FINfacts™ XXIV – No. 41 | October 12, 2016

MARKET RATES
Prime Rate 3.50
1 Month LIBOR .53
6 Month LIBOR 1.26
5 Yr Swap 1.30
10 Yr Swap 1.60
5 Yr US Treasury 1.30
10 Yr US Treasury 1.77
30 Yr US Treasury 2.50

RECENT TRANSACTIONS
$14,400,000 L+2.95% Acquisition and Reposition Financing for a Single-Tenant Office with Event Risk

Rate: L + 2.95; 3.48% at Close
Term: 42-month w/ one 12-month extension
Amortization: Interest only until stabilization
LTC: 65% total loan-to-cost
Prepayment: None
Guaranty: Top-End Recourse
Lender Fee: 1%

Transaction Description: George Smith Partners successfully placed $14,400,000 in acquisition and reposition financing to acquire a 30,400 square foot West Los Angeles office building currently occupied by a single tenant with rolling annual termination options. Our Sponsor’s business plan assumes the current tenant will exercise one of their annual termination options; allowing for a building renovation and conversion to a multi-tenant creative office building with ground floor retail. The tenant, through extensions, may choose to continue to occupy this location and is not obligated to vacate during the initial 3½ year loan term. George Smith Partners sourced a flexible lender comfortable executing on the transaction regardless of the tenant’s occupancy status. Sized to 65% of total project cost, this financing is priced at 2.95% over one-month LIBOR despite the potential for zero cash flow should the tenant choose to vacate. Our Capital Provider underwrote and will fund 100% of creative office conversion and re-tenanting costs. Interest is not paid on this additional $4,400,000 funding until drawn.

Advisors

Nick Rogers
Vice President

$6,798,000 Non-Recourse 80% Loan-to-Purchase Multifamily Acquisition Financing

Rate: 4.26%
Term: 12 Years
Amortization: 30 Years
LTC: 80%
DCR: 1.25
Non-Recourse
Lender Fee: Par
Prepayment Penalty: Yield Maintenance

Transaction Description: George Smith Partners secured $6,798,000 for the acquisition financing of a 130-unit apartment building located in Kissimmee, Florida. At the time of purchase, the subject was operating at below-market rents and inflated expenses. Our institutional capital provider underwrote lower projected operating expenses supported by current market information and the property manager’s successful management track record. This allowed our Sponsor to qualify for full proceeds at 80% of purchase price. Fixed at 4.26% for 12 years, the non-recourse loan amortizes over 30 years and did not have an origination fee. This is the fifth transaction that George Smith Partners has completed with this Sponsor.

Advisors

Steve Bram
Managing Director & Principal / GSP Co-Founder
David R. Pascale, Jr.
Senior Vice President

Los Angeles City Calls Upon Developers to Address Housing Affordability

Los Angeles City issued an RFQ/P to developers interested in building on city-owned land as an initiative to decrease homelessness (approximately 28,464 living unsheltered) and increase affordable housing. 12 potential sites were identified, allowing developers to submit proposals on one, multiple, or all sites. This RFQ/P is considered round one and a future second round with additional sites is expected. Submissions for this initial round were due September 15, 2016. Winning proposals may receive an Exclusive Negotiating Agreement, but the City has yet to announce when winners will be chosen for round one. Click for additional specifics on this Affordable Housing Opportunity RFQ/P.     Huber Bongolan, Jr.


Pascale's Portrait
PASCALE'S PERSPECTIVE
Treasuries Sell Off (Yields Up) as Investors See Limits in Central Bank “Accommodation”

Today’s Fed Minutes release from the September meeting indicated a divided committee, almost split 50/50 amongst the “raise now” and “raise later” factions. Interestingly, some members perceive risk based on previous cycles where the Fed raised rates quickly after keeping them low too long. The loose policy stoked inflation which then had to be reined in with rate increases. This pattern often led to recessions. The Fed’s increasingly hawkish stance combined with the growing realization that bond buying by the ECB and Bank of Japan is tapering is triggering a sell off in government bonds worldwide. Are we at the “twilight” of ultra-accommodative Central Bank policy? Is the “toolbox” near empty? The German 10 year is now in positive territory (after being negative for several months) and the 10 year US Treasury is at 1.78%; the highest since June 2 of this year. Stay tuned.

David R. Pascale, Jr.

More Perspectives ›

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