FINfacts™ XXIV – No. 330 | August 10, 2022

MARKET RATES
Prime Rate 5.50%
1 Month LIBOR 2.38%
6 Month LIBOR 3.55%
5 Yr SOFR Swap 2.63%
10 Yr SOFR Swap 2.52%
5 Yr US Treasury 2.93%
10 Yr US Treasury 2.79%
30 Yr US Treasury 3.05%

RECENT TRANSACTIONS
$38,500,000 Refinance of 950-Unit Multifamily Property; Cleveland, Ohio Suburb

Rate: 4.5% Fixed for 5 years
Term: 5 years
Amortization: 2 Years Interest Only/ Then 30-year amortization
Prepayment Penalty: None
Guaranty: Recourse
Lender Origination Fees: 1/4 Point

Transaction Description:

George Smith Partners secured $38,500,000 for the recourse, cash-out refinance of a 950-unit multifamily building located just outside of Cleveland, Ohio. The waterfront building is situated in one of the best suburbs. The Sponsor purchased the building about 12 months ago with large vacancies and completely renovated and rehabbed the Property.

Challenges:
With the successful renovation plan making progress, the Property was leased from 30% to just above 70% occupancy. Most lenders require 90% occupancy for 90 days to qualify for long-term fixed-rate financing. The Property’s current bridge loan had a floating rate that was increasing as both short-term and long-term rates increased in today’s challenging environment.

Solution:
With GSP’s help, the Sponsor utilized a detailed lease-up business plan which allowed the Lender to understand the strength of the asset, location, and experience of the Sponsor. GSP originated a permanent loan for this 72% leased property and the Lender was able to underwrite to in-place income and allow for low-cost, 5-year financing at a below market rate with no prepayment penalty.

Advisors

Bryan Shaffer
Managing Director & Principal
Ruben Bohbot
Director

$6,850,000 Multifamily, Cash-Out Refinance; Los Angeles, CA

Rate: 4.15% Fixed for 5 years; 30-Day Average SOFR + 2.35% Thereafter
Term: 30 years
Prepayment Penalty: 3, 1, 1, 1%
LTV: 55%
DCR: 1.20x
Origination Fees: Par

Transaction Description:

George Smith Partners secured $6,850,000 for the refinance of a stabilized 58-unit Los Angeles apartment building. The loan is fixed at 4.15% for five years and has full-term interest-only payments. The Lender offered a 60-day rate lock, which provided a great benefit to the Borrower because interest rates increased while the loan was in application. A fast-paced closing process was required to keep the rate locked at 4.15%. GSP ensured that all stakeholders adhered to the timeline and that the loan successfully closed on the required date. There were no changes to the term sheet.

Advisors

Shahin Yazdi
Managing Director & Chief Operating Officer, AXCS Capital
Jonathan Lee
Managing Director & President, AXCS Advisors
Matthew Kirisits
Vice President

Pascale's Portrait
PASCALE'S PERSPECTIVE
“Slightly Cooler” CPI Report Sparks Market Rally, Treasury Yields End Flat on the Day

The July CPI report indicated an 8.5% annual inflation rate, and flat for monthly inflation rate. Gasoline led the decline with a 7.7% drop monthly, but that was offset by increases in food (1.1%) and shelter (0.5%). These numbers were softer than estimates. Markets rallied accordingly on hopes that inflation had peaked. Markets also cheered Monday’s inflation expectations survey from the NY Fed: the median expectation of inflation over the next 3 years dropped to 3.2%. Down from 3.6% last month, and 3.9% in May. That is critical as consumers’ expectations of rising prices can become a self-fulfilling prophecy. The 10-Year Treasury dropped to 2.70% this morning and then settled back up to about 2.78%. Today’s auction of 10-Year Treasurys saw the highest demand in 6 months, a good sign. As far as inflation peaking, it will take multiple months of trending for the Fed to be comfortable that their rate increases have been effective (remember the Fed target is 2.0% annual inflation). Futures markets are already pricing in less hawkish Fed behavior: the futures market shifted from predicting a 75 point increase at the next meeting to a 50 point increase. Tomorrow’s PPI report will be closely watched along with Fed President Mary Daly’s speech. 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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