FINfacts™ XXIV – No. 309 | March 16, 2022

MARKET RATES
Prime Rate 3.50%
1 Month LIBOR 0.44%
6 Month LIBOR 1.24%
5 Yr Swap 2.24%
10 Yr Swap 2.28%
5 Yr US Treasury 2.14%
10 Yr US Treasury 2.17%
30 Yr US Treasury 2.46%

RECENT TRANSACTIONS
$53,710,000 Non-Recourse Bridge Financing for a Six Property Portfolio Comprising Conventional Multifamily & Co-living Properties; Los Angeles, CA

Interest Rate: SOFR + 4.14% (SOFR floor of 0.10%)
Term: 3+1+1
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners successfully arranged $53,710,000 in bridge financing for a six-property portfolio comprising three conventional multifamily properties and three co-living properties totaling 113 units (278 beds) in Los Angeles. All six of the properties are in various stages of lease-up. The non-recourse bridge financing refinanced existing construction debt from four unrelated lenders, provided a significant cash out to the Sponsor and allows more time for continued rent recovery in Los Angeles, in anticipation of permanent long-term financing.
The Properties are in highly dense submarkets with significant levels of rentership, with vacancies approaching 3%. The housing crisis in Los Angeles has yielded significant pent-up demand for attainable housing options. The best-in-class Sponsor recognized the substantial value of the high quality multifamily and co-living properties in strong growth submarkets where demand has consistently outweighed supply, especially for new product. GSP was able to identify a lender who was able to get comfortable with the business plan due the Sponsors familiarity with the markets and demonstrated success with both conventional and co-living properties.


$3,870,000 Cash-Out Permanent Financing Loan for 44-Unit, Multifamily Property; Los Angeles, CA

Rate: 3.15% (Fixed for 7 Years)
Term: 30 Years
LTV: 60%
DCR: 1.20

Transaction Description:

George Smith Partners arranged $3,870,000 in cash-out permanent financing for the refinance of a 44-unit multifamily property located in Los Angeles, CA. GSP was able to time the refinance of the more expensive lender and lock the rate before the interest rate market started to move upwards. The recent improvements allowed the Sponsor to increase rents thus increasing the value of the Property. GSP was able to provide the Sponsor with a 10-year term, and the first 7 years being fixed at an incredibly low rate. The flexible prepayment structure is equal to 2% for the first 2 years, 1% for years 3 and 4, and 0% thereafter. The loan structure allows the Sponsor to refinance out of an expensive loan with a fixed rate of 3.15%, while also receiving cash out. The Sponsor is using cash-out proceeds to continue their business plan of purchasing and renovating additional properties.

Advisors

Bryan Shaffer
Managing Director & Principal
Ruben Bohbot
Vice President

$3,000,000 Non-Recourse Acquisition Loan for 20,000 SF Office/Retail Building; Sacramento, CA

Rate: 6.40%
Term: 18 months
LTC: 60%
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners successfully arranged $3,000,000 in acquisition financing for a 20,000 SF office/retail single story building in Sacramento. The Seller will occupy the Property paying no rent but will cover the operating expenses until the client provides 90 days’ notice to vacate. Centrally located in Midtown Sacramento, the Sponsor purchased the property for its land value, as they will entitle and assemble adjacent properties to be developed into a new ground-up multifamily project. Requiring a three-week closing timeline over the holiday season, George Smith Partners successfully sourced financing within the tight schedule.

Advisors

Gary E. Mozer
Managing Director & Principal
Lee Norman
Senior Vice President
Portrait Robert Horton
Senior Vice President
Tommy Adelson
Vice President

SPEAKERS CORNER

Bryan Shaffer will be moderating the finance panel at the Interface Seattle Multifamily Conference on March 23rd.

More information can be found here: Seattle Multifamily Conference


Pascale's Portrait
PASCALE'S PERSPECTIVE
1st Rate Increase Since 2018, 10 year T spikes to 2.25%

Today’s Federal Reserve meeting and accompanying announcement was expected – the first increase in 4 years of the Fed Funds rate. The quarter point increase today will be followed by six more increases throughout 2022 according to the accompanying statement and “dot plots”. That would bring the overnight rate and the index for floating rate loans up to 1.75 – 2.00% by year end. Stocks rallied on the news as markets welcome some action on inflation. The Fed is searching for the (elusive) “soft landing” whereby rate increases cool inflation without choking growth. It is looking like a tough challenge with little historical precedent: a supply shock, high commodity prices, wage inflation, pent up demand following massive stimulus. The prospect of recession or “stagflation” (low growth, rising prices) is feared as a possible outcome. The Fed committee also predicted three rate increases in 2023 to end up at the so-called “neutral rate” (or “terminal rate”) now pegged at around 2.50%. The 10 year T hit 2.25% today, a high last reached in May 2019. Look for SOFR (the leading floating rate index) to increase, today the 30 day SOFR is at 0.33% and is expected to increase in nearly lock step with the Fed Funds rate. The Ukraine invasion and global uncertainty continue to contribute to volatility in credit spreads. 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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