FINfacts™ XXIV – No. 283 | September 1, 2021

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.09%
6 Month LIBOR 0.16%
5 Yr Swap 0.87%
10 Yr Swap 1.32%
5 Yr US Treasury 0.78%
10 Yr US Treasury 1.31%
30 Yr US Treasury 1.90%

RECENT TRANSACTIONS
$35,900,000 Construction Takeout Financing for Single Tenant Industrial Asset; Austin, Texas MSA

All Terms Confidential

Transaction Description:

George Smith Partners successfully secured $35,900,000 in construction takeout financing for a state-of-the-art industrial project located in the Austin, Texas MSA. The manufacturing, research and office facility is 130,000 square feet. Spanning a 103-acre site, the building offers an additional 93 acres of undeveloped, shovel-ready land, yielding a development potential of more than 1,000,000 square feet of light / heavy commercial and industrial use.

The financing recapitalized construction costs related to the facility development, and utility infrastructure improvements.

The Sponsorship team acquired the undeveloped site in 2019, a strategic parcel in a rapidly developing industrial corridor, and subsequently developed the Class A facility. In order to take out the construction financing, GSP was able to identify a local lender with the expertise to develop a credit profile that appropriately accounted for the startup’s long-term viability, while also understanding the significant value of the excess developable land in a high-growth micro market within the Austin MSA.

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

$25,818,000 Bridge Loan Refinance of Vacant 51-Unit Multifamily Property; 85% LTV;5.2% Stabilized Debt Yield; Los Angeles, CA

Rate: Floating at LIBOR+6.00% with floor of 6.65%
Term: 12 months + one 12-month extension
LTV: 85%
Debt Yield: 5.2%
Guaranty: Non-Recourse at Certificate of Occupancy

Transaction Description:

George Smith Partners secured $25,818,000 in proceeds for the cash-neutral bridge loan refinance of a 51-unit multifamily property in Los Angeles. The Lender provided proceeds of 85% of appraised value and underwrote to a 5.2% stabilized debt yield. The new loan refinances both the construction loan and the preferred equity that were part of the original financing. The loan is floating at LIBOR + 6.00% with a 6.65% floor.

At the time of financing the Property was 95% complete but still short of a temporary certificate of occupancy. In addition, the leverage on the loan precluded several lending sources from achieving the necessary proceeds. The Sponsor desired to completely pay off the original construction financing, which was originated at 85% loan to cost. Only a few lenders could get the requested leverage and the market quoted pricing in the high single digits. Lastly, Koreatown experienced Covid related collection issues which affected the rental underwriting. GSP provided rental and sales comps that proved out the strength of the market. As a result, the selected Lender became comfortable with the location and the Sponsor’s ability to lease up the new Property.

Advisors

Jonathan Lee
Principal/Managing Director
Shahin Yazdi
Principal/Managing Director
Matthew Kirisits
Vice President
Miles Musalman
Senior Vice President
Jarod King
Senior Vice President
Kyle Redmond
Assistant Vice President
Jessica Mania
Marketing and Business Development Associate

$2,650,000 Non-Recourse Cash-Out Refinance to 95% of Total Capitalization; Long Beach, CA

Rate: 3.15% Fixed
Term: Three Years
Amortization: Interest Only
LTV: 65%
LTC: Not Applicable
DCR: 1.25 based on proforma expenses
Guaranty: Non-Recourse
Prepayment: 1,1,1

Transaction Description:

George Smith Partners placed the cash-out refinance of a recently renovated 10-unit Long Beach multifamily property. This asset was acquired less than 18 months prior to our Sponsor initiating a $1,000,000 ($100,000 per unit) reposition of the property. These upgrades allowed the complex to be re-leased at market rate rental terms. Our take-out capital, a local regional bank, acknowledged the tremendous value-add and sized to market rather than the Sponsors’ capitalization. Sized to 65% of “As Is” value and a 1.25 DCR, proceeds returned most of the cash equity invested. Our DCR was measured against the actual annualized rent roll at close although relied upon proforma operating expenses due to the recent reposition and lease-up. This permanent loan is fixed at 3.15% and is full-term interest only for the three years. A five-year term was also offered under the same rate although our Sponsor opted for a 1,1,1 prepayment schedule rather than the more expensive five-year option.

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
Heather Gonzalez
Closing Specialist/Executive Assistant

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HOT MONEY
Non-Recourse Bridge Financing Rates Starting at 3%, Up to 85% LTC

George Smith Partners is working with a national lender providing non-recourse bridge financing for multifamily, office, industrial, self-storage, limited-service hotels, retail, office, and student housing projects up to $100,000,000. With the ability to advance 85% of cost, pricing starts at 3% for terms up to three years. The lender can close quickly.

More Hot Money ›

KIRISITS’ CORNER by Matt Kirisits

Fed Tapering Announcement May Come in September

Jerome Powell’s speech last Friday at Jackson Hole had few surprises. Most notably, the Fed is laying the groundwork to reduce their monthly purchases of $80B of Treasuries and $40B of mortgage backed securities. A tapering announcement could come as soon as this month. For now, the 10 yr T rate is holding steady around 1.31%, only slightly higher than the recent low of 1.17% in early August.

A key question is how the market will respond to reduced Fed bond buying. The 10 yr Treasury rate is market-determined. Fed purchases have supported low rates since quantitative easing was resumed in March 2020, and the central bank currently owns nearly 25% of outstanding Treasuries. A first-order analysis assumes that removing the largest buyer of Treasuries (the Fed) will result in reduced demand for government debt, leading to higher long term rates. However, in the one historical example of Fed tapering, the relationship was not clear cut. Market participants remember the “taper tantrum” that resulted from the Fed announcement of ending QE in 2013. However, during the actual tapering period in 2014, rates slowly declined. By early 2015 the 10 year yield was back to the pre-tapering level. This time around, although there may be an initial increase upon the tapering announcement, the longer term drivers of the 10 year rate are likely to be 1)economic growth and employment 2)success at controlling the current increase in daily COVID cases 3)persistence of above-trend inflation and 4)demand for US government debt from foreign bond buyers.

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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