Finfacts XXIV – No. 444
January 17, 2025Market Rates
Recent Financings
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Advisors
Justin Piasecki
President of George Smith Partners
Shuvo Hussain
Vice President
All Terms Confidential.
$23,550,000 Refinance for a 232-Key Hotel in Fort Worth, Texas
Transaction Description:
George Smith Partners, along with CapMoon, secured $23,550,000 in proceeds for the permanent refinance of a 232-key hotel in Fort Worth, Texas. The Lender provided proceeds of 40% of value and underwrote to a 16% stabilized debt yield. The property had undergone several flag changes and ultimately opened as a Hilton-flagged hotel in mid-2023 and has finally hit its stride in terms of performance.
Several challenges were encountered when discussing the transaction with capital providers, particularly its lack of history under the Hilton flag, as well as the fact that it had just begun to stabilize in terms of operating performance. GSP was able to source a lender that was able to close the loan, with the intent of securitizing it in two months, in an uncertain B-piece buyer market.
Pascale’s Perspective
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“Cooler than Expected” CPI and “Dovish” Fed Speak Drive Yields Down
The Wednesday release of December’s CPI report showed a 0.4% monthly increase (2.9% annually). Markets focused on the core numbers – 3.2% annually (3.3% expected) and 0.2% monthly (0.3% expected). 2023: 3.3% headline and 3.9% core. Wonky component alert: housing costs (partially dependent on “owner equivalent rent” surveys and responsible for 36% of CPI) rose 4.6% this year. The housing element peaked at 8.2% in March 2023. Ironically, high rates are keeping homeowners in their homes, which “freezes” and perpetuates the owner equivalent rent, which is not based on any actual purchases.
Meanwhile, apartment units are coming online from construction projects begun prior to 2023, which helps lower that side of the index. Treasuries staged a “relief rally” as some bearish option positions were unwound. Fed Reserve Governor Waller’s comments the next day continued the rally. He indicated that multiple rate cuts this year are still on the table as he expects inflation to ease further.
The next Fed meeting is considered a lock to be a “pause” (Waller: “January, we need to kind of see what’s going to happen” aka “we’re pausing”). However, futures markets for May/June indicate a likelihood of a cut in the first half of the year. Waller expects possibly 3 or 4 cuts this year, but of course, everything is (you guessed it) “data dependent.” Stay tuned…
By David R. Pascale, Jr., Senior Vice President at George Smith Partners.
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