FINfacts™ XXIV – No. 323 | June 22, 2022

MARKET RATES
Prime Rate 4.75%
1 Month LIBOR 1.64%
3 Month LIBOR 2.15%
5 Yr SOFR Swap 2.99%
10 Yr SOFR Swap 2.96%
5 Yr US Treasury 3.22%
10 Yr US Treasury 3.16%
30 Yr US Treasury 3.25%

RECENT TRANSACTIONS
$23,000,000 Construction Financing and $9,800,000 Equity Placement for 108-Unit Build-to-Rent Community; Charlotte, NC

Rate: SOFR + 5.50%
Term: 3 Years
LTC: 70%
Fee: 1.25%
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners successfully advised on $23,000,000 in construction financing and $9,800,000 in JV Equity for the development of a 108-unit built-to-rent community in Charlotte, NC. The Project features 108 attached single-family homes situated atop a 13.5-acre site. The Site is located just seven miles outside of downtown Charlotte and less than 2 miles from UNC Charlotte. The houses have private entrances, individual backyards and feature shared amenities including a pool, jacuzzi, clubhouse, fitness facility, grilling area, pet park, and game room.

GSP worked through several strategies with the Sponsor to source the non-recourse financing terms and joint-venture equity partner for the ground-up built-to-rent community. The Sponsor chose a joint-venture partner that GSP had introduced to the sponsors on a previous deal. GSP sourced several highly reliable lender options, and the Sponsor ultimately went with a lender headquartered in Charlotte that provided strong terms and would keep the loan on their balance sheet.

The Sponsor projects vertical development to be completed by late 2023 and lease-up to be finalized by Q2 2024.

Advisors

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

$6,100,000 Perm Financing for an Unanchored Retail Property; Bakersfield, CA

Rate: 4.13%
Term: 7 years
LTV: 70%
Amortization: 1 Year IO, then 25 Year Amortization
Prepayment: None
Fee: None
Guaranty: Full Recourse

Transaction Description:

George Smith Partners successfully closed a loan at 60% loan-to-value for an 84% occupied, newly built, and stabilized retail center in Bakersfield, CA. GSP located a lender that was able to lock the rate of 4.125% at application to avoid the rate volatility in the market. Many lenders were not comfortable quoting the deal because of the lack of operating history. GSP was able to locate a lender that was comfortable with the lack of history, with a 6-month debt service reserve held back at closing, to ensure that the tenants continue to pay rent. The reserve is released after 6 months of full rent collection.

Advisors

Steve Bram
Managing Director & Principal
David R. Pascale, Jr.
Senior Vice President
Allison Higgins
Senior Vice President
Nick Rogers
Vice President

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HOT MONEY
Multifamily Takeout Pre-Stabilization

George Smith Partners is in application with a capital provider funding take-out loans for new multifamily buildings, in lease-up, and prior to stabilization. Transactions range from $5,000,000 – $40,000,000 and can be sized up to 65% of “as stabilized” value. The rate is locked at application and prices in the mid-4.00% range for a seven-year execution. This on-book portfolio lender will close on a pro-forma and C of O, with only a 25% occupancy threshold. Coupons are fixed without the use of SWAPs allowing for prepayments that do not include a loss of yield formula.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Treasury Yields Drop as Anticipation of a Growth Slowdown Overtakes Inflation Fears

Markets are whipsawing back and forth between worrying about stubborn inflation, recession, or both- stagflation. The conundrum is partially a result of Fed policy. Remember, the Fed’s toolbox consists of “hammers not scalpels.” The central bank is not able to fine-tune or tweak sections of the economy. Instead, it’s interest rate increases are macro-monetary policy moves that affect capital markets, personal finance, consumer behavior, etc., on a large scale. Much of today’s inflation is due to a massive supply shock, as manufacturing and logistics underwent disruption due to COVID. So, the Fed’s “hammer” is to create a demand shock by raising interest rates. Example: Existing home sales volume is plummeting as mortgage rates spike (the 30-year fixed mortgage rate has spiked to over 6.00%, up from about 3.10% last year). Also, there are signs that gas prices have actually dropped slightly in recent days. Markets are looking at this as “good news and bad news” as high prices and increased interest rates are causing consumers to curb purchases. The 10-year Treasury hit 3.50 on June 14 on the narrative that inflation was possibly out of control. Today, it is at 3.16% on slowdown fears. No matter what, the focus will be on the data over the next couple of weeks. This week will include jobless claims and consumer sentiment. Next week will include durable goods and Thursday’s big PCE release. 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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