FINfacts™ XXIV – No. 337 | September 28, 2022

MARKET RATES
Prime Rate 6.25%
1 Month LIBOR 3.12%
6 Month LIBOR 4.21%
5 Yr SOFR Swap 3.72%
10 Yr SOFR Swap 3.49%
5 Yr US Treasury 3.94%
10 Yr US Treasury 3.73%
30 Yr US Treasury 3.70%

RECENT TRANSACTIONS
$18,000,000 Bridge Financing for 100,686 SF Fitness Anchored Retail Center; Northern CA

Term: 36 months
Amortization: Full Term IO
LTV: 55%
TILC Holdback: $4,210,300
Rate: SOFR + 220

Transaction Description:

George Smith Partners successfully advised on the placement of an $18,000,000 bridge loan to finance a fee simple retail center in an affluent Northern California suburb. GSP was able to procure a lender in a turbulent market that was willing to provide significant cash out on an excellently located retail property. The 100,000+ SF fitness anchored neighborhood center was 52% occupied at the time of closing and will reach 90% once the fitness tenant opens for business.

Although the property performed well during COVID, GSP had to strategically market the opportunity considering the recent loss of the previous anchor tenant that has been replaced by the fitness tenant. Due to the extremely strong sponsorship, the Sponsor received 100% of the floor funding as cash out (the property was free and clear of debt) with additional TI/LC holdbacks for the fitness tenant. As retail experiences a strong recovery, this execution serves as a prime example for retail investors to enter a shorter-term loan during a rising rate environment and avoid committing to decade-high rates.


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HOT MONEY
Construction Financing Starting at SOFR + 300

George Smith Partners has identified a capital provider that specializes in financing the construction of build-for-sale (BFS) and build-for-rent (BFR), single-family residential properties. The lender can fund non-recourse construction debt up to 75% LTC. With floating rates starting at SOFR + 300, they can fund loans from $5,000,000 to over $100,000,000. This capital provider lends nationwide and has recently been very active in western markets.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Bonds Rally Out of “Free Fall” On BOE Intervention

Bond yields spiked over the past week as global financial assets sold off. Stock markets here re-tested the June 2022 lows and the 10 Year Treasury jumped from 3.50% (at the time of the Fed meeting) up to 4.01% yesterday. A 4.0% 10 Year Treasury was last seen in mid-2008. The fear trade was in full effect as markets are getting the message that the “Fed Put” is off the table – the central bank will allow unemployment, market volatility, and higher unemployment in order to control rising prices.

The announcement of large tax cuts in Britain created market turmoil as the already weakened British pound plummeted in value, rating agencies issued harsh downgrades and Gilt bond yields spiked. The Bank of England surprisingly intervened strongly, buying up as much government debt as necessary to restore stability. The BOE statement: “Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.” Bond markets worldwide rallied as one of the “Big 7” central banks, who often discuss policy covertly or overtly during crises, stepped up in a crisis. Maybe this sets a new higher standard for monetary or fiscal intervention (“In case of financial meltdown, please break glass, otherwise you’re on your own”). The 10 Year Treasury dropped from 4.01% to 3.69% today, the biggest drop since 2020. Interestingly, the 10 Year British Gilt bond yield spiked to 4.5% before dropping to 4.05% today, which is very close to where the US 10 Year started the day. This week’s big data release is Friday’s PCE. The monthly core rate will be very closely watched, and its elements parsed. 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 Jessica Mania, at (310) 867-2974 or jmania@gspartners.com


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