leveraged its expertise of the Los Angeles market along with its local lender relationships to achieve all the Sponsor’s goals.

Advisors

Reuven Risch
Vice President

$1,200,000 Permanent Refinance on Multi-Tenant Industrial Building for Sponsor with Discharged Bankruptcy; Sun Valley, CA

Rate: 4.90% Fixed; Resets after Year 5
Term: 5 Years + Extension Option for 5 Years
Amortization: 1 Year Interest Only; 25 Years thereafter
LTV: 58%
Guaranty: Recourse

Transaction Description:

George Smith Partners successfully arranged a $1,200,000 permanent refinance for a fully occupied, eight-unit industrial building in the Sun Valley neighborhood of northern Los Angeles, CA. The Sponsor acquired the fully entitled site in 2015 and completed construction in 2016. The Property consists of two buildings totaling 8,084 SF on a 20,452 SF parcel.

The Sponsor had a Chapter 13 bankruptcy due to the impacts of the Great Recession. Having worked diligently to pay off creditors, the bankruptcy was ultimately discharged in 2017. At the same time, the Sponsor’s real estate portfolio grew substantially despite very limited access to capital sources. GSP was engaged in hopes of capitalizing on the low interest rate environment despite the bankruptcy being on record.

GSP focused on the Sponsor’s strong track record and leveraged its longstanding relationship with a lender who provided a 4.90% fixed rate for 5 years, with a 5-year extension option. The loan is interest only the first year and then fully amortizing for the remaining 24 years.

Advisors

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

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HOT MONEY
Zero Prepayment Permanent Debt

George Smith Partners is actively placing five- and seven-year perm-debt with a California based portfolio lender financing up to $18,000,000 for office, industrial, multifamily, and retail properties. A 5+5+5 term structure is also available for a 15-year term with rate resets. The zero-prepayment penalty allows for total flexibility to take advantage of future capital appreciation, sale or further rate reductions. Rates range from 3.75% to 4.25% to a 1.20 DCR.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Treasury Yields Drop As “Taper Talk” Gets Closer

This week saw a parade of Fed officials simultaneously calming markets on one hand while preparing for the inevitable reduction in monthly bond purchases. Prices have risen across a broad spectrum of commodities: lumber, steel, copper, aluminum, gasoline, corn, chickens and entry level wages. The officials, including SF Fed President Mary Daly and Vice Chair Richard Clarida are sticking to the view that the recent inflation is transitory. Issues regarding supply chain and labor market bottlenecks need to work themselves out. The thinking is that we need to see sustained inflation with normally functioning supply chains until a true assessment can be made. Only then will the Fed start “removing the punch bowl” in a measured and well telegraphed process. For now, its working as the 10 year T dropped to as low as 1.55% this week after hitting 1.70% in early May. But note that one prominent Fed official is “tolling the bell” as he said, “It’s time to start talking about tapering bond purchases.” 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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