FINfacts™ XXIV – No. 315 | April 27, 2022

MARKET RATES
Prime Rate 3.50%
1 Month LIBOR 0.75%
6 Month LIBOR 1.82%
5 Yr SOFR Swap 2.54%
10 Yr SOFR Swap 2.52%
5 Yr US Treasury 2.85%
10 Yr US Treasury 2.84%
30 Yr US Treasury 2.91%

RECENT TRANSACTIONS
$10,737,375 Joint Venture Equity for a Built-for-Rent Development; Savannah, GA

Equity Structure: 90/10

Transaction Description

George Smith Partners advised on $10,737,375 in Joint Venture equity for the ground-up development of a Built-for-Rent community in Savannah, GA. When complete, the Project will consist of 142 single-family homes on 66 acres of land. The Project is located just a 20-minute drive outside of downtown Savannah and just 3 miles northwest of Savannah Quarters Country Club and Blue Moon Crossing; a major retail center in the area.

GSP marketed the transaction broadly and found several equity providers interested in the Project. Time was of the essence as the Sponsor had closed on the land and was ready to start horizontal development. GSP worked with the Sponsors to pick a group that could move quickly and help share cost overruns. Construction is expected to take 36-months and for the Project to be completed and leased up by Q1 2025.

Advisors

Ed Steffelin
Managing Director & Chief Investment Officer, AXCS Investments
Evan Kinne
Managing Director & President, AXCS Capital
Miles Musalman
Senior Vice President
Portrait Blair Lewis
Vice President
Jordan Lipton
Vice President

$3,200,000 Refinance Loan For 18-Unit Live/Work Property in Oxnard, CA; 5 Years Fixed at 3.0%; Three Years Interest Only Payments

Rate: 3.0%
Term: 5 years
Amortization: 3 Years Interest-Only
Prepayment Penalty: 3,2,1%
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners arranged a $3,200,000 loan for the refinance of a stabilized 18-unit live/work property in Oxnard, California. The Property is a former warehouse that has been converted to apartments. They have been converted to allow tenants to run small businesses from their units. Although the Property is permitted as multifamily, some lenders declined the deal due to this unique use. GSP was able to find a lender that provided a 3.0% fixed rate, which is well below current market interest rates. Compared to the previous loan, the new interest rate is more than 1% less. The Lender was also able to provide non-recourse financing and 3 years of Interest-Only payments.

Advisors

Shahin Yazdi
Managing Director & Chief Operating Officer, AXCS Capital
Jonathan Lee
Managing Director & President, AXCS Advisors
Matthew Kirisits
Vice President
Kyle Redmond
Vice President
Miles Musalman
Senior Vice President
Jessica Mania
Marketing and Business Development Associate

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HOT MONEY
Fixed Rate Bridge Financing

George Smith Partners is working with a capital provider funding brand new built apartments for Sponsors who are either buying at Certificate of Occupancy with some pre-leasing or taking out construction loans up to $25,000,000. With terms two years or less, this lender can offer fixed rate pricing at 5.25% for year one and 5.50% for year two and up to 75% LTC. A SOFR Cap is not needed.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Treasury Yield Volatility – Peak Inflation? Risk Spreads Widen, SOFR/LIBOR Indices Spike on Hawkish Fed Expectations

The last few weeks have seen major volatility in financial markets with stock market selloffs, climbing VIX index, oil price swings, and whipsawing bond yields. The 10 year yield marched up to 2.95% last Monday before dropping to 2.73% yesterday morning. Global slowdown fears tied to the Ukraine war, Chinese demand ebbing due to Covid breakouts/shutdowns in key Chinese cities, interest rate spikes, consumer confidence drops due to inflation are all contributing to uncertainty. The yield curve has been inverting, steepening and partially inverting over the past few months. Today the 10 year is at 2.83%.

This week, all eyes will be on the release of the March PCE report on Friday. Markets will be looking for indications that inflation has peaked – hoping that the monthly increases in PCE and core PCE are below the February numbers. The prospect of “stagflation” is a major “fear factor” (stubborn inflation, high interest rates, stagnant economic growth). The Fed meeting and commentary next week seemingly has been telegraphed and received by markets – a 50 basis point increase is expected (futures markets show 97% probability).

Note that markets now expect three consecutive 50 basis point increases (May, June, July). Signs that inflation is peaking and possibly decreasing in the coming months may temper these hawkish expectations. Term SOFR rates (floating rate lenders’ preferred loan index) have increased from about 0.21% (March 1) to 0.70 (today). New fixed rate CMBS loans are pricing at about 4.80-5.25%. Banks winning loans as they are able to compete with lower rates and simple rate locks. Bank loan proceeds may be slightly less and involve some level of recourse. Fannie and Freddie are locking rates anywhere from the mid to upper 4’s depending on leverage and affordability metrics. Life companies are able to lock rate early and price in the 4.50-4.75% range for higher quality properties, especially apartments and industrial. 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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