FINfacts™ XXIV – No. 319 | May 25, 2022

MARKET RATES
Prime Rate 4.00%
1 Month LIBOR 1.02%
6 Month LIBOR 2.07%
5 Yr SOFR Swap 2.47%
10 Yr SOFR Swap 2.51%
5 Yr US Treasury 2.72%
10 Yr US Treasury 2.75%
30 Yr US Treasury 2.97%

RECENT TRANSACTIONS
$10,385,000 SBA 504 Acquisition Financing for Single-Tenant Creative Office; 85% LTC; Glendale, CA

Bank 1st 
TD Rate: 4.978% Fixed for 10 Years
Term: 20 Years
Amortization: 25 Years
LTC: 50%

SBA 2nd
TD Term: 25 Years
Amortization: 25 Years
Combined LTC: 85%

Transaction Description:

George Smith Partners arranged a SBA 504 financing for a recently renovated single-tenant, creative office building in Glendale, CA. The Property will become the new headquarters for the Sponsor’s company. GSP leveraged its long-standing relationships with an institutional SBA lender and a leading Certified Development Company (CDC) to structure and close at 85% LTC. Though the appraisal value came in below the initial purchase price, GSP offered additional market analysis and local area expertise that helped the Sponsor negotiate a reduced price of nearly half a million dollars.

Advisors

Antonio Hachem
Managing Director & Principal
John Choi
Vice President
Wendy Wang
Vice President
Cornelius Baliukonis
Assistant Vice President

Acquisition Loan for a 15-Unit Multifamily Property; 3.54% Fixed; 72% LTV; Houston, Texas

Rate: 3.54%, Fixed for 5 Years
Term: 30 Years
Amortization: 30 Years
LTV: 72%
Prepayment: 4, 3, 2, 1%
Depository Relationship: None Required

Transaction Description:

George Smith Partners secured permanent financing for a 15-unit multifamily property located in Houston, Texas. The financing is fixed at 3.54% for 5 years. The deal went into application right before the Federal Reserve increased rates and before we experienced a run-up in treasuries. GSP’s good standing with the Lender ensured the original terms were honored until closing, notwithstanding the loan extension that took place and the rapid increase in the interest rate environment. The financing does not require any deposit relationship with the bank or any funds to be held back for reserves. The Lender’s processing/application fee was $2,000 and they had no origination fee.

Advisors

Reuven Risch
Vice President

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HOT MONEY
Senior Bridge Loan Financing up to $100,000,000

George Smith Partners has identified a senior mortgage capital provider that is funding multifamily bridge loans for transactions ranging from $10,000,000 to $100,000,000 in all markets nationwide. The Lender underwrites to 65% of stabilized value and an exit debt yield of 7.0% or less. There is no DCR test on the stabilized cash flow, which allows the lender to provide higher proceeds despite the current interest rate environment. The bridge loans are non-recourse and have an initial 3-year term.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Hawkish Fed Rallies Markets. What?

Yes, that is correct. Today’s release of Fed committee notes from the May 4th meeting indicated a resolve to “do what it takes” to tame inflation. Usually a Fed announcement like “we judged that 50 basis point increases would likely be necessary at the next couple of meetings” would trigger major volatility in stock and bond markets. Today, however, stock markets rallied and bond markets held firm. Why? Recent quarterly earnings reports by Fortune 100 corporations and plummeting stock markets have shown inflation is hitting the bottom line hard. Remember, 2021 featured trillions of dollars in stimulus, the lowest interest rates in modern history, and some “transitory” inflation. The punch bowls have all been pulled from the table and the lights are on, reality is setting in. A return to normalcy is predicated on inflation being brought down to the Fed target of 2.0% (most recent reading: 6.6%). The Fed notes indicated unanimity on the rate hiking plan. Markets are cheering the determination and resolve (although some believe it should have been shown earlier).

Bottom Line: The “next couple of meetings” means 50 basis point increases are guaranteed for the next two meetings: June 15 and July 27. Futures markets are at 90% on both of those moves – that puts the Fed Funds target rate at 1.75% after the July meeting. What next? The traditional August break with the next meeting on September 21. So, the Fed will have almost 2 months to gather data and gauge the effects. The September increase may be 25 basis points (futures markets are at 67% for the smaller increase). Again, the Fed invoked their willingness to go “above the neutral rate” (2.4%) into restrictive territory, if necessary to battle inflation. The next few inflation readings will be very closely watched, starting with this Friday’s release of the April 2022 PCE (the Fed’s Preferred Inflation Gauge). Over the next few months, that along with CPI/PPI will be critical as markets watch for signs that inflation is peaking or retreating. Interesting “coincidence” – a Fed Funds rate above the neutral rate would put it at 2.75%, exactly where today’s 10-Year Treasury is at (down from 3.20% on May 6); with 30-Day SOFR at 0.98% and 30-Day LIBOR at 1.01%. 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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