FINfacts™ XXIV – No. 271 | June 9, 2021

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.08%
6 Month LIBOR 0.15%
5 Yr Swap 0.83%
10 Yr Swap 1.48%
5 Yr US Treasury 0.75%
10 Yr US Treasury 1.49%
30 Yr US Treasury 2.17%

RECENT TRANSACTIONS
$19,000,000 CMBS Financing for Select-Service Hotel; Southern California

Rate: 3.73%
Term: 10 Years
Amortization: Full Term Interest Only
Recourse: Non-Recourse

Transaction Description:

George Smith Partners successfully placed the $19,000,000 cash out CMBS loan to fund the refinancing of a select service hotel in Southern California. The 10-year fixed rate loan locked below 3.75%, fully interest only. The financing was successful despite significant headwinds on hotel operations due to the pandemic, but GSP was able to source a creative CMBS lender that not only sized the loan based off of 2019 performance, but also allowed for a two-year holiday from any debt yield test covenants. With California and the country as a whole reopening following the global pandemic, and best-in-class ownership and management in place, GSP was able to build a story around recovery to achieve favorable terms in a challenging environment.

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

$7,850,000 Acquisition Loan for 48 Unit Multifamily Property; Fixed at 3.30% for 7 Years; Hollywood, CA

Rate: Fixed for 7 years at 3.30% with initial 5-years IO
Term: 7 years
Amortization: 30 years
Prepay: 3,3,2,2,1
LTV: 65% max
DCR: 1.20x
Lender Fee: $0

Transaction Description:

George Smith Partners successfully secured $7,850,000 in proceeds for the acquisition of a 48-unit multifamily property in Hollywood. The loan is fixed at a rate of 3.30% for 7 years and has 5 years of interest only payments. The Property’s location, a few feet from a fault line, raised a concern that earthquake insurance might be required. GSP conducted a comprehensive search of city records and engaged a seismic report to demonstrate that sufficient retrofit work had already been completed. As a result, the Lender waived the additional insurance. Several lenders required a reserve account of 6-12 months of P&I payments, but the selected lender had no holdbacks or reserves. The loan closed with no changes to the original 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

$5,300,000 Office Cash-Out Refinance; San Fernando Valley, CA

Rate: 3.0%
Term: 10 Years
Amortization: 25 Years
LTV: 75%
DCR: 1.25
Prepayment: 5,4,3,2,1 open

Transaction Description:

Classified as an owner-user, this multi-tenant office building was being transitioned during due diligence as a new ground floor tenant leased a third of the net rentable but had not taken occupancy due to COVID restrictions. The delayed funding worked to our Sponsor’s benefit as it allowed GSP to restructure the loan for additional net proceeds while reducing the Sponsor’s current SBA pre-payment penalty. All additional proceeds were used to consolidate business lines and other unrecorded debt at a substantially lower interest rate. An early rate lock feature permitted the Sponsor to take advantage of lower indexes prior to the rate bump. This non-SBA execution is fixed for ten years at 3.00% and was sized to 75% LTV and a 1.25 DCR. The loan is open to prepayment without penalty after the 5th year.

Advisors

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

Pascale's Portrait
PASCALE'S PERSPECTIVE
Treasury Yields Drop As Markets Wait for CPI

Economists are expecting tomorrow’s CPI report to show a 4.7% increase from a year earlier. Today saw the 10 year treasury yield drop to as low as 1.47%, possibly due to technical short covering in the markets. The big question is – will tomorrow’s big number rattle Treasuries into a sell-off? Or, will the number be tamer than anticipated? Last week’s weaker than expected jobs report calmed market inflation expectations. Tomorrow’s report may rekindle inflation fears.

Spotlight on Hospitality: During the depths of the pandemic shutdowns in 2020, the hotel industry was hit hard, many hotels were closed for business or operating at severely reduced capacity. The monthly occupancy rate plunged from 62% in February to a multi-decade low of 22% in April. Many market participants were anticipating a wave of distressed property acquisition opportunities in the sector stemming from lender foreclosures. The “wave of distress” did not occur. The pandemic shutdown was vastly different from the credit crisis and Great Recession that began in 2008. This time, vaccine distribution and the 2021 reopening of society was within sight. Most lenders allowed their borrowers to hold on through the crisis. Case in point: the largest distressed portfolio in the US, the Eagle Hospitality Trust included 15 hotels located across the country. The distress in the portfolio stemmed from ownership issues then exacerbated by the pandemic. The auction is going better than anticipated with 5 assets fetching prices in excess of the stalking horse bids and the remaining assets expected to be sold this month. According to STR, May 2021 US Hotel occupancy hit 61.8%. Memorial Day weekend occupancy was nearly 80%. CMBS Hotel loans in special servicing dropped to a pandemic era low of 20.1%, after hitting a high of 26% last summer. Last month’s jobs report indicated that Leisure and Hospitality led the net increases in jobs at 331,000 new hires (#2, Government was at 48,000). Business travel is showing signs of life and even pent up demand. This week, the first major convention post pandemic, the World of Concrete in Las Vegas is well attended. Corporate travel is starting up amongst companies looking to get an edge on their competitors still doing business remotely. Here at GSP we are seeing more capital sources now considering hotel loans albeit at lower proceeds and higher risk spreads, but it’s a start. 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!