FINfacts™ XXIV – No. 349 | December 21, 2022

Prime Rate 7.50%
1 Month LIBOR 4.39%
6 Month LIBOR 5.16%
5 Yr SOFR Swap 3.54%
10 Yr SOFR Swap 3.36%
5 Yr US Treasury 3.77%
10 Yr US Treasury 3.67%
30 Yr US Treasury 3.72%

Land Acquisition Financing for 6.8-Acre Development Site; Denver, CO

Term: 12 Months
Rate: 9.25% Fixed
LTV: 66%
Prepayment: No Prepay
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners successfully placed $6,000,000 (66% Loan to Purchase Price) in acquisition land financing for a 6.8-acre site to be developed into 120 units in the Denver Metropolitan area. An infill site originally zoned agricultural; the Sponsor invested significant time and capital to change the site’s use to residential. The ability to develop attainable housing is the driver for both the city and the developer, as the finalized project will provide much-needed affordable housing to the increasingly expensive Denver Metro. With preliminary entitlements achieved, the Sponsor is working through civil engineering to receive final entitlements and sell the fully-entitled site to a well-known build-to-rent developer.

GSP was able to source debt with favorable leverage, a fixed-rate, and most importantly, without the need for an appraisal.

Acquisition Financing and JV Equity for 57.62 Acres of Vacant Land; Cibolo, TX

Senior Loan
Term: 12 Months
Guaranty: Non-Recourse

Transaction Description:

George Smith Partners successfully placed the land acquisition senior loan and JV equity for 57.62 AC of vacant and unentitled land in Cibolo, TX (suburb of San Antonio). We went out to 40+ sources and the Lender loved the site and was aggressive by bringing the effective financing between debt and equity to about 78% LTP. The deal is in the early stages, with no clear exit plan and most lenders were not comfortable with taking on that risk. Initially, the Sponsor was under LOI to flip 30 acres to a tech-related entity post close, however, that fell through when we were already under app. Regardless, the site was highly favored after putting their feet on the ground and closed on the original structure.

Pascale's Portrait
“Wait’ll Next Year”… Volatile Year in Capital Markets Draws to A Close…

2022 began with the 30-day floating index at 0.10% (now 4.32%) and the 10-year T at 1.51% (now 3.69%). Federal Reserve policy has dominated the capital markets. Speculation on future moves by the Fed is a huge factor in decision-making by all players in commercial real estate. Transaction volume started strong as the momentum from 2021’s huge year carried into Q1 2022. Volatility kicked in on January 26 with the Fed’s unexpected announcement that balance sheet reduction (aka Quantitative Tightening) would be a major part of Fed policy in 2022 (along with rate increases). Many borrowers rushed to lock in rates as the Treasury hovered around 2.00% in January-March. Then the Fed put the hammer down with 25 and 50 basis point increases in March and May – followed by 4 consecutive 75 basis point increases. Sales and loan volume plummeted as buyers, sellers, lenders, and equity providers were unable to price assets with any certainty. Lenders and investors are hoping for more clarity coming into the new year. Securitized lending volumes and investor appetite for the paper has waned. CMBS volume declined over 35% from 2021 levels. As one major originator said, “Only borrowers that have to transact are in the market.” Many originators are pushing 5 year loans as borrowers are reluctant to lock in long-term. The floating rate CLO market is in limbo. Many originators have not been able to securitize and are holding unsold pools on warehouse lines. Life companies had large origination volume in the first half of 2021 during the rush to lock in rates, with a considerable drop-off in the 2nd half of the year. Credit unions and banks are increasingly cautious. Optimism for 2023 revolves around the possibility of the Fed engineering a “soft landing” and the anticipation of the “pivot” to lower rates which will unleash capital on the sidelines and rally securitized markets. Lenders and buyers of secondary market paper will come into the new year with fresh allocations. The US economy is showing incredible resiliency in these challenging times (GDP, unemployment, consumer sentiment) although there are also indicators of a slowdown going into 2023. In the contrarian world of Fed watching, that may be welcome news. Stay tuned… Happy Holidays to All!

By David R. Pascale, Jr., Senior Vice President at George Smith Partners

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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


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