FINfacts™ XXIV – No. 275 | July 7, 2021

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.10%
6 Month LIBOR 0.17%
5 Yr Swap 0.87%
10 Yr Swap 1.30%
5 Yr US Treasury 0.78%
10 Yr US Treasury 1.32%
30 Yr US Treasury 2.00%

RECENT TRANSACTIONS
$45,570,000 Non-Recourse Construction Completion and Inventory Financing for a 77-Unit Residential Condominium Development; Downtown Los Angeles

All Terms Confidential

Transaction Description:

George Smith Partners successfully arranged a $45,570,000 construction completion and inventory loan for a mixed-used residential condominium development project in the Little Tokyo neighborhood of Downtown Los Angeles. The non-recourse loan refinanced the existing construction debt, provided additional proceeds to complete the development, and additional term for unit sales. The 77-unit project features 2,400 square feet of ground floor retail and an 8,000 square foot rooftop amenity area. It is slated to deliver in Q2 2022.

GSP ran a robust process, fielded multiple proposals and was able to identify a lender with whom we shared a long-standing relationship offering favorable terms in a challenging market. The selected lender understood the story around recovery, the value of the asset due to a dearth of new condominium product in the market and 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

2.52% Floating Rate – 7-Years IO – Cash-Out – Stabilized Multifamily; Kent, WA

Rate: 2.51% + 1-Mo SOFR
Term: 7 years
Max LTV: 60%
Amortization: None; 10-Years Interest Only
Origination Fee: 1%
Prepayment: 1% Exit; 3-Months open; PP waived w/ Lender Refi

Transaction Description:

George Smith Partners secured a senior floating rate loan for a stabilized multifamily property in Kent, WA. The non-recourse debt totaling $12,200,000 was utilized to refinance existing acquisition bridge debt and return of a significant amount of equity to the Ownership. The loan was structured with a 7-year term and interest only payments for the entire duration. The loan was collateralized by a 95-unit multifamily building; the Subject was 97% leased at closing. The Sponsorship had recently renovated approximately 70 of the units with plans to complete the remaining 25 units over the next 18 months.

GSP selected a lender that offered an extremely attractive coupon. The variable rate provided the Sponsorship flexible prepay in the event of a future sale while supplying cash-out proceeds at funding. GSP negotiated a very minimal 2-year rate cap, and the Lender waived all Covid debt service reserves. The Property appraised for more than expected and GSP worked with the Lender to both increase the proceeds and reduce the spread.

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

$5,350,000 Cash-Out Refinance for Owner-User Office Property; Downtown Riverside, CA

Rate: 4% fixed for 5 Years
Term: 25 Years, First 12 Months Interest Only
Min DSCR: 1.25x
Prepayment: No prepayment penalty

Transaction Description:

George Smith Partners arranged $5,350,000 in cash-out permanent financing for an owner-user office building located in Downtown Riverside, CA. The Sponsor approached GSP to help assist with the refinance of the Property to help relocate their company headquarters from the east coast. The Sponsor was on a strict deadline with their existing lender, only having 60 days to refinance before the current loan maturity. At the time of the refinance process, the Sponsor was close to completing exterior and interior renovations, including common area upgrades. GSP had to quickly identity a lender who could deliver certainty of execution on short notice, while delivering competitive terms. GSP was able to provide the Sponsor with a 25-year term, and the first 5 years being fixed at a low rate of 4%. The first 12 months are interest only, before converting to 25-year amortization thereafter. There is additional flexibility within the loan structure because there is no prepayment penalty. The cash-out loan allows the Sponsor to use more equity towards continuing to grow their business. Thanks to our long-standing relationship with the Lender, GSP was able to meet the Sponsors deadline and close this transaction within 60 days.

Advisors

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

SPEAKERS CORNER

Please join us for the webinar, “Housing in 2021: Multifamily, Single Family Attached & Detached, For Sale & For Rent”.

Register Here: https://us06web.zoom.us/webinar/register/WN_EtPayloMQNiQvRNLgKfhjw

Date: Friday, July 16, 2021

Time: 10:00am PT | 1:00pm ET


Pascale's Portrait
PASCALE'S PERSPECTIVE
Rates Drop as Recovery Expectations Settle, Bund Plunges

Today’s 10 year Treasury actually dropped to 1.28% as the 2nd half of 2021 gets underway. Many industry analysts predicted a 2.00% 10 year Treasury by year end 2021, spurred by robust economic growth coming out of the pandemic. However, the 10 year has been dropping in recent weeks, while very short term Treasury yields are rising slightly. This flattening of the curve usually signals lower growth expectations. The dip in yields may be a perfect storm of multiple factors; (1) Technical short covering of traders covering “bad bets” on treasury yields spiking; (2) Realization that the recovery may be uneven, an estimated 80% of all the stimulus has been spent and the effects may be dwindling; (3) Employment – last month’s new jobs number of 850,000 new hires is impressive, but it will take over a year at that rate to reach pre-pandemic job levels, traders feel the Fed will keep priming the pump until that goal is within sight, even at the risk of running “hot” inflation; (4) Relative value trade, the 10 year German Bund dropped to negative 0.30% after almost breaking above zero in recent weeks, so the US 10 year T at 1.30% is a good alternative.

What are we telling borrowers? Today is a great time to lock in 10 year fixed rates. 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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