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FINfacts™ XXIV – No. 47 | November 30, 2016
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| Prime Rate |
 3.50 |
| 1 Month LIBOR |
 0.62 |
| 6 Month LIBOR |
1.27 |
| 5 Yr Swap |
1.84 |
| 10 Yr Swap |
2.22 |
| 5 Yr US Treasury |
1.84 |
| 10 Yr US Treasury |
2.39 |
| 30 Yr US Treasury |
3.04 |
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Rate: LIBOR + 3.15%
Term: 24 Months
Lender Fee: 0.60%
LTC: 80%
Recourse
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Transaction Description:
George Smith Partners structured senior construction debt for 22 luxury condominium units in the Pico/Robertson area of Los Angeles, two miles south of Beverly Hills. Our Sponsor has extensive experience with residential construction in Los Angeles, but recent trends in the construction lending market have placed downward pressure on Loan-To-Cost constraints. “For Sale” product has been especially impacted by revised underwriting criteria. Supportive market data and product demand verified the value of this project. Our healthy Sponsor armed with a pipeline of future transactions allowed us to secure 80% of actual cost financing at an institutional interest rate. Priced at LIBOR + 3.15%, the two year term is supported by a personal repayment guarantee.
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Rate: 4.15% Fixed for 5 years; resets at 5 year CMT + 2.5%
Term: 15 years
Amortization: 25 Years
Prepayment Penalty: None
LTV: 65%
Lender Fee: $2,000
Recourse
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Transaction Description:
George Smith Partners successfully secured the $5,375,000 acquisition loan for the purchase of a Los Angeles in-line retail center. Sized to 65% of the purchase price, the loan is fixed for 5 years at 4.15% before floating at 2.5% over the 5 year CMT for the remaining 10 years of the term. Underwritten for a 25 year amortization schedule, there is no prepayment penalty for the 49,235 square foot collateral.
Challenge:
Physical occupancy was 75% at funding. Institutional permanent debt providers traditionally require 80% occupancy or more by close. The MAI appraisal needed to use a 5% vacancy factor in order to support the value and maintain loan proceeds and terms.
Solution:
GSP obtained historical data which proved the property consistently operated at over 90% occupancy for prior five years. Our Sponsor’s extensive experience leasing and stabilizing retail properties allowed us to gain a Policy Exception that generated competitive pricing and leverage. Market data supported the higher occupancy and allowed the MAI appraiser to underwrite to historical and market standards rather than the current “snap shot” occupancy.
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National bridge provider will fund $5,000,000 to $35,000,000 of reposition debt sized to a HUD permanent loan to 90% of cost. Our capital provider provides debt on various healthcare assets including: senior housing, assisted living, medical office and skilled nursing. With the ability to fund a zero cash flow conversion at close, this program targets a HUD loan exit. Bridge transactions are priced from L +400 for a 2 to 5 year term. Loan servicing and process management is conducted internally, granting efficiency during the asset rehabilitation.
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Early this week, Treasury yields seemed to “crest” as the 10 year hit just over 2.40% and then rallied to 2.31%. Note that the 10 year T was at its all time low of 1.32% in early July. With the stock market hitting all time highs, the long anticipated “great rotation” out of bonds into equities seems to be finally upon us. Markets are reacting to the anticipated return of actual fiscal policy after years of gridlock in Washington and the economy depending mostly on monetary policy from the Fed. But the big swings are all based on assumptions of policies that will not be in place until March 2017 at the earliest. The past few weeks have seen the markets react to a string of positive economic reports: Q3 GDP revised to 3.2%, consumer confidence much higher than expected, and today’s surprising OPEC agreement (which sent oil prices higher, always a harbinger of inflation). This Friday’s unemployment report will be closely watched. stay tuned. David R Pascale, Jr.
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Constellation Place
10250 Constellation Blvd., Ste. 2700
Los Angeles, CA 90067
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