FINfacts™ XXIV – No. 322 | June 15, 2022

MARKET RATES
Prime Rate 4.00%
1 Month LIBOR 1.51%
6 Month LIBOR 2.67%
5 Yr SOFR Swap 3.27%
10 Yr SOFR Swap 3.17%
5 Yr US Treasury 3.45%
10 Yr US Treasury 3.38%
30 Yr US Treasury 3.40%

RECENT TRANSACTIONS
$11,258,000 Cash-Out Refinance of a Seven-Property Multifamily Portfolio; Los Angeles, CA

Rate: 3.00% Fixed
Term: 5 Years
Amortization: 3 Years Interest-Only
LTV: 55%
Prepayment: 3, 2, 1%
Fee: 0.25%
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners secured $11,258,000 for the refinance of a seven-property multifamily portfolio in Los Angeles, CA. The loans are non-recourse and fixed at 3.00% for 5 years with 3 years of interest-only payments. The Sponsor received a significant return of equity. The loans went into app about 5 months ago, prior to the recent increase in interest rates. Because of GSP’s strong relationship with the Lender, the Lender held the original 3.00% fixed rate.

Advisors

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

Perm Loan Debt for Two Multifamily Communities; San Diego, CA

Rate: 3.30% Fixed for 7 Years, Floating Thereafter at S+2.25%
Term: 30 Years
Amortization: 3 Years Interest-Only
LTV: 70%
DSCR: 1.20x
LTC: 85%
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners secured permanent financing for two newly renovated/repositioned Class C apartment communities in San Diego. Two separate loans were originated for the same Sponsor for the 14-unit and 5-unit multifamily communities.

The Properties were in the process of being completed and leased when the Borrower went under application with a bank. Despite the longer than normal application process and rising interest rate environment, GSP was able to get the bank to extend the rate lock and obtain a favorable coupon.

Advisors

Alina Mardesich
Senior Director

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HOT MONEY
$600,000,000 JV Equity Bucket

George Smith Partners has identified an equity provider seeking to deploy $600,000,000 in JV equity. They are pursuing multifamily, industrial, hospitality, for-sale residential and BTR strategies. With financing starting at $15,000,000, this equity provider is open to deals across the nation with an IRR of 15% or higher.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Fed Raises Rates by 0.75%, Biggest Increase Since 1994

“Seinfeld” was a must-see show on TV and “Forrest Gump” was packing cinemas back when Fed Chair Greenspan raised rates by 0.75% in November of 1994. Today’s rate increase was expected after last Friday’s CPI report of 8.6% overall, with a 6.0% jump in core inflation. The news broke Monday and was confirmed by many bank analysts. This led to a huge jump in the 10-Year Treasury from about 3.04% (Friday morning) to as high as 3.50% (Yesterday). Stock markets plunged with the Dow losing about 10% of its value in the last week.

Today’s Fed announcement and press conference by Fed Chair Powell, while hawkish, actually calmed markets. Why? It was a case of “Sell the rumor, buy the news.” Stock markets rose and the bond market rallied – the 10-Year dropped to 3.29%. Markets see a Fed that is determined to fight inflation and Powell provided more clarity on the future. Markets were in free fall largely due to the uncertainty of monetary policy going forward. Today, Powell and his colleagues helped assuage those concerns with the following comments: (1) The planned increase at next month’s meeting will be “50 or 75 basis points” (so a 75 bp increase is not “for sure”), (2) “75 bp increase is a large one, and I do not expect moves like this to be common”, (3) Predictions from the Fed: the Fed Fund’s target rate for year end 2022 is 3.4% (note that this estimate was 1.9% in March) and 3.8% for year-end 2023, before tapering down to 2.4% – the neutral rate. The Fed Funds rate is at 1.50% – 1.75%, 30-Day SOFR is 1.48%, and 30-Day LIBOR is 1.50%. Sign of the Times: “Collars” are back. Interest rate caps are now also being offered with a “collar” that can alleviate costs. The cap purchaser also “sells a floor” to the cap provider by agreeing to pay a minimum interest rate if rates drop. 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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