FINfacts™ XXIV – No. 281 | August 18, 2021

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.09%
6 Month LIBOR 0.16%
5 Yr Swap 0.88%
10 Yr Swap 1.30%
5 Yr US Treasury 1.26%
10 Yr US Treasury 1.26%
30 Yr US Treasury 1.91%

RECENT TRANSACTIONS
$26,000,000 Total Construction, LP Equity, & Co-GP Platform Advisory, SFR for Rent; Fort Meyers, Florida

SENIOR DEBT
Rate: 3.75%
Term: 4 years
LTC: 70%
Guaranty: Recourse

EQUITY
80% JV & 20% Co-GP Equity

Transaction Description:

As the leader in the rapidly emerging Single Family for Rent (SFR for Rent) and Build-to-Rent (BTR) multifamily asset classes, George Smith Partners worked with our client to structure an optimal structure for the development of the 130-unit project located in Fort Meyers, FL. Throughout the year-long engagement, GSP and the Sponsorship secured various investment structures including multiple Co-GP, LP, Pref, and Senior construction facilities, ultimately structuring a high leverage 70% recourse loan and a full equity structure of 80% LP + 20% Co-GP.

With the intention of securing platform participants, the chosen structure will allow for a rapid expansion of the portfolio on a favorable deal by deal basis. The Sponsorship plans to scale with their partners to an additional 600 units in the next 12 months to meet the rapidly growing need for housing across Florida. The platform investment will also provide the opportunity to grow into other high growth markets across the south and east coasts.

Advisors

Ed Steffelin
Senior Vice President
Evan Kinne
Senior Vice President
Jonathan Lee
Principal/Managing Director
Shahin Yazdi
Principal/Managing Director
Kyle Redmond
Assistant Vice President

$4,680,000 Paper Lot Land Acquisition Loan in Ten Days; San Diego, CA

Rate: 10%
Term: 18 Months
LTV: 50%
Guaranty: Non-Recourse with Bad Boy Carveouts
Fee: 3%

Transaction Description:
George Smith Partners successfully placed a $4,680,000, 50% LTV loan to fund the acquisition of a 6.9-acre parcel of land located in North County, San Diego, California, and the funds needed to finalize the entitlements for 135 paper lot townhome subdivision.

When GSP became involved, the Borrower had already invested over $2,300,000 to secure a tentative map and development agreement while the land was under option. However, there were only ten days remaining on the purchase contract when the land lender with whom the Borrower had been dealing with directly, declined to proceed. When the Seller refused to grant the Buyer an extension on the purchase escrow, GSP was engaged to arrange the land acquisition financing to enable a timely closing.

GSP had several highly reliable alternative land lenders that could close within ten days. Strategically, GSP selected a lender that was not only willing to finance the land acquisition and final entitlements, but also was willing to give the Sponsor a strong indication that they would favorably consider funding the future stages of the project, including the grading, horizontal land, and infrastructure development as well as the vertical construction financing once the final map was achieved in approximately nine months.

Advisors

Gary M. Tenzer
Principal/Co-Founder

High Leverage Land Development Financing for Build By-Right Land, for 92-UnitMultifamily ,75% LTC; Koreatown area of Los Angeles, CA

Rate: 5.50%
Term: 24 Months, One 6 Month Extension
LTV: 75%
Prepayment: None

Transaction Description:
George Smith Partners arranged $3,500,000 in land pre-development financing for Phase II of a multifamily development project. The vacant lot will be developed into 92 workforce housing units located in the Koreatown area of Los Angeles, CA. The Sponsor is addressing the need for workforce housing in this area. GSP utilized a unique capital source to arrange highly favorable and flexible capital to allow the Sponsor’s long-term plan of developing workforce housing communities within Los Angeles. The loan represents 75% of the pre-development soft costs to bring the Project to permit-ready status. This is the second phase of the land development. The interest-only land loan was priced at 5.50%, with a 24-month term and one 6-month extension option. The extension option gives flexibility to the Sponsor should they be unable to pull permits within 24 months. There is additional flexibility with the loan structure with no prepayment penalty. Despite being on a strict closing deadline, GSP was able to identify a lender who could execute on terms and close within 30 days.

Advisors

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

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HOT MONEY
Small JV Equity Investments for Existing Product

George Smith Partners identified an equity provider offering LP Capital for value add to opportunistic real estate investments throughout the United States. With financing starting at $5,000,000 and going to $15,000,000 this equity provider is open to all property types across the investment life cycle with focus on multifamily, single family, and retail. The hold period is 2-5 years (longer for stable, cash flowing deals).

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Fed Notes Release, Consumer Confidence, Retail Sales

Today’s release of the notes from the Fed’s July28-29 meeting reveals the Fed committee members’ opinions reflect the general mood amongst market participants: uncertainty about the future during this time of “uncharted territory” of the Covid recovery. Last week’s historically low Consumer Confidence report and yesterday’s drop in retail sales underline the bumpy path of the recovery. The Delta variant surge is affecting demand.

The Fed: tapering of bond purchases “soon” looks like it’s happening. The members disagree on how soon and how fast. Some want to announce in the next few months and begin tapering this year, others want to see more data on the recovery and start next year. Interestingly, some members are calling for a quicker deceleration of purchases than the last taper in 2014. Instead of a gradual 12 month period, it could be 6 months. That would mean lowering purchases by about $20 billion a month. Will that disrupt financial markets? Besides the inflation concerns, much of the debate centers on whether the Fed’s employment goals are close to being met. The data is not determinative. Yes, there are still about 6 million fewer jobs than pre-pandemic. But unfilled job openings and labor shortages are being seen in several sectors and regions. The pandemic has possibly created a “great reset” as the labor market is shrinking, many workers are not returning to their old jobs. People are taking early retirement and moving to different sectors. So perhaps “full employment” is an illusory goal that will be difficult or impossible to achieve. The 10 year T is at 1.27% and investors will now look to Powell’s remarks in Jackson Hole next week as for potential policy announcements. 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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