FINfacts™ XXIV – No. 286 | September 22, 2021

MARKET RATES
Prime Rate 3.25%
1 Month LIBOR 0.08%
6 Month LIBOR 0.15%
5 Yr Swap 0.95%
10 Yr Swap 1.35%
5 Yr US Treasury 0.86%
10 Yr US Treasury 1.32%
30 Yr US Treasury 1.82%

RECENT TRANSACTIONS
$37,500,000 Non-Recourse, Stretch Senior Construction Loan for a Mixed-Use OpZone Development; Western States

Loan-To-Cost: 75%
Stabilized Loan-To-Value: 70%
Term: 24 Months + 6 Month Extension
Amortization: Interest-Only
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners placed a $37,500,000 non-recourse, stretch senior construction loan for a 7-story ground-up development of a mixed-use OpZone Project. When complete, the Project will consist of 151 apartment units (including 14 Live/Work Lofts), approximately 15,000 sf of restaurant space, 10,000 sf of retail, and 12,000 sf of office space. The average apartment size is 730 sf, and most units will have private balconies with unobstructed views of the desert and city.

As the Project is a first of its kind in the surrounding area, finding appropriate comparable projects that would speak to the strength of this market proved to be a challenge. GSP focused on the Project as a marquee development and detailed the new employment opportunities from Google, and a hospital expansion, sports training facility, along with the emerging renaissance happening within the downtown area. GSP was able to demonstrate the immense intrinsic value from the ongoing renovation of the City Hall Plaza and Events Center — a 500-seat canopied amphitheater and 60,000 sf of programmable deck area for hosting community events — that sits directly across from the Project. GSP also worked through the Sponsor’s GMP budget with the Lender during a period of escalating cost, showcasing the strength of the Sponsor group in their local market. In turn, this created a comfort level needed by the Lender with regards to the commercial space of the Project.

GSP executed a broad and in-depth marketing campaign to help capital markets understand the opportunity appropriately. These efforts resulted in a successful close with proceeds achieving the Sponsorship’s objective.

Advisors

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

$15,400,000 Note-On-Note Financing for a Class-A, Self-Storage Facility; Major Southwest Metro

All Terms Confidential

Transaction Description:

George Smith Partners successfully arranged $15,400,000 in note-on-note financing for a newly constructed Class-A, self-storage facility in a major Southwest metropolitan market. The financing was obtained for a prominent national debt fund and proved extremely accretive, due to an attractive advance rate and pricing. GSP leveraged its extensive lending network and was able to identify a premier note-on-note lender with an extensive book of business in both the note-on-note space and credit facility space. The note-on-note Lender understood the strength of the debt fund platform it was financing and the strong underlying loan. The financing has the potential to grow into a larger credit facility for the debt fund and A-Note lender over time.

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

$3,700,000 Highly Leveraged, Quick Close Acquisition Capital for 97-Unit, Multifamily Property; Oklahoma City, OK

Rate: 7.25%
Amortization: Interest-Only
Term: 1 Year + Two 6-Month extensions
LTC: 75%

Transaction Description:

George Smith Partners secured $3,700,000 for an acquisition of a multifamily property in Oklahoma City, OK. The Sponsor had the opportunity to purchase a well-located, value-add property in Oklahoma City. By utilizing a quick close loan, the Sponsor was able to negotiate a below market price. The Sponsor approached GSP to help arrange a loan that needed to close on a strict timeline of only one week. Because of the quick timing and the short-term distress in the cash flow, the Property would not qualify for bank or agency financing. The Property rents were below market because the Seller self-managed and the Property needs exterior and interior improvements. The loan was structured with a CapEx holdback to allow the Sponsor to implement their value-add strategy. The non-recourse facility represents 75% of total cost and was priced at an interest-only fixed rate of 7.25% with a 12-month term plus two 6-month extension options. The interest-only loan allows for more property cash flow to be used towards improving the Property. Thanks to GSP’s long-standing relationship with this debt fund, we were able to close this transaction in less than 7 days from signing the term sheet.

Advisors

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

SPEAKERS CORNER

We are excited to announce our upcoming webinar, The Demand for Housing and The Future of the American Home featuring Ivy Zelman, CEO of Zelman Associates. Ivy is widely respected for her unbiased, in-depth research, insightful analysis, and actionable advice about the housing market and related sectors. Evan Kinne, SVP and Ed Steffelin, SVP at George Smith Partners will discuss the below topics with Ivy.

* Effects of the legislative agenda on housing
* Affordability and what that looks like in the years ahead
* Single family rentals – supply and demand dynamics

Register HereThe Demand for Housing and The Future of the American Home


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HOT MONEY
4.90% Fixed Rate Non-Recourse Bridge Financing

George Smith Partners is working with a non-recourse capital provider funding bridge loans from $10,000,000 to $50,000,000. With a focus in California, the portfolio lender will fund up to 60% of value but will allow a recorded second Deed of Trust behind them up to 85% of value. With terms up to one year, program highlights include no prepayment and interest only. Decision making is flat and seven-business day close is their normal execution.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Talking About Tapering, In December

After many months of “telegraphing” the first pullback of accommodative policy instituted in the wake of the Covid financial meltdown of March/April 2020, Fed Chair Powell indicated that we should expect a formal announcement “soon” (most likely at the next meeting in early November) and tapering to begin in December. Keep in mind that if the Fed lowers purchases by $10-$15 billion per month, there will still be over $500 billion of bonds purchased during a 6-9 month process. The Fed statement today indicated that, “If progress continues broadly as expected, a moderation in the pace of asset purchases may soon be warranted”. Significantly, the consensus amongst Fed members was unanimous. Inflation continues to be the unknown factor, transitory or sticky? The Fed core inflation projections increased (3.7% this year vs 3.0% months ago, 2.3% in 2022, 2.2% in 2023). So inflation may be a little stickier than estimated early in the summer, with future years at just over the Fed’s target of 2.0%. Powell indicated that economic growth is progressing (although the Delta variant spikes have dented earlier optimism) and conditions warrant tapering. He also said that the economic growth threshold for “liftoff” (raising rates from 0%) is nowhere near being met at this time. However, 9 of the 18 members now predict a rate increase in 2022, with 3 members predicting 2 increases. Projections for 2024 show an expected “neutral rate” of 1.75% or 7 increases in the next 3 years (neutral rate is the predicted “Goldilocks” rate, neither stimulative nor slowing). Markets seem very receptive to the Fed’s plan, no “tantrum” today as the 10 year T yield actually dropped about 3 bps this afternoon, closing at 1.30%. The big question is how will treasury markets react to the expected announcement at the next meeting? Meanwhile in Washington, markets are watching the Congressional debate on the upcoming debt ceiling with trepidation. The US has never breached their obligations (treasury bonds) which are an underpinning of the entire financial system Moody’s has indicated that a default of the US treasury obligations could cost $15 trillion in stock losses and 6 million jobs would be erased. Many expect a solution “just in time”. 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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