FINfacts™ XXIV – No. 324 | June 29, 2022

MARKET RATES
Prime Rate 4.75%
1 Month LIBOR 1.67%
3 Month LIBOR 2.25%
5 Yr SOFR Swap 2.91%
10 Yr SOFR Swap 2.89%
5 Yr US Treasury 3.16%
10 Yr US Treasury 3.10%
30 Yr US Treasury 3.22%

INTRODUCTION


RECENT TRANSACTIONS
$38,500,000 Bridge Financing for a Two-Property Multifamily Portfolio; Sanford, FL

Rate: One Month CME Term SOFR + 3.60% (0.25% Floor Rate)
Term: 3 Years, Two 12-Month Extensions
Amortization: Full Term Interest-Only
LTV: 80% (As-Is LTV)
LTC: 79%
Prepayment: 15 Months Minimum Interest Period
Loan Fee: 1% Origination Fee, 0.25% Exit Fee
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners successfully placed a $38,500,000 bridge loan for the acquisition and renovation of two multifamily properties located in Sanford, Florida. The two Properties total 260 units and are located across the street from one another. GSP sourced a lender that was able to maximize proceeds at a low rate by crossing the properties with release provisions. The two properties were allocated at different loan amounts for their release provisions. One property is a 1970’s vintage single-story, 120-unit, apartment complex that had an initial loan of $14,150,000. The other property is a 1990’s vintage, two-story, 140-unit, garden-style apartment complex that was allocated at an initial loan amount of $20,800,000. The loan was sized to 79% LTC and includes the portfolio’s capital improvement and renovation budget. The Sponsor intends on renovating approximately 75% of the units within the 3-year loan term.

Advisors

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

Perm Financing for a Multifamily Property; Houston, Texas

Rate: 4.00%, Fixed for 7 Years
Term: 30 Years
Amortization: 30 Years
LTV: 70%
Prepayment: 5, 4, 3, 2, 1%
Depository Relationship: None Required

Transaction Description:

George Smith Partners secured permanent financing for an eight-unit multifamily property located in Houston, Texas. The loan is fixed at a rate of 4.00% and locked in for 7 years. The deal went into application during the Fed run-up in rates and the rate was never locked. However, due to GSP’s relationship with the Lender, we were able to hold the rate and term down substantially. The financing does not require any deposit relationship with the bank and did not require any funds to be held back for reserves. The Lender’s processing/application fee was $2,000 all in.

Advisors

Reuven Risch
Director

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HOT MONEY
Bridge Financing up to 85% LTC

GSP has identified a bridge lender providing financing up to 85% loan to cost. Light transitional bridge is priced with a spread of 300 to 400 basis points over SOFR, while heavy bridge is priced with a spread of 400 to 600 basis points over SOFR. The lender will underwrite to a 6.5% stabilized debt yield. Product types include multifamily, self-storage, industrial, hospitality, and student housing.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
10-Year Treasury in “Slowdown Territory” as Yield Curve Zig Zags

The treasury yield curve is indicating near-term rate hikes and long-term economic slowdown. The 2-Year is 3.04%, 5-Year is 3.14%, and 10-Year is 3.09% (41 bps below its recent high). The markets are betting against the “soft landing” unicorn, as continued hawkish comments by Fed officials indicate that fighting inflation is the priority. Higher unemployment and/or slower growth could be collateral damage. Markets are “treading water” in anticipation of tomorrow’s PCE Report – the Fed’s preferred inflation gauge. The critical component will be the Core PCE monthly increase. Last month’s increase was 0.3%, and the analyst consensus for this month is 0.4%. The report will be the major market mover as we enter the 2nd half of 2022.

Capital Markets Update: Market dislocation is occurring throughout capital markets as securitized lending (both fixed and floating) is slowing. Bond buyers are demanding higher yields, and some lenders are reluctant to clear their inventory and take losses. Some lenders are hitting the pause button on new originations, which then puts increased pressure and demand on lenders still active. New CMBS “full leverage” fixed-rate loans are pricing between 5.75% – 6.25%. “Full leverage” in this case is low leverage, as cap rates have yet to widen accordingly. We are seeing regional banks step up with rates in the low to mid 5’s with the ability to rate lock early. In the bridge lending space, active lenders are extremely busy as some competitors are on the sidelines. This is not a 2008-style “meltdown” as Bank balance sheets are strong and there is liquidity in the marketplace. It is a period of “price discovery” and uncertainty about asset values and the direction of the economy. 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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