FINfacts™ XXIV – No.272 | June 16, 2021

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.08%
6 Month LIBOR 0.15%
5 Yr Swap 0.86%
10 Yr Swap 1.47%
5 Yr US Treasury 0.89%
10 Yr US Treasury 1.56%
30 Yr US Treasury 2.21%

RECENT TRANSACTIONS
$12,083,000 Non-Recourse Cash-Out Agency Refinance for Multifamily Property; Western States

Rate: 2.55% + SOFR
Term: 7 Years
LTV: 65%
Amortization: 3 Years Interest Only, 30 Year Am Thereafter
Prepayment: 1-Year Lockout, then 1%
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners successfully arranged the cash-out refinance of a 200+ unit multifamily property. The loan is floating at a starting rate of 2.56% and allows the Sponsor to complete a value-add strategy to increase the NOI and refinance into a permanent loan at higher proceeds in 18-24 months.

While processing the loan, GSP worked with the Lender to understand the historical cash flow which was extremely choppy due to the inconsistent rent payments during the Covid-19 pandemic. The analysis resulted in a $3,000,000 increase to the loan amount and an additional year of interest only payments.

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

$6,600,000 Refinance of 28 Units; Maximum Credit for Newly Signed Leases; Los Angeles, CA

Rate: 3.35% fixed for 5 years
Term: 30 years
Amortization: 3 years Interest Only followed by 30-year amortization
Prepayment Penalty: 3,2,1,0
LTV: 67%
DCR: 1.20x
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners secured $6,600,000 in proceeds for the refinance of two properties comprised of 28 units in Los Angeles. The loan is fixed at a rate of 3.35% for 5 years. The Borrowers had closed their previous loan during a cyclical peak in interest rates. With this refinance, they were able to lower their interest rate by over 1% and get 3 years of additional interest only payments.

The original loan application had a loan-to-value stipulation of 60%. Shortly after the loan went into application in August 2020, the Property experienced an increase in vacancy. Additionally, the appraised value reflected some temporary challenges in the market. Since this Property was part of a portfolio refinance, the Lender agreed to raise the LTV to 67% and provide additional time for occupancy to recover. Ultimately, the loan terms and rate were held for 8 months until the Property was fully leased up. Once stabilization was achieved, the Lender underwrote cash flow based on newly signed leases and closed within 2 weeks.

Advisors

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

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HOT MONEY
Non-Recourse Western States Portfolio Permanent Financing Starting at 3%

George Smith Partners is placing non-recourse financing for permanent transactions up to $40,000,000 for properties in California and major metros in all western states. The Lender will finance stabilized income-producing projects for office, industrial, multifamily, industrial, retail, Manufactured Home Parks, and will consider some special purpose assets on a case-by-case basis. Rates start at 3% and can be locked at application. With terms up to ten years, loan sizing is 50% of value for multifamily and industrial and 40% of value for retail and office.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Fed Indicates that “Peak Dovishness” Is Over

Today’s Federal Reserve meeting, statement and presser from Fed Chair Powell definitely showed the central bank starting to pivot away from the ultra-accommodative policies put in place last year The headline: 13 of the 18 Fed voting members believe the Fed will raise rates in 2023 (this number was 7 of 18 in March 2021), with 7 of them now predicting a 2022 rate increase (up from 4 in March 2021). Inflation hawkishness has been abundant in recent weeks. Statements from Lawrence Summers, Deutsche Bank, various CNBC commentators have accused the Fed of being overly sanguine in policy and rhetoric. Powell acknowledged this atmosphere: “inflation could turn out to be higher and more persistent than we anticipate”. He also prepared the markets for a decrease in monthly bond purchases (now $120 billion per month) by saying “this meeting, is the ‘talking about talking about’ meeting” which referenced his promise to telegraph any decreases in Fed bond buying in advance. Today the telegram was sent! Bond buying will taper probably by year end. This matters to commercial real estate because the Fed is affecting both the index (treasuries) and the spreads (Fannie/Freddie bonds) with these purchases. As these purchases slow, the private sector would have to make up the slack to keep rates low. Also, the Fed increased their headline inflation expectation to 3.4% (up a full point from March 2021). Powell sought to calm markets near the end of the presser. Perhaps he was watching the Dow crash 400 points on a CNBC monitor in the room? Again, he used the “t word” (Transitory) to describe inflation. As far as the projections for upcoming rate increases, he reminded everyone they are projections and should be taken with a “big grain of salt”. 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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