FINfacts™ XXIV – No. 343 | November 9, 2022

MARKET RATES
Prime Rate 7.00%
1 Month LIBOR 3.86%
6 Month LIBOR 5.13%
5 Yr SOFR Swap 4.04%
10 Yr SOFR Swap 3.83%
5 Yr US Treasury 4.30%
10 Yr US Treasury 4.15%
30 Yr US Treasury 4.27%

RECENT TRANSACTIONS
$13,990,000 Construction Revolver Financing for 23 For-Sale, Detached Single Family Residences; Prescott, AZ

Rate: 9.25% Fixed
Term: 18 Months, with Two 3-Month Extension Options
Amortization: Interest Only
LTC: 82% (combined on land & construction)
Guaranty: Non-Recourse, with Completion Guaranty
Prepayment: 9 Months Minimum Interest

Transaction Description:

George Smith Partners successfully arranged $13,990,000 in acquisition and construction revolver financing for a 23-lot, for-sale, detached single-family residential community in Prescott, AZ. The Project is located in a gated community within the 1,100-acre Prescott Lakes master-planned community. The City of Prescott, known for its seasonal climate, quality of life, and low property taxes has experienced tremendous population growth. The Sponsor, a repeat client, recognized the opportunity to develop much-needed housing for the area. Despite the increasingly challenging market, GSP leveraged its expertise and relationships to identify a construction lender that had a deep understanding of the submarket, understood the projected sales prices (appraisal requirement waived), and recognized the Sponsor’s ability to execute on their plan. GSP was able to negotiate a high-leverage, fixed-rate loan and worked efficiently with the Lender throughout the one-month closing process.

Advisors

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

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HOT MONEY
Quick Close Land Financing Starting at 6.21%

George Smith Partners recently went into app with a capital provider financing land acquisition with pricing just over 6%. The balance sheet lender can provide financing on all major asset types, provided that the property is within its geographic footprint of NV, UT, OR, and ID. Financing up to $15,000,000 with no prepayment penalties, loans can close in less than 30 days. Interest only options are available.

More Hot Money ›

Pascale's Portrait
PASCALE'S PERSPECTIVE
Bond and Stock Markets Rally on Cooler Than Expected CPI on “Pivot” Hopes

This morning’s October CPI report: Core CPI increased 0.3% for the month (0.5% expected), overall CPI is 0.4% (0.6% expected). Annual CPI is at 7.7% (7.9% expected and down from the June high of 9.1%). Relief rally: 10-Year Treasury dropped to 3.84%, down from a 4.12% opening; a big intraday move and below the psychologically significant 4.00% level. It’s interesting to note that the major fixed and floating rate lending indices are converging – 30 Day Term SOFR is 3.79%. The Dow jumped 850 points within hours. Fed futures “softened”:  85% chance of a 50 bp increase at next month’s meeting, 15% chance of a 75 bp increase. Yesterday it was 56% for 50 bps, 44% for 75 bps. One report does not “fix” inflation, but markets are ultra sensitive to trending data and anticipation. The rally is big as it assuages the fear that has emerged in recent weeks regarding the great Fed questions regarding the eventual terminal rate or peak rate: “How high and how long? Recent comments by Fed Chair Powell and other officials suggested the terminal rate may need to be 5.00% or higher to tame inflation. Today’s report provides a “hopeful path” to a lower peak and shorter time there.

Inside the numbers: Prices for “core goods” (homes, used cars, appliances, apparel) have been softening for months, while services costs have spiked. Today’s report indicated medical services prices fell 0.6%, benefitting from the “annual reset” methodology employed by the Labor Department. Another lagging indicator that should start showing softer price increases is shelter. Zillow, CoreLogic, RealPage and Apartment List have all indicated apartment rents (for new leases) softening nationwide over the past 2-3 months. It will take a couple more months for that to be figured into CPI, which counts “renters at large”- aka all tenants. Markets don’t want a repeat of the optimistic rallies as core CPI dropped steadily from April to June, but then leveled off in July and spiked in August and September- which sent rates soaring. Therefore, next month’s CPI report release on December 13, followed by the year’s final Fed meeting the next day is looming very large. 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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